US Dollar decline will cause market reversal

Discussion in 'Economics' started by Hansel H, Oct 22, 2009.

  1. So far the USD decline has stimulated the stock market. The reasoning is that a cheap USD is good for business for a variety of reasons most of you already know.

    Trouble is.. the Dollar is dropping through a critical zone here that will soon make the sale of gov't bonds impossible.

    If the US can't raise money through bonds it will have to either raise interest rates and kill the economy, raise taxes and kill the economy, or abandon stimulus programs and kill the economy.

    The improvements in corporate earnings are due to cost-cutting, expecially by means of layoffs. Those US consumers who still have jobs have no savings, are deeply in debt, and can't borrow from anywhere. Sales will stall or drop next year.

    The market is stalling even though the USD continues in freefall. Watch for a 'correction' that will actually be an anticipation of a relapse into recession next year.
  2. Isn't that what happened in the crash of 1987? A 10% dollar drop caused bond mayhem and voila....crash.