Posted on 12/01/2004 11:42:47 AM PST by xsysmgr
I just don't see this as the doom-and-gloom it's presented to be. I remember the same stuff back in 1991. It is a long-term problem that we must address, but I see no evidence that a freakish drop in the dollar is imminent.
OK, but sense when has raising taxes been the best method of raising tax revenue?......
The Carter Administration????
Don't worry about the dollar. Let the EU worry about the dollar.
Thanks, good read.
yeah. of course. the whole world owns us bonds. and the whole world derives income in dollars from them. and that selfsame world is going to whistle dixie while driving the dollar into the ground. not (even if they could do it, which they can't).
I get a kick out of most Americans because this is out of their grasp. Due you think the trade towers were a target of opportunity or were they a stratigic target. O.K., if it was stratigic, what was it's value. Why did they AQ hit the petroleum plant in Suadi? I'm not saying "Its over", but you better relize the ACTUAL possibilities. Keep in mind, the dollar itself is the target in this NEW COLD WAR.
"The problem is that this process cannot go on indefinitely."
LOL! That's a problem? Nothing goes on indefinitely.
The bottom line is that the market will correct itself. We don't need to lose sleep worrying about it. The people who should worry about it are the foreigners who've been acquiring dollars, and refuse to spend them because they don't want to import American goods. They are the ones who are going to suffer when the dollar goes down.
Dollars are like any other commodity in the fact that if you have less demand and more supply, the value comes down. How many dollars have been spread thoughout the world through the IMF and World bank? Our currency has to be in a constant state of expansion, when that stops, were screwed.
No kidding!
One way to ameliorate the problem is to get foreigners to use the dollar in transactions between themselves. They already do that to a significant extent, but the introduction of the euro has reduced that practice to some degree. Now that they have so many dollars, and the euro is less available, maybe that will change. They've either got to use those dollars, hold them, or unload them. The first choice may be the most appealing.
As a percentage of GDP, the "trade deficit" is nowhere near a record, same as for the "budget deficit." Currency speculators are at play; some will win, some will lose. One thing is nearly certain: U.S. interest rates will rise as the Fed raises rates in lockstep with the U.S. economic recovery. This is a self-correcting mechanism: as U.S. interest rates rise, the dollar becomes more attractive relative to other currencies. In foreign currency markets, the "market" is supposed to correct imbalances. Our biggest imbalance is with China, so the dollar should fall relative to the RMB; however, the RMB is pegged to the dollar. So the deficit continues to grow and China is forced to buy dollars to maintain the peg. If and when China abandons the peg and lets the RMB float or pegs it to the Euro, then the market mechanism will solve the problem. Until then, we will continue to post large dollar value trade deficits.
Ah, but it is *their* problem, not ours. The more that the Dollar drops, the fewer things we import from Europe and Asia.
Even the dimwitted author of the above article manages to notice that the Asians (Europeans, too) are propping up the Dollar versus their currencies.
They have their reasons for so doing, but it is their problem to maintain that artificial support, not ours.
For our part, let the Dollar fall to its fair market value (i.e. that point where imports equal exports).
The administration should stop talking down the dollar. We've had some good economic news and Greenspan has been gradually raising rates. Of course, the variable is whether the administration can cut spending. Nevermind, what was I thinking?
It complicates monetary policy and threatens foreign central banks with large capital losses should U.S. interest rates rise.
I think the problem comes in when the foreign central banks ask the U.S. for gold in return for the dollars.
An anonymous investment expert revealed that Middle Eastern countries are redirecting their money away from the dollar, preferring to buy the Euro and treasury bonds instead. This trend, which began several months ago, was triggered by the steady depreciation of the dollar.
It's a very serious problem, but raising taxes will do absolutely nothing to solve it. I'm surprised that NRO would publish such garbage.
Clinton presided over the largest tax increase in history, and he also presided over the largest increase in the current account deficit, most of which occurred during his watch.
Ronald Reagan fixed the Carter deficits with a huge tax cut, although the pop in the current account deficit didn't disappear until halfway through George HW Bush's term in office.
Bruce Bartlett is one of the smartest economic oberservers out there. Considering you just got a schooling on the causes of inflation and deflation, you should be the last to cast stones.
For our part, let the Dollar fall to its fair market value (i.e. that point where imports equal exports).
There you go again. Read the article. Also read Greenspan's speech from Nov. 19th. The best way to handle the current account deficit is for the administration to balance the budget. Ideally through spending cuts, but that's not going to happen. Sadly that leaves tax increases. Greenspan and Bartlett are warning against a rapidly falling dollar. They are very smart people and there is historical precedent for what they are saying (see 1987 stock market crash) Listen to them and understand. Do some research rather than calling them stupid.
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