Yesterday it was comments from Mr Bean of the BoE regarding retirees expectations and today it’s Dennis Lockhart from the Atlanta Fed who sees problems in the years ahead.
In other points, Mr Lockhart seemed to be saying that QE2 is not a foregone conclusion, that despite the slower pace of recovery improvements are in sight (not sure where he’s seeing them), and also that we can expect a gradual reduction in the role of the USD as the world’s reserve currency.
On this latter point, the pace of reduction seems to be speeding up. Last year we saw China initiate some major swap arrangements with other emerging economic powers such as Brazil and India thereby reducing the necessity to deal in USD. In more recent months, countries here in SE Asia which traditionally have done all of their trade in USD are increasingly using their own currencies. This is putting enormous strain on the USD/Asia exchange rates as these excess USD come back into the system.
This trend is still in its infancy but as it develops we may have to get used to a much weaker greenback.