US Dollar plunge could lead to full-blown financial crisis

The Straits Times ^ | 01.17.04 | William Choong

[george wythe]

My wife just had twins 2 hours ago.

Congratulations.

Take a lot pictures and devise a sleeping schedule.

Unless you make time for sleeping, both parents will find it difficult to get some shut eye.

Don't be afraid of asking friends/relatives for help.

The rewards of parenthood are worth any effort. Nothing makes me happier than being there when my preschooler awakes from her nap. She walks toward daddy, puts her little hands around my neck, and breaths softly while I hold her.

[Henchman]

CLINK not PING! The EUROpeans will panic first. They will support the dollar because they don't want the dollar to be weak cyphoning trade and JOBS. The Germans started to panic at 1.28 US to 1 EURO

[txhurl]

*Sniff* but I don't wanna be toast.

[Beck_isright]

The ECB will cut interest rates. This action will not be enough thus the Fed will cut again before the election. The dollar will be at 1.25 EU or worse by the election.

[imawit]

That's a tough one to have happen. With the USD in world reserve position and OPEC requiring trade in USD, the Yuan and the Yen dropping against the dollar will keep them lower than the Euro.

Don't forget the original basis for the Euro was to knock out the USD as the world reserve currency. For years Europe and the OPEC have been talking and slowly putting the foundation in for this. Asia remains with the USD and below it because they are sucking the technology and manufacturing out of the US with their gambit.

Sadly enough, the US corporations, government and the FED are playing along and facilitating this. Remember too that a lot of the increase in profit in US corps due to a devalued dollar also have their manufacturing and sales offshore.

A weaker dollar lessens our debt but in the end gives us inflation and a weak currency, a weak economy and equal if not less status than the other economic powers. Once we then lose all of our gold because it's so cheap, we'll have nothing. We are only debting our way to prosperity and at the end game we will have just the debt and worn out applicances and cars. Where are the working households going to come from when the jobs are offshore.

[imawit]

The ECB will cut interest rates.

Last night on Bloomberg TV out of Europe they announced that the CB's in Europe would not be heeding Trichet's words. And that's all it was, words. Looks to me like a market ploy to snatch a few billion out of the currency exchange trade and give the FED the benefit of a successful auction. Then, back to SOP.

The devaluing action, stronger dollar remarks by W, the Treasury and the FED will and are continuing. Imagine that. Watch what they do, not what they say. And, if you're trading anything you've gotta play the trends or suffer through until the end and we're at reality sans the hype and PR.

[Beck_isright]

I'm ignoring the technical analysts as we are in uncharted territory. I think that the ECB will cut this spring and then the Fed will follow in June or July. Just in time to give the economy a 2% boost before the election.

[AdamSelene235]

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.

Great, now even the Rooskies are mocking the integrity of our financial system.

Welcome to the FR doom and gloom club !!

Got gold, got oil, got popcorn??

[imawit]

I think ... ECB will cut this spring ... the Fed will follow ... to give the economy a 2% boost before the election.

I don't doubt it. It's more probable than not but remember !

It’s simple, basic, fundamental, inviolate, logical, incontrovertible, as sure as birth taxes and death. 1+1=2 and as long as the FED does not raise its 24hr rate and treasuries remain at the low levels they are and deficit financing continues, THE USD WILL DEVALUE. This is not a function of other currencies and what they are doing. That’s a relative relationship, not a direct one.

This is what needs to be prepared for.

[imawit]

Yo Adam. I invited him on. I think he's a good addition. He's also studying for his MBA. He's also 11 hours ahead of us. We'll be able to see how much sleep he gets.

[meyer]

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

Ahhhh, Krugman, the voice of reason. (sarcasm)

[meyer]

Got gold, got oil, got popcorn??

Yes to all three. I've also got lead and a variety of launching mechanisms at my disposal.

But I have to ask, is this devaluation of the dollar that bad or is it a correction for several years of hypervaluation when American production lost a great deal of market share. Weaker dollars do make our labor cheaper on the world labor market (though not as cheap as, say, China) but when you consider shipping costs, this might have a positive effect on our own industries.

[Jeff Head]

I believe they will come...I pray soon.

On a related note, I found out today that the Independent American Party saw and published my recent article that I posted here on FR:

The Rising Sea Dragon in Asia

[SunkenCiv]

Note: this topic is from January 18, 2004. And you're gonna love this:

In a paper presented earlier this month, three analysts - including former US treasury secretary Robert Rubin -- argued that Washington's twin deficits could amount to what some have termed a 'full-blown, Third World-style financial crisis'. Mr Paul Krugman, a prominent economist who foresaw the 1997 Asian financial crisis, drew the conclusion as early as last October. In a New York Times column, he said the US economy was approaching a 'Wile E. Coyote' moment - when the coyote in the famous Road Runner cartoon runs off a cliff, only to realise at the last minute - too late - that it is about to plunge to the bottom. 'What will the plunge look like? It will certainly involve a sharp fall in the dollar and sharp rise in interest rates,' he wrote. 'In the worst-case scenario, the government's access to borrowing will be cut off, creating a cash crisis that throws the nation into chaos.'

[GOPJ]

...a weaker dollar is a double-edged sword: It could lead to dearer imports and raise inflation...

Our future's sitting out there - and it's not pretty.

[Southack]

This article, and its predictions, are half a dozen years old.

Instead of inflation, we’ve got home prices and salaries falling. Deflation.

[GOPJ]

I think it’ll flip - too much debt...

[Jim Noble]

'In the worst-case scenario, the government's access to borrowing will be cut off, creating a cash crisis that throws the nation parasite class into chaos.'

There. Fixed it.

The crisis will lead to the repeal of the Federal Reserve Act and the return of real money.

Never let a crisis go to waste.

[Southack]

Japan’s had much more debt than us for the past 21 straight years.

Japan has deflation, not inflation.

This article in this thread predicted inflation half a dozen years ago.

Didn’t happen.

Won’t happen.

We’ll get falling home prices and lower salaries, instead. The opposite of inflation.

Learn from Japan.