Well, this article in the Financial Times by Nouriel Roubini on November 1 confirms this argument. It's a bit technical in his terminology but basically what he's talking about is that because the US dollar is falling in value, and because the Fed has a policy of very loose money, with interest rates at near zero, there is a massive growth in what is called the carry trade in US dollars.
The basic idea is that traders borrow massive quantities of money, then they use that cheap money to invest in assets that have a higher return rate. And since the US dollar is falling, even better if they are foreign denominated assets. It's like me taking out a mortgage at prime rates to lend you money at credit card interest rates. It's likely that this is also happening in China with Chinese capitalists taking advantage of the huge expansion of cheap money (US$1 trillion this year) to buy up commodities like steel, which then appreciate at rates much higher than the interest rate at which the money was borrowed. This is all well and good, until things make a turn and then everything goes up in flames and everyone runs for the exits at the same time. If, for instance, as is almost inevitable, the dollar rises in value, the big returns will suddenly be cut. Or if the economy continues to improve and the Fed decides to raise interest rates, the same will happen. Then things could get very ugly. As Roubini notes:
"But one day this bubble will burst, leading to the biggest co-ordinated asset bust ever: if factors lead the dollar to reverse and suddenly appreciate – as was seen in previous reversals, such as the yen-funded carry trade – the leveraged carry trade will have to be suddenly closed as investors cover their dollar shorts. A stampede will occur as closing long leveraged risky asset positions across all asset classes funded by dollar shorts triggers a co-ordinated collapse of all those risky assets – equities, commodities, emerging market asset classes and credit instruments...
"This unraveling may not occur for a while, as easy money and excessive global liquidity can push asset prices higher for a while. But the longer and bigger the carry trades and the larger the asset bubble, the bigger will be the ensuing asset bubble crash. The Fed and other policymakers seem unaware of the monster bubble they are creating. The longer they remain blind, the harder the markets will fall."For the brave and foolish, borrow big now and put the cash in assets or commodities. But if you get caught with your pants down, don't come and ask to sleep on my couch.