If a small country had a budget deficit of 50%, will their currency devalue soon?

Discussion in 'Economics' started by crgarcia, Sep 10, 2007.

  1. By 50% I mean that for every $100 of income, the government spends $150.
  2. Daal


    probably. specially if the finance minister repeats over and over that they will never default. which country your talking about
  3. What if they repeat over and over that their currency and economy are "strong"?
  4. Daal


    then everything is fine and you should load up on their stocks, that is unless your a terrorist who dont support the troops
  5. Supporting the troops is different than supporting the liars, fools, and thieves that sent them there.
  6. Akavall


    I would think that it would depend on the exchange rate policy of the country. If it is free-floating, then there probably wouldn't be any drastic changes. If the exchange rate was fixed or defacto fixed, then it could be a financial crisis in the making.
  7. gnome


    That's always the lie they tell. If they are printing and spending 50% more than they take in taxes, it won't be long before the currency is destroyed and most of its citizens are bankrupt.

    America is doing the same... just at a slower pace.
  8. Ummmmm, I think that was the POINT of this thread...

    America's federal government *IS* spending 50% more they take in from taxes.

    I wonder how many Americans realize that? Starting in 2010 as boomers try to retire its going to get MUCH worse, too unless there are huge spending cuts or huge additional tax levies.

    The only thing delaying the dollar's collapse is that there isn't a better alternative because there is no currency left that is both stable and big enough to be used for global trade. That's why the Middle East, Asia, and South America are all working on regional currencies like the Euro. Until they have a reasonable alternative, they are pretty much stuck using dollars, even if it is declining quickly.
  9. ntt


    Quote from The New Market Wizards (Stanley Druckenmiller):

    "His [George Soros'] theory was that if a huge deficit were accompanied by an expansionary fiscal policy and tight monetary policy, the country's currency would actually rise."