I think our high-deficit cheap dollar party is a strategic blunder of the first order. And I also think currency markets are chaotic, and we are at risk of falling off a cliff. Brad thinks I'm silly, but I think this is doubly true now that the Euro is a credible alternate reserve currency (and commodity pricing index…what happens when oil is priced in Euros and the dollar falls?).
Of course, a sudden collapse in the value of the dollar could never happen…
This would have kept me awake nights back when I actually had some money, but after 4 years of the Bush economy, I have next to no savings or investments anymore, so who cares?
Uhm, Brad (de Long ?) doesn’t seem to be saying it’s silly if I’m reading this right. Our learned experts say it’s only a matter of time and can’t predict if it’s going to be merely awful or truly horrendous.
my paranoid conspiracy take on this…
the world knows that its only real weapon against the US is its control of the dollar. I have the feeling that a number of countries are putting the pieces together for a massive assault on the US economy should the Bush regime start acting crazy again. Something along the lies of China deciding to peg its currency to the Euro, and OPEC deciding to use the Yuan as its reserve currency should do it…
I also suspect that one of the things keeping the stock market and the dollar itself from crashing at the moment is that nations like China that hold a lot of US debt are selling off that debt, and buying stocks.
Of course we all know that at the end of 2000, only one country had the audacity to change to use Euro’s to transact oil sales – Iraq. Only one other country had the audacity to debate it in parliament – Iran, and a final challenger to U.S. currency imperialism threatened to – North Korea. Axis of financial indepence anyone?
The interesting question of Paul’s observation that Chinese investors are selling of U.S. debt and investing in stocks is if that stock investment is in U.S. companies or more widely distributed across world markets.
The article you link to is for a blog entry dated Nov. 14 that refers back to a September 9 news story. Although concerns about our creditors walking away are very real the author fails to mention the successful series of bond auctions last week. Last week’s auctions as reported at the Bloomberg link below were oversubscribed, they price was higher than pre-market trading indicated they would sell for, and foreign Central Banks were noted buyers.
The good news there is that if you take a job in the UK you may be earning less *now* but if the dollar drops you could wind up globally better off.