iv THE BiG DROP
strategy for the Aussie dollar on the actions of the US Federal
Reserve. Governor Glenn Stevens made this explicit on 5 May
2015, when he surprised investors by saying that he expects
the Fed ‘to start increasing its policy rate later this year’.
Glenn thinks that will stimulate the Aussie economy this year
by weakening our currency. But fighting the Fed is a risky strategy.
Australia’s economic fortunes have depended on US
growth for decades. But that relationship is entering a danger-
ous new stage.
What will happen to the Aussie dollar — and your Aussie-
denominated investments — when US and Australian eco-
nomic interests diverge? The ructions Jim foresees in financial
markets could send the Aussie dollar — and the Australian
stock exchange — into a tailspin. But as in all crises, the well-
prepared can reap the benefits of once-in-a-generation oppor-
tunities.
By the way, we’re not talking about pie-in-the-sky, far-off sce-
narios. Jim penned The Big Drop because the themes that will
spark the next crisis are playing out right now — in real time.
Some of Jim’s views may strike you as improbable. Some
will certainly rub you the wrong way.
Well, hard truths are rarely palatable. That mean you
might react to Jim’s work in the same way as the reader I’ll
quote below...
On 6 February 2015, Jim wrote to his readers in The Daily
Reckoning about the slowly unfolding ‘de-dollarisation’.
The US dollar would ‘die with a whimper,’ Jim suggested,
‘not with a bang.’
Soon after, an American reader sent us this note:
‘My mother tells the story of her first day working as a
bank teller. It was when my father was in Vietnam —
circa 1968.‘Her manager, a guy who was otherwise reasonable,