The Dollar is Fucked

[andrewducker]

If you have debt, now would be a very good time to pay it off.  Seriously, the dollar has been looking shaky for a while, and looks likely to undergo a rather large correction in the near future.

This sounds rather extreme, but wander this-away and read what the head of investment giant Morgan Stanley has to say

His prediction: America has no better than a 10 percent chance of avoiding economic ``armageddon.''

America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.
The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded.

To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day.
That is an amazing 80 percent of the entire world's net savings.
Sustainable? Hardly.
Meanwhile, he notes that household debt is at record levels.
Twenty years ago the total debt of U.S. households was equal to half the size of the economy.
Today the figure is 85 percent.

Go read the rest - I've been reading similar stuff for about 9 months now, pointing out which way things are heading.  But it really is reaching the ridiculous stage at the moment...

Comments

[cheekbones3.livejournal.com]

Such is their policy - they want a weak dollar! Easy to export I suppose.

[guybles.livejournal.com]

Not just that, but expensive to import. Hence, home-produced products are comparatively cheaper than foreign goods. Hence, protecting American jobs (for the short-term at least).

Mind you, they did skip the fact that due to using money earmarked for welfare to prop up the economy, American workers are utterly demoralised and no longer care about doing a job job, since they know they will never be recognised for it. As a result, the quality of American products is shockingly low...which causes all the people with money to buy overseas goods, increasing net imports, increasing net debt and so on.

[green-amber.livejournal.com]

Um does that mean I'd be beter to turn my dollars into sterling even at this crap rate??

[andrewducker]

Depends on whether you think the dollar is going to fall by a little (keep em), a lot, then bounce back (keep em) or catastrophically fall over, as America plunges into a depression (swap them for food for the bunker).

I'd say you could afford to speculate somewhat - leave them in dollars and wait and see.

If nothing else, being able to say to the future generations "These are Old Dollars, of course, I decided to keep them rather than swap them in for Yen." will be something to look forward to.

[xquiq.livejournal.com]

I still maintain an interest in economics and I must admit, the second Bush term scares me for that very reason. At the moment, I can't see anything other than a major crash or a return to 80s inflation - neither appeal :/

[thadrin.livejournal.com]

It still amazes me that the whole thing of Bush turning a decent economy into a huge defecit got ignored at the polls.

America has dug its own grave.

[original-aj.livejournal.com]

Maybe they should try "Godless Communism"? ;)

[dragonscholar.livejournal.com]

I think the gentleman in question is overdoing it a bit, not looking at the entire system.

However, I say a bit. The problem is still atritious. The levels of debt Americans has truly astounds me, and it'd be bad even WITHOUT a weakened dollar.