From Mike Larson

A fascinating thing just occurred in the global interest rate market: For the first time since 1993, it became cheaper to borrow dollars than Japanese yen! The three-month dollar-based London Interbank Offered Rate, or LIBOR, slumped to 0.292 percent, compared with the yen-based LIBOR rate of 0.352 percent.

I know. You're thinking: "Who the heck cares?" But this development is big — and so are the potential implications. It's all because of something called the "carry trade,"...

What the Carry Trade Did to the Yen and Global Markets ...
And What We May See Happen Here

The mechanics of the carry trade require that you sell the carry currency and buy foreign currencies against it. So one of the side effects is that it depresses the value of the borrowed currency.

Another side effect is that the carry trade helps inflate global asset bubbles.

Last time around, it did this by transporting the excess liquidity being created in Japan to foreign shores.

Now, thanks to the Federal Reserve's incredibly easy policy stance, we may be in for "Carry Trade Round Two." Only this time it's not Japan's currency that's being sold relentlessly to fund risky bets ...

It's our dollar!

Look at the chart to the left of the U.S. Dollar Index (DXY), which measures the performance of the greenback against six major world currencies (the euro, yen, British pound, Canadian dollar, Swedish krona, and Swiss franc). It looks like a ski slope, pointing down and to the right.

Unfortunately for dollar-based consumers (that's us!), the falling dollar has side effects. It drives up the cost of imports, raising our cost of living. It also boosts the price of commodities like gold and oil. And it means the cost of travelling abroad goes up, too.

However, you can actually PROFIT from the trend by socking money away in contra-dollar plays. That includes natural resource stocks, gold, and foreign short-term bonds and stocks. If you want to know more, I urge you to check out my colleague Larry Edelson's blog.