Domestic Issue: Crashing US Dollar from US Trade Deficit (Fed. Reserve)

[cthrumatrix]

McTeer Says U.S. Trade Imbalance May Cause the U.S. Dollar to Fall Rapidly


Oct. 7 (Bloomberg) -- The record U.S. current account deficit will lead to an inevitable decline in the value of the dollar, a drop that might be rapid and provoke a financial crisis, Dallas Federal Reserve Bank President Robert McTeer said.

In a New York speech, McTeer said a precipitous drop in the U.S. currency would lead to a big jump in interest rates. He offered no easy policy solution, saying he `` feels foolish warning about it'' because ``nothing bad has happened so far.''

The current account deficit, which reached $166.2 billion in the second quarter, ``is going to cause problems, but we just don't know when,'' McTeer said at a New York event hosted by Market News International.

http://www.bloomberg.com/news/economy/fedwatch.html#


This is a BIG problem. The US cannot easily resolve our trade deficit unless we "devalue the dollar" OR start making and buying only US goods.

The end result (if not fixed) will be a dramatic rise in interest rates which would really hurt our economy .

We've got a big problem guys.

[requiem99]

1. Bush says the economy is fine, so it is. Who needs facts? We got Bush.

[cthrumatrix]

4. the sick part is "everyone is ignoring this".... watch the dollar & rates

At some point, foreigners will slow their investments in the U.S., meaning capital ``flows will turn against us, and there will be crisis that will result in rapidly rising interest rates and a rapidly depreciating dollar that will be very disruptive,'' he said. ``But I don't know what to do about it.''

(same link)

[wishlist]

2. Only consolation of Bush win is that at least Kerry wouldn't be blamed

It does look like a possibility that there could be a convergence of high oil prices and high interest rates along with a low dollar causing inflationary pressure. Could hurt both the stock and bond and housing markets plus the huge budget deficit will limit government's ability to reduce taxes or spend our way out of another economic downturn.

[Killarney]

3. I don't understand how a true fiscal conservative could vote Bush

he's created a monster.

[cthrumatrix]

5. That's why Paul O"Neil was fired as Bush's Tresurer...he wanted to use

the surplus towards social safety nets (Medicare & Soc Sec). Bush just wanted tax cuts...

Read it in O'Neil's book "The Price of Loyalty".

[Robert Oak]

6. Big problem is an understatement, why I got active

What's amazing is they think it couldn't happen to the US, what happened
in Korea, Argentina, Thailand...

but it could. Legislators just keep listening to lobbyists and ignoring the statistics. We saw it just today with the passage of HR 4520.

My favorite is the IMF giving the United States warning on the deficit.

Barely makes the news.

http://www.wsws.org/articles/2004/jan2004/imf-j12.shtml

The International Monetary Fund has sounded the alarm on the state of US finances, warning that the growth of external debt and the increase in the budget deficit are threatening global financial stability.

[Warpy]

7. Nobody will care as long as wishful thinking and hot air

are keeping the dollar strong on currency markets. However, there's a huge amount of pressure to convert the world system to the Euro, something the Bush team is fighting tooth and nail at this point.

As soon as enough countries start doing business in Euros instead of the buck, we'll see that rapid decline he's warning about, which means rapid inflation here at home at a time when the government can no longer borrow its way out of a depression.

This one is going to be really, really ugly, folks.

[Warpy]

8. Board hiccup, delete