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).
"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.
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.
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.
bttt
The root of the problem is not a trade or budget deficit...It is the lack of a GOLD STANDARD. Politicians can not be held accountable when they can print endless amounts of money.