The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: Real Man who wrote (10729)	8/27/2008 9:55:55 AM
From: GST	of 71474

<It's A bear market bottom> That is how I see it as well. I also see it as the beginning of a period of competitive devaluation -- an inherently unstable inflationary period for many currencies. Countries with strong current account surpluses fear currency appreciation will choke off their surplus. China has allowed the RMB to float up 25% against the dollar in the last few years -- now I think they want to slow the rate of ascent. Japan has always feared currency appreciation for the same reason. I don't see the US current account deficit shrinking to levels where it is not a factor pushing the dollar down until we see a much lower dollar. Remember, the current account deficit is NOT merely the trade deficit. We have to service trillions of dollars of existing debt and federal deficits pile on hundreds of billions more each year. That is not going to turn around in a recession or period of stagflation. The long term terminus for the dollar is likely to be far lower than where we are today because of our debt position relative to our savings rate -- in other words, it is a function of our absolute dependence on inflows of foreign capital.

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