Small, growing companies rarely if ever benefit from having their assets weaken in value, nor do they tend to flourish in a liquidity crunch. The idea that domestic investment by foreigners becomes more attractive as exchange rates become more liberal is kind of simplistic. You have to consider viability and repatriation into those equations.
The U.S. economy is still the single largest money machine in the world, by a huge margin. Remember, the Euro is dependent on the combined solvency of what.....19 different nations? I forget. Doesn't matter. The point is that without U.S. participation, the world starves. My feeling is that in time cost of carry and transportation will boost demand for domestically produced goods. Farther out we will benefit even more from our geography as the rest of the western hemisphere modernizes. We may see a contraction of the U.S.'s sphere of economic influence but that's not necessarily a bad thing. Competition creates strength and efficiency, the lack thereof creates waste and vulnerability.
What I did agree with was that the idea of the Federal Reserve trading paper with these lenders is a dangerous game. Not having any idea of what qualifiers were used or at what discount the exchange was made (if any) it seems as though theres an opportunity for these guys to scrub their books and distill their portfolios into A grade stock. Even if there are controls in place, the audits will be done by gov't employees and we all know the risks there. That's not what the Fed's supposed to do. These lenders need to crash and burn. As heartless as it sounds I think a major reset is in order and I for one think the pain should be born by those of us who contributed to this divergence.
