Since 2001, the U.S. dollar has steadily declined. British pound against the dollar had risen to over £ 1 = 1.45 dollars to close to £ 1 = low down two U.S. dollars mark. U.S. dollar against the euro, the dollar has depreciated against the current 1 euro level from 0.85 to 1.35 U.S. dollars.
From the different points of view in the dollar seems to be running the following basic economic foundation and continue, and these imbalances, the dollar could fall further.
First, the U.S. current accountDeficits to maintain the highest level in history. Debt and other countries the exact amount expected to be approximately 710 billion U.S. dollars for 2006 [1]
Basically, this means that the U.S. imports more than exports, resulting in capital outflows. In recent years, this huge debt has been from Asia and other countries, are happy because the U.S. dollar as it as "buying stability and security of the state," to buy currency. However, there is increasing evidence Asian banks are not asConfidence in the U.S. economy. Therefore, they are looking to sell U.S. dollars and reduce the dollar reserves. As a result of this situation, the dollar must fall, because too few buyers, the U.S. debt [2].
Second, the future of economic growth is no longer doing so positive. Economic growth forecasts have been downgraded recently. The OECD lowered to 3.6% growth forecast to 2.4% of the U.S. economy. If Nu Beene Beene pessimistic about the global economy [2]Is expected that by mid-2007 in the United States recession. In economic growth is expected to decline in the important factor is the U.S. consumer confidence to decline.
Related to this is that the former gave a warm housing market may have bottomed out signal. While the new housing prices continue to rise. Old house prices fell 3.5 percent on average since last year. Although the 3.5% decline may not be big, it is the largest in history. Housing prices are the main factorsConsumer protection in recent years. Between individuals, the amount of debt the U.S. consumer is a new high. Consumer debt ratio of disposable income from 62% in 1980 to 127% in 2005 [3]
Therefore, falling house prices in other parts of the U.S. economy, the effectiveness of a powerful knock-on effect, as consumers struggle to refinance debt and meet. Another consequence of high level of consumer debt is that the U.S. economy should be particularly sensitive toTo raise interest rates. Rising interest rates will be a devaluation of the solution may require investors to finance the U.S. current account deficit. Although the distant prospect of the Fed to raise interest rates. Continued to decline in the dollar will lead to long-term interest rates rise on U.S. secutities.
However, some economists argue that the prospects for the dollar may be bad as some people predicted. First, as Anatole Kaletsky, that [4]Of globalization and financial market deregulation era, the trade deficit is not that difficult to finance, as it once was. As experience has shown that the trade deficit as a guide exchange rate fluctuations is not reliable. First of all, one of the few countries, the current account surplus is Japan. Your current account surplus has increased, but the yen fell against the dollar, one of a small number of currencies. [4]
Secondly, although the pace of U.S. economic growth slowingCurrently, not much worse off than the European Union and Japanese economies. 2, the gap between interest rates in the economic field is still only about 2%. Against the euro's strength and weakness against the dollar if there is good reason, there are many good reasons. Some American economists like Ben Bernanke the Federal Reserve to keep U.S. growth was only slightly below trend in controversy optimistic economic conditions.
However, it is important not to underestimate theThe importance of the general market confidence in U.S. economic outlook. For example, in Iraq's political problems also hurt the reputation of the United States as the world's leading economic and political level. More than 50 years, the United States has been the undisputed global economic power, but slowly changed my view they believe may be coming to an end the era of U.S. dollars. As the population migration in U.S. dollar assets could be to establish an investment banker to the strong leverage effectThey do not want to hold U.S. dollar assets.
The United States to a large extent the adjustment period can not be avoided because they are trying to solve the triple deficit, with the rest of the world, the trade deficit, consumer debt, the U.S. government debt. Whether the adjustment phase is gradual and painful things to start 2. First, how important is that U.S. housing prices and the resulting decline in consumer confidence. Second, will depend on the attitude of Asian banks, especially theChina. Because they hold so many dollar-denominated assets, they may try to gradually depreciate to manage the continuation of the past five years. However, can not be ignored, if the dollar's status as a reserve currency in the world, it may try to attack the United States creditors to increase their inspection cash. This will exacerbate the dollar's decline, so that genuine economic difficulties, the United States and the rest of the world.
The only certainty is that European consumers may be retainedSome in the U.S. real bargain shopping in a great future.
References
[1] http://www.cbsnews.com/stories/2006/01/12/business/main1203762.shtml
[2] http://www.economist.com/finance/displaystory.cfm?story_id=8361260
[3] can be http://www.federalreserve.gov/releases/Z1/Current/
[4] http://www.timesonline.co.uk/article/0, .630-2485597. The HTML - greatly exaggerated the demise of U.S. dollars
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