The higher cost of imports and a slow rise in interest rates should combine to slow the American economy over the next few years, although strong export growth will offset some of this. If interest rates keep rising, mortgage refinancing will inevitably decline.
Ultimately, Swanson believes all these imbalances will be reconciled, at least partially, by an increase in the U.S. savings rate. "That would help us self-finance ourselves better," he says.
As for the dollar's implications for financial assets, they are not so clear. "Try to find a deterministic link between a stock market and a currency and you can't," Swanson says. "Right now there may be better investment opportunities abroad. But eventually, a currency reflects the investment opportunities in a country," he notes.
