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Post Info TOPIC: The direction of the USD long term?
Anonymous

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The direction of the USD long term?
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This is not as easy to answer for the following reason:
1. The US has trouble attracting foreign funding for deficit so its forced to raise interest rates to defend the USD
2. The US allows the USD to fall to stimulate exports - the question is, who will buy their product in a soft market. Hardly the time to stimulate exports.
3. The $700 billion support for the US banking sector is going to be inflationary which is just going to delay the problem
4. The US Fed is forced to raise interest rates to deal with cost-of-living inflation
5. The US Fed lowers rates to stimulate the economy. With what? Unlikely to be further new debt at a time of deflating asset prices.
6. The US needs more money so under pressure to have higher interest rates (higher USD) than other countries

If the rest of the world was strong, we might have expected the Fed to lower interest rates, but the global economy is spent, or otherwise reliant on US imports.

Care to comment?

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selenawright


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The USD will remain quite strong as other countries like china (which is pegged on USD) also try to inject artificial financial stimuli to their economy.

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shouganai


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selenawright wrote:

The USD will remain quite strong as other countries like china (which is pegged on USD) also try to inject artificial financial stimuli to their economy.

Hmm.. that's been the paradigm for a long time now. Interesting to see if it stays that way. Given that China tends to produce cheap &/or intermediate goods, I guess there is a reason to support that trade. But I suspect the US will not be buying those products and we are looking at higher interest rates in the USA. It will again be a Democrat government bailing out the USA with high interest rates (1st being Clinton) after Reagan & Twin Bush towers collapsed.

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valuesourcer


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Don't agree with china producing cheap goods.
40% of factories in china already closed due to:
1. increasing labor cost - http://www.chinapost.com.tw/business/2008/02/23/144161/Rising-material.htm
china govt apparently tried to increase minimum wage for chinese worker before the olympics...
2. increasing material costs
3. lower USA demand

manufacturing jobs/factories are now opening up in other countries like vietnam, thailand, cambodia and philippines.



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