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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: FiveFour	1/17/2005 11:33:29 PM
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U.S. DEFICITS COULD LEAD to a crisis in which the dollar tumbles, driving up interest rates and squeezing the economy, a growing chorus warns. Inflation is lower than during the last dollar crisis in the late 1970s, but trade and budget gaps are greater. online.wsj.com As Dollar Weakens, Hidden Strengths May Stave Off Crisis 'Twin Deficits' Would Sink Other Currencies, but U.S. Is Clearly a Special Case By GREG IP Staff Reporter of THE WALL STREET JOURNAL January 18, 2005 Up to a point, a falling currency is a blessing. After that, it's a curse. The dollar has fallen 16% against a basket of its trading partners' currencies over the past three years. In theory, that should, with time, make U.S.-made goods more competitive with those made abroad, boosting U.S. growth and employment. But a growing chorus warns that the U.S.'s gaping budget and trade deficits will lead to a crisis in which the dollar falls much more sharply, driving up interest rates and squeezing the economy....

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