Plunging dollar will set world markets reeling

[Jcrowley]

Plunging dollar will set world markets reeling

Heather Stewart, economics correspondent
Sunday December 3, 2006
The Observer

The slowdown in the US economy, which has sent the dollar into freefall over the past fortnight, will have devastating knock-on effects in markets around the world, analysts warn.

As the US slows, and consumers in the world's biggest economy feel the buying power of the dollar in their pocket declining, global growth will be hit hard, economists say. The greenback took yet another turn for the worse on Friday, after a survey of the US manufacturing sector showed output declining for the first time in more than three years.

Wall Street is now betting that Federal Reserve chairman Ben Bernanke will slash interest rates to stave off a recession. The dollar ended the week at $1.98 against the pound, and $1.32 to the euro, but analysts say there is further weakness to come. 'I think the dollar's going to hell in a handbag,' said David Bloom, currency strategist at HSBC. 'The market is starting to think that the US is going from a soft landing to a hard landing.'

Some analysts have argued that a more balanced global economy, with strong growth in Asia and Europe, means the impact of a US slowdown will be limited; but Stephen Roach, chief economist at Morgan Stanley, believes China - and in turn the rest of Asia - will follow.

http://observer.guardian.co.uk/business/story/0,,1962449,00.html

[ayeshahaqqiqa]

1. Hang on tight: bumpy road ahead

I've noticed that recently, people aren't getting out and buying things or even getting out and doing things. On Saturday, the day after our ice storm when the roads were all clear, the only lines I saw were at the bank, for people to cash their paychecks from Friday. No traffic at stores; no traffic at the popular local flea market; no one showing up for the free health lecture at the Foundation. My doctor said a friend in California told her he's come across the same phenomenae; it's like people are scared to death and are hunkered down in foxholes.

[Duer 157099]

2. I'll tell you which stores *are* busy though

Thrift stores.

Not kidding. They are usually like graveyards, but not lately.

[tabasco]

8. Scratch & dent in my community is always crowded these days.

I always shop there because I'm not afraid someone might think I'm poor (gasp!).

[ayeshahaqqiqa]

16. You're right there

but then where I live they have always had a big business, as have the bent and dent stores.

[AX10]

3. Roach has being warning of this for some time now.

[screembloodymurder]

6. The fact that this has hit the MSM is a good reason to

buy the dollar and sell the euro. Remember when their's blood in the streets, buy.

[whistle]

7. Who is Roach?

[Lone_Star_Dem]

9. I think they mean Stephen Roach

He's a Chief Economist for Morgan Stanley.

[Warren DeMontague]

4. One, Two, Three....

...Well, that was productive.

[Lone_Star_Dem]

5. Wall Street may be in for a surprise then

With core inflation up 2.9% in the past year I don't see how the Feds can lower interest rates. Just leaving them where they are is a gamble.

[Joanne98]

11. And OPEC is cutting oil production again....

[BrokenBeyondRepair]

10. a catalyst

[DoYouEverWonder]

12. The Repugs

want to make sure they leave as big a mess as possible so when they are gone, they can blame it on the Dems who will be in charge and have to try to clean it up.

[madrchsod]

13. if the dollar collapses the world economy will stall

i do not think china will be very happy because that would mean trouble politically and economically. all those wally bucks will be worthless

[Strelnikov_]

14. Where Does The Money To Back The Lower Interest Rates Come From?

Every loan shark I have ever dealt with raises the rates once you get in a hole.

And we all know Asian loan sharks are the toughest ones on the block.


Maybe that's what Cheney was doing in Saudi Arabia sucking up to a corrupt king. Trying to convince him to buy some T-Bills on the cheap.


The GOP Reich is going to have a lot of problems holding this Potemkin Village economy together until after 11/08.

[Deja Q]

15. Slow down on the offshoring and surely this problem would be improved?

At least for the US; if the US crashes yet the rest of the world doesn't, what then?

[medeak]

17. Gold projected to go over $700

my paper says tonight.