The psychology of a falling dollar
Given a current-account deficit in excess of 6% of US gross domestic product (GDP), many fear the dollar must decline. At the World Economic Forum in Davos, Switzerland, policymakers disagreed as to the severity of the risk, its causes and cures.
In a nutshell, the United States does not export enough to the rest of the world to balance its own appetite for cheap Asian imports. The American consumer spends too much and saves too little. As a result, dollars are leaving the US in return for goods and services. Unless those dollars are reinvested in US-denominated assets at a rate in excess of US$2 billion a day, the dollar will decline.
( Full story here )
In a nutshell, the United States does not export enough to the rest of the world to balance its own appetite for cheap Asian imports. The American consumer spends too much and saves too little. As a result, dollars are leaving the US in return for goods and services. Unless those dollars are reinvested in US-denominated assets at a rate in excess of US$2 billion a day, the dollar will decline.
( Full story here )
posted by Oil Shock at 12:03 AM
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