Posted on 10/18/2009 8:48:41 AM PDT by FromLori
he dollar will extend its drop versus the euro over the next two to five years, falling as much as 20 percent to an all-time low under a widening U.S. budget deficit, Harvard University’s Professor Niall Ferguson said.
Policy makers favor the dollar’s slide as a means of supporting a recovery from the worst economic slump since the Great Depression even as they voice support for a strong greenback, Ferguson said in an interview on Bloomberg Radio.
A weak dollar is “the simplest solution to most of America’s problems right now,” said Ferguson, author of “The Ascent of Money: A Financial History of the World.” “We are likely to see 1 percent to 2 percent growth unless exports take off, and that’s what everyone in Washington is quietly hoping: If the dollar keeps sliding, then maybe we can get some traction on exports.”
The dollar increased 0.4 percent to $1.4888 versus the euro today after depreciating yesterday to $1.4968, the weakest level in 14 months. The U.S. currency touched $1.6038 on July 15, 2008, the weakest level since the euro’s 1999 debut.
The world’s largest economy shrank at a 0.7 percent annual rate in the second quarter, the Commerce Department reported last month. Gross domestic product contracted at a 6.4 percent pace in the first three months of 2009.
Economists forecast the current-account deficit will rise to 3.2 percent of gross domestic product in 2010 and 3.3 percent in 2011, compared with 2.9 percent this year.
‘Terrible News’
The weakening of the dollar is “terrible news for practically all of the rest of the world’s economies,” except the U.S. and China, said Ferguson. China, which manages the yuan’s appreciation, will “intervene to make sure the dollar does not weaken” relative to its currency, Ferguson added.
Treasury Secretary Timothy Geithner said on Oct. 3 after attending a meeting of Group of Seven finance officials that it’s “very important” for the U.S. to have a strong dollar.
The administration of President Barack Obama pushed the nation’s marketable debt to an unprecedented $6.78 trillion in an effort to spur economic growth and support the financial system.
The U.S. government’s annual budget deficit widened to a record $1.42 trillion for the 12 months ended Sept. 30, the Treasury Department said today in Washington. The shortfall was more than triple the $455 billion record set a year earlier, the department said.
Go ahead Barry...tell the Fed to just keep the printing presses rolling...
This is Obama’s idea of a tax increase...pay back installments of the debt with debased currency.
Of course, it’s our buying power that’s reduced too.
Harvard Ha Ha Ha Yeah I see their Grads and the toy degrees I would take the advice with a grain of salt.
That would assume that we have a vibrant export industry. With government sopping up all the cash, trillions going into government programs, and a political policy that is downright hostile toward business, how much are we really going to be exporting in the future? You have to produce real things of value in order to export them.
Yeah! Especially since it will drive up the price of everything we import..especially energy. What an Einstein!
Thanks for posting that I think many do not realize the damage we will suffer because of the devaluation never mind we should have never left the gold standard this is a disaster in the making.
Harvard just lost $500MILLION in risky investments.
Why would we pay any attention to their so called economists.
For now all the economists are full of bull.
Zer0 will just print more to make up the ‘difference’
The dollar will be down to two Euros by next summer.
You saw it here first. I will remind you next June.
At least it might make imports so expensive that we might start manufacturing stuff here again - if we still remember how.
We really do need to restart our own manufacturing again I for one was not in agreement with all that globalization crap right from the start. We never had Fair trade from the beginning and now we pretty much have nothing for our own people. I really lay a lot of fault at all those who promoted this crap.
If so, King Obama will just "tarp" it. Can't let his institution for communists leaders by in jeopardy.
This is a tyrannical assault on fixed income people.
More wishful thinking that there is still a recovery in progress. None of this administration's policies are actually encouraging investment and job creation from the private sector. They reward failure and punish success. Then they wonder why there is no growth. Weaken the dollar and guess what happens to private investment.
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