Without dollar fall, U.S. will repeat crisis

"A dollar devaluation is needed of at least 25 percent from here, but resistance will be so great that this is not feasible," said Connolly, managing director of UK-based Connolly Global Macro Advisors.

Without substantial dollar depreciation or a resurgent private sector, "the Fed will have to buy another $2 trillion in debt, including Treasuries and agency debt" to reflate the economy, running up dangerous asset bubbles in the process.

But Connolly said there is "a real disconnect between the rebound of risky assets and the real economy, and added that "financial markets are working their way up to ... a renewed bubble, which will burst again."

http://www.reuters.com/article/ousivMolt/idUSTRE59J66820091020