Danger of carry trade in the US

I personally know little about carry trade, but am interested in understanding it. The following article is about the potential danger of carry trade in the US as the current low interest rate there and depreciating $US. The article also mentions

See Stephen Bartholomeusz "Greed and the greenback", 5/11/2009, http://www.businessspectator.com.au/bs.nsf/Article/US-dollar-Federal-Reserve-interest-rates-financial-pd20091105-XHA33?OpenDocument&src=sph

The following is a copy of the article:

Overnight the US Federal Reserve Board’s open market committee restated its commitment to keeping official rates at "exceptionally low levels" for an extended period, with a target range for the federal funds rate of 0 to 0.25 per cent. That promise would have been greeted with great enthusiasm by the traders in investment banks and hedge funds.
As discussed previously (Risky business as usual, October 16) effectively the Fed is paying banks to borrow from it by keeping rates negative in real terms. That has helped swell the profits of the investment banks by enabling them to undertake relatively low-risk carry trades, borrowing from the Fed to buy government-guaranteed securities.
However, it may have done something rather more dangerous than that.
Writing in the Financial Times earlier this week, Nouriel Roubini referred to the dramatic rallies in equities, oil, energy and commodity prices since the markets bottomed in March. A combination of the Fed’s policy of a zero federal funds rate, quantitative easing and massive purchases of long-term debt instruments, he argued, was seemingly making the world safer today but creating the "mother of all carry trades and mother of all highly-leveraged global asset bubbles".
Roubini says that while the recovery in risky assets is partly driven by better economic fundamentals, and partly by the huge injections of liquidity from monetary and fiscal policies, the more important factor has been the weakness of the US dollar.
Investors were, he said, shorting the dollar to buy higher-yielding assets using lots of leverage and effectively borrowing at very negative rates – negative 10 to 20 per cent annualised – as the declining US dollar generated massive capital gains.
The problem with too-good-too-ignore carry trades is that everyone piles into them. Initially that exaggerates the gains but in the process it increases the risk of a bubble forming and of damaging and destabilising fallout when it eventually bursts.
The longer these so-called momentum trades – where the weight of money creates or amplifies trends in asset prices and attracts more money to the trade – continue, the bigger the bubble and the more potentially destructive its bursting.
At the moment borrowing in US dollars at zero or negative interest rates to invest in almost anything would appear a relatively safe play. There are good reasons for US official rates to be low and the dollar weak – the US economy itself remains weak and fragile and the legacies of the crisis should keep a lid on growth and weigh on the dollar for a very long time to come.
However, dollar-funded carry trades would be exceptionally vulnerable to any stabilisation or even modest appreciation of the dollar. That would spark an instant rush for the exit gates as traders scrambled to cover their short positions – which would in turn cause the dollar to bounce and exacerbate the squeeze on their positions.
Any material improvement in the US economy or any event that triggered the usual flight to the traditional safe haven of US treasuries could be a catalyst for massive losses and another meltdown of the financial system.
For the moment it is easy to rationalise the Fed’s position. It has, with the extraordinary measures taken to support the US financial system, helped avert an implosion in the global financial system. However, the still-parlous state of the system and the US economy says that it is too early and too risky to start unwinding those emergency settings just yet.
However, the longer they remain in place the more risk and instability is again being built up within the system and the more difficult it will be to unwind the trades without causing massive dislocations.