The Dollar's Decline in Perspective
The principle tenents of the article could still be written today, and remain accurate and pertinent descriptions of our government's predicament.
Careful, Paul Ross. Jedward took grief for posting links from an other than conservative organization.
But, it is a very good article, isn't it? :-)
The dollar's decline has been stalled by the federal government's appetite for new money from overseas. To finance large budget deficits, the federal government borrowed money from international investors, particularly from central banks in Asia. The result has been a rising demand for dollars from overseas investors which has kept the dollar comparatively high despite the gaping U.S. trade deficit.
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. . . Eventually, foreign investors will worry about the impact of large U.S. government budget deficits on economic growth. Nobody expects deficits to rise without an effect on interest rates. To compensate for the loss of value that slower growth would mean for their investments in the U.S., they may demand higher interest rates to keep their money here. . . .
The policy responses are clear. The federal government's irresponsible dependence on international capital flows has helped to bring the U.S. economy closer to the brink of either a financial crisis or a prolonged economic slowdown. To reduce this possibility, federal budget policy needs to be put on a course towards fiscal responsibility.