Discussion in 'Economics' started by The Kin, Apr 1, 2005.
Come on. Next you'll be telling me I can't rely on what is written in Alan Abelson's column.
* mode fun on*
what they call market reform is increase use of debt by consummer which will end up as always in inflation.
it has the opposite effect on the long term value of the currency!
* mode fun off*
The dollar will fall ( maybe the EU more so) till we see improvements in the trade deficit. And, this is inextricably related to the labor cost relation between the US and Asian countries, and most importantly, China.
If the Yuan, stays pegged to the dollar, employment and production will be transferred at alarming rates to China.
If the Yuan is allowed to float against the dollar, the dollar drop against the chinese currency should stop when labor costs between these nations find equilibrium, including the perceived cost disadvantages of distances and others.
So, it's up to the chinese to play a very delicate balance in order not to destroy the hen with the golden eggs, by curtailing their economic growth, ever so minutely, so not to destroy the US economy. And, on the other hand, incorporate at a moderate pace the other 800 million chinese which are sitting at the sidelines of their burgeoning economy.
If the second alternative is pursued by the chinese, a pegged yuan, only 10% of their exports go to the US, the bottom of the pit for the US is too dark to fathom.
A major contraction would surely hit the worlds' economies, which would also drag the chinese economy into quagmire. So, it's unlikely that the chinese will follow this most unsavory path for all, a measured pace of advance is the easiest road to economic success for them.
In conclusion, excluding rare and unexpected events, the dollar will fall for several years till it finds labor cost equilibrium between the US and China, not withstanding retracements along the way.
The key question here is....
FALL AGAINST WHAT ?????
"Former Prime Minister Mahathir Mohamad, whose economic management during the 1997-98 financial crisis won worldwide accolades, says the U.S. dollar is heading for a collapse, and urged international businesses to trade in euro, news reports said Wednesday."
While there is no doubt that US$ will correct by another 20% or so, but this decline will not be substainable. THERE WILL BE NO DOLLAR COLLAPSE................THIS PRIME MINISTER IS AN ISLAMIC BIGOT FANATIC..........WAS HE NOT THE ONE BLAMING THE JEWS FOR PROBLEMS IN THE WORLD.
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