1. The Dollar's Doldrums.
- Author
-
Henwood, Doug
- Subjects
- *
BALANCE of trade , *PUBLIC finance , *INTERNATIONAL economic relations , *U.S. dollar , *DEFICIT financing , *BUDGET deficits , *PUBLIC debts , *MONETARY policy , *FOREIGN exchange , *BALANCE of payments deficit , *RENMINBI - Abstract
The article focuses on the decline of the dollar in the United States under President George W. Bush. Between the February 2002 peak and the December 2004 low in the value of the dollar, the American dollar lost 35 percent of its value against the euro, 22 percent against the Japanese yen and even 24 percent against the Canadian dollar. The major reason for the dollar's weakness is the profound imbalance in America's dealings with the outside world: We import far more than we export. The trade accounts slipped into the red in 1976, and the deficit has been getting steadily larger. Lately, the task of financing American deficits has fallen to the central banks of Asia, whose dollar assets (mostly U.S. government bonds) now collectively surpass $1 trillion. China has successfully kept the value of its currency, the yuan, unchanged against the dollar--and kept Chinese exports growing mightily. Markedly higher interest rates would almost certainly knock the stuffing out of the housing market, ending the wonderfully stimulative game of borrowing against home equity, and tip the broad economy into recession.
- Published
- 2005