US Dollar plunge could lead to full-blown financial crisis

The Straits Times ^ | 01.17.04 | William Choong

[Beck_isright]

"This has led commentators to lament how America's twin deficits could grow into a 'full-blown, Third World-style financial crisis'."

Any crisis of confidence would see them withdrawing their loans, triggering a fall in American financial markets and then a run on the greenback.

The writing is already on the wall.

In the past year, the greenback has racked up losses of more than 20 per cent against the euro - falling to a seven-year low of around 80 US cents to the euro. Against the yen, it has shed 11 per cent to hit a three-year low of 105 yen to the dollar.

And we've been saying this for a while now and just tagged as being stupid little "goldbugs". Amazing.

[Beck_isright]

$$$$$$$$$$$$$ PING $$$$$$$$$$$$$$$$$

[lelio]

This has led to a massive current account deficit of more than US$500 billion (S$850 billion) - a far cry from 10 years ago, when the US enjoyed a trade surplus of US$82 billion.

According to some on FR this is a sign of the US's growing wealth -- that we can afford to import more than we can create ourselves. They don't seem to follow this to the next step: that we're beholden to foreign governments that buy our debt.

[nwrep]

This is a dangerous trend. If it accelerates, it could spell disaster for the country, and the election of a Democrat majority.

[Beck_isright]

" They don't seem to follow this to the next step: that we're beholden to foreign governments that buy our debt."

I thought a foreign perspective on this subject was overdue. And it's quite logical. But too many on this board keep believing the steaming pile which is emitted from the "don't worry be happy" crowd. At what time will this price be paid by Joe six pack is what should be addressed. But in the mean time, let's all just get liquored up like that kicker from the Colts. Don't worry....be happy.....be a bot....don't speak ill...

[Beck_isright]

"This is a dangerous trend. If it accelerates, it could spell disaster for the country, and the election of a Democrat majority."

And the actual installation of Euro-socialism as our political and economic way of life.

[cynicom]

Bottom line reads "profit"..If it takes Asian workers to enlarge that bottom line, so be it. If we transfer enough wealth to China, they will not want to make war and will become a peace loving friend.

[Beck_isright]

If the dollar crashes, China might go into acquisition mode. My fear is the creation of a new Greater Asian Co-Prosperity Sphere.

[Praxeologue]

The author displays a complete ignorance of basic economics in this rambling and scattered piece. In addition, he favorably quotes Rubin and Krugman, no friends of the free market.

The U.S. will grow its way out of its deficit.

Let's have another tax cut.

[Dane]

Mr Paul Krugman, a prominent economist who foresaw the 1997 Asian financial crisis, drew the conclusion as early as last October

Real good source there Beck. And don't give me that cliche that a broken clock is right twice a day. The clock is still broken.

[lelio]

The author displays a complete ignorance of basic economics in this rambling and scattered piece.

Such as? Specifics please.

[Beck_isright]

"The author displays a complete ignorance of basic economics in this rambling and scattered piece. In addition, he favorably quotes Rubin and Krugman, no friends of the free market."

No disagreement there. He could have found better sources.

" The U.S. will grow its way out of its deficit."

The government deficit? Never. The consumer deficit? Only via default.

" Let's have another tax cut."

It's needed desperately. But it will not happen.

[Beck_isright]

" Real good source there Beck. And don't give me that cliche that a broken clock is right twice a day. The clock is still broken."

Not my source. Krugman is an avowed socialist. I disagree with him on many points. It's the author's source. Like I said, there are better sources who have said the same thing.

[RussianConservative]

bump

[templar]

The U.S. will grow its way out of its deficit.

When historically, has this happened? And where?

[RussianConservative]

If we transfer enough wealth to China, they will not want to make war and will become a peace loving friend.

hahahahahahahaahah...or nationalize your factory when ready, take Taiwan and US do nothing but wimpper as little girl...why? Because China can now nationalize and bankrupt most US company.

[RussianConservative]

To have tax cut, one must have monies that mean control and cutting of spending. US not comprehend basic accounting...it have tax cut and increase spending, this is debt..like take large loan on credit card...even if balance not paid, interest is.

[RussianConservative]

When historically, has this happened? And where?

In fantasy land of modern US economy, where skies are purple, flowers always bloom and new shiny credit card but mailman's delivery away.....where all sins and debts never come due.

[BlazingArizona]

The article speculates about the disastrous results of a Weimar-style mega-devaluation, while citing actual figures showing a much more modest develation of 25% or so against the Euro and gold. What Asians are really afraid of is that the devaluation that has already taken place will cause us to make more of our own goods, and put Americans back to work doing so.

[Hank Rearden]

The U.S. will grow its way out of its deficit.

Not if the Republicans don't stop their drunken spending spree.

Let's have another tax cut.

Ok by me. And a much larger spending cut to go with it.

Like that'll happen, with the free-spending Republicans in charge.