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Does the Carry Regime Have to Exist?
Is the Carry Regime Inevitable?
GLOBAL FINANCIAL MARKETS HAVE COME TO BE DOMInated by carry; they exist in a carry regime. But as we have shown, in a levered world a long-run positive return to carry trades seems inevitable. Therefore, in practice, does it really mean anything to talk about the world existing in a carry regime? Is it possible to imagine anything different?
An obvious starting point, and one we believe can give us some insight into the nature of carry, is to consider the possibility of the exact opposite of a carry regime—a hypothetical “anti-carry” regime. What would be the characteristics and implications of such a regime?
First, to recap, the defining feature of the carry regime is that ...
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