The US Economy and the US Dollar: the US is facing a dollar collapse by the end of 2021 and an over 50% chance of a double-dip recession, economist Stephen Roach says - by Shalini Nagarajan

• The US dollar could collapse by the end of 2021 and the economy can expect a more than 50% chance of a double-dip recession, the economist Stephen Roach told CNBC on Wednesday.
• The US has seen economic output rise briefly and then fall in eight of the past 11 business-cycle recoveries, Roach said.
• Grim second-quarter data cannot be dismissed, he said, pointing out that "the current-account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration."
• Roach last predicted a crash in the dollar index in June, when it was trading at about 96. He said at the time that it would collapse 35% against other major currencies within the next year or two.

The "seemingly crazed idea" that the US dollar will collapse against other major currencies in the post-pandemic global economy is not so crazy anymore, the economist Stephen Roach told CNBC's "Trading Nation" on Wednesday.

Roach,a former chairman of Morgan Stanley Asia, also said he sees a more than 50% probability of a double-dip recession in the United States.

He based that prediction on historical evidence, saying that in eight of the past 11 business-cycle recoveries economic output has risen briefly and then fallen.

"It's certainly something that happens more often than not," he said.

Roach last predicted a dollar crash in June, saying it would collapse 35% against other major currencies within the next couple of years. At the time, the dollar index traded at about 96. On Thursday, the index traded at about 94.41.

He said on Wednesday that he expected the collapse to happen by the end of 2021, but he did not say by how much.

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The US is facing a dollar collapse by the end of 2021 and an over 50% chance of a double-dip recession, economist Stephen Roach says | Markets Insider

EU UNITY required as Brussels tragedy strikes at the heart of an already fragile European Union - by E. Reguky and M. Mackinnon

United we stand divided we fall

This week’s bombings in Brussels shattered the peace, and the sense of self-confidence, in the heart of the European Union. The Islamic State militants who carried them out may yet achieve a much larger goal: speeding the breakup of the 28-country bloc that is the grandest geopolitical project since the Second World War.

Even before the massacre, the EU – based on lofty ideals about the free movement of people, money and ideas – was reeling from a seemingly endless series of body blows. There was the refugee crisis, the spectre of Britain voting to leave and the rise of parties of extreme right and left, movements united only by their anti-EU positions. All these problems were exacerbated by Tuesday’s bloodshed.

Throw in the continent’s lingering economic malaise – symbolized by shocking jobless rates in Mediterranean countries – and an institution that was lauded just four years ago with a Nobel Peace Prize for its role in maintaining stability in Europe seems at genuine risk of falling apart.

That reality is just starting to sink into the institutional, clubby atmosphere of Brussels, a world of expense accounts, black BMWs and cushy high-paying jobs. Samir Benelcaid, a Belgian radio talk-show host who broadcasts in French and Arabic, said “people in Brussels didn’t really worry about the future of the EU” even though they were involved in shaping it.

The mentality is starting to change since this week’s bombings. “My own view is that Europe is falling down,” Mr. Benelcaid said. “The EU is facing so many issues with no responses, like migration, terrorism, unemployment. They give billions and billions of euros to young people for jobs formation and there are no results.”

The questions facing the EU post-Brussels are whether the bloc is just one, or perhaps two, more blows away from shattering – and whether the threat of disintegration will persuade the EU’s leaders and citizens that their union is worth saving.

Read more: Brussels tragedy strikes at the heart of an already fragile European Union - The Globe and Mail

Brexit fears stalk currency markets ahead of EU summit - by David Oakley, Elaine Moore and Roger Blitz

"To be or not to be"

Investors are betting that sterling is heading for another big tumble as currency markets are gripped by Brexit fears.

Net short positions on the pound have increased to the highest level since the summer of 2013, according to data from the US Commodity Futures Trading Commission.High quality global journalism requires investment.

With prime minister David Cameron expected to announce the date for the vote soon, possibly at the EU summit this week, some investors are predicting a rocky ride for sterling in the currency markets in the next few months.

The pound has fallen about 8 per cent since the middle of November on a trade weighted basis, with investors citing the uncertainty surrounding the Brexit vote, which could come as early as June, as one of the main reasons for the weakness in the currency.

“We need to be prepared for a choppy market,” said James Maltin, investment director at wealth manager Rathbones. “The Brexit debate may be about to heat up. It is yet another uncertainty out there that could hit the UK markets.”

Some analysts fear a potential Brexit could spark a recession, with Nomura, the Japanese bank, warning that the pound could fall 10 per cent to 15 per cent if overseas investors prove unwilling to finance Britain’s current account deficit.

Mark Carney, governor of the Bank of England, warned in January that concerns about Britain’s exit from the EU could test “the kindness of strangers” that the country relies on to fund its hefty current account deficit with the rest of the world.

Britain has a relatively large current account deficit of 3.7 per cent of gross domestic product. The worry is that overseas investors, which hold £427bn in UK government bonds, or a quarter of the market, might start to sell, putting further pressure on the pound.

Read more: Brexit fears stalk currency markets ahead of EU summit - FT.com