Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (922)	11/24/2000 9:33:46 PM
From: rajaggs	Read Replies (1) of 74559

Jay, what your talking about here is a crisis of confidence in the Taiwan currency, not the US$. A similar situation in Thailand precipitated the Asian crisis in 1998 and the effects hurt the USA, though not nearly as much as they hurt the Asian economies. What I am thinking is that it might be a win-win for the USA to gradually devalue the US$ rather than have it run into a sudden loss of confidence in the future, where foreign investors (Japanese especially) might get the idea that the US$ would devalue significantly and withdraw their bond and treasury bill holdings, in a hurry. Gradual changes in currency valuations are more easily handled than rapid devaluations, which worsen the situation as often as they help it. The downside to a reduction in the value of the US$ that I can see is that imports will become more expensive and lead to some degree of inflation. This will slow the economy but not hurt it enough to cause higher interest rates. The increased cost of crude and NG is having that effect right now and the increased US$ being exported to pay for oil will help to reduce its value slightly. 'jaggs

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