Beware the carry trade!

With interest rates in the U.S. at historic lows, some economists are worried that Americans involved in the carry trade could drive down the value of the dollar. Paddy Hirsch explains how the carry trade works, and why some people are worried about its return to the markets. #MarketplaceAPM #Currency #EconomicExplainers
Subscribe to our channel!
/ marketplacevideos

[@aligncars10000]

Learned more in these five minutes than I did in the 30 minutes my teacher spent talking about this

[@marketplaceAPM]

aligncars10000 Awesome. I'm stoked to hear that. Thank you!

[@mattlm64]

The carry trade isn't without risk. Exchange rates can move against you. It's not as clear cut as the video implies.

[@houdapurple]

i can feel my brain getting bigger the more i watch ur videos

[@Danny.r1]

I have a question (hopefully not stupid) - I understand why a depreciating yen would be bad for Japan in this scenario, but isn't it beneficial to the lady in the carry trade? i.e. she borrows in yen, converts to NZD for higher deposit yield, and converts back to yen at the end of the year. She would be profiting from a) the difference in deposit rates and; b) would be buying yen at a cheaper rate - essentially getting more yen back than when she started.

[@devhipster]

🎉congrats amazing explanation

[@Icecream-dv8oz]

thank you efficient and clear !

[@Gyrode]

@BlacksAreBeautiful Conversion only matters when you convert back. If your home currency increases in value relative to the foreign currency, you will lose some of the interest rate advantage. For example, if you trade 2 dollars for 1 british pound (I made up the conversion rate), and later when you trade back, 1 british pound gets you $1.75, you lost some money. But you still may be ahead due to the interest rate difference.

[@nyc10101]

thank you so much, i've learned 2 things from you today. carry trade and uptick rule. Thank you, P

[@ghache88]

very very clear explanation, thank you, i've got an Asset management exam tomorrow, for my last Management Bachelor year, and this helped me understand :-) going to have a look at your other vids. thanks.

[@mzambo666]

Thank you so much!

[@KoalaBearWarrior]

you're the best man! Thanks for the video! I learned a lot!!!!

[@_Geniecool_]

Awesome Explanation ❤

[@Gyrode]

@BlacksAreBeautiful Certainly, you would need some lucky growth stocks to get that type of return over a short term period. I should have made the conversion difference less extreme. 25% differences can take years to happen. Although certain shocks like the Greek crisis made the value of a dollar go up 7% relative to the euro...which would have hurt the carry trade if you kept the money for long.

[@gigijbijbj]

Thank You

[@cesara7478]

Great Video!!

[@callimachust1474]

Best drawings for finance lessons

[@RegM86]

Being in the food import business I know first hand what the weak USD has done for us. To make matters worse consumers are unwilling to pay the higher prices leading to cuts in our profit margin. I'm with the politicians and say keep the USD high.

[@freshasdida]

brilliant!

[@belibem]

There one slight problem though. JPY was actually going north all those years.

[@robertlunn3678]

If you think politicians think this way I'd be shocked.

[@Qualitiedx]

but when time comes to payback the us bank...doesn't buying the usdollars + 1% of interest mean that this will drive the value of usdollar back up?

[@SI0AX]

Is this similar to Carried Interest? Sorry if this is a dumb question, I have to write a research paper for college and have no clue on economics. Everywhere I look, I'm left more confused.

[@Danny.r1]

No. Carried interest is a term mostly used in Private equity. It refers to the General Partner's (fund manager's) share of the profits, usually 20%.

[@jeffreagan2001]

I can't go borrow money at 1%- only the banks can! Carry trade is only for the banksters- individuals are stuck borrowing at a much higher rate.

[@DavidAxelrodP]

you need a tv show

[@OneCreator87]

Hello

[@SupremeUltimateone]

everyone needs a drink

[@mikki7522]

Well, the price was driven down, but now it's pretty high again. So I'd postulate that there's a natural cycle as it is for arbitrage, and all other aspects of trading.

[@RomasNordman]

If you have lots of money you want that currency to be strong, so you can buy and invest offshore. The only way poor people would suffer if they are totally dependent on import goods...

[@_nik]

ms watanabe converting $10m¥ to "NZ Dank"... nice lmao

[@serkutaktas577]

Try to invest riskier but somewhat stable countrİes like Turkey , Poland , egypt . %14 interest rate OMG.

[@jeune_turc9404]

Almost %20 interest rate in Turkey right now. If you take a loan of like %2 interest rate from a random EU country and invest in Turkish Lira in a Turkish Bank with %20 interest rate, you might be rich depending on the amount of loan you could take.