The current account deficit will be dramatically reduced in
case of serious US recession (we don't buy foreign stuff).
The reduction trend started, at least as a percentage of GDP.
It may get reduced further if US economy slows further.
The dollar rallied in 1988 under similar circumstances.
Note that June data was at oil =140
bea.gov
I agree with you, the entitlement crisis (SS + medicare) looms
large, and the government will either have to engage in
serious printing or drastically raise taxes, or cut these
programs.
In other words, the crisis is not at all cured, but ...
the dollar was already cut almost in half at the bottom, so
there may be a change of intermediate term trend.
Note: Yes, a serious manipulation on part of the ECB and
the Fed. They call it currency market intervention -g-
I just watch 74 on the downside, 78-80 on the upside.
It could be that all the effort will just prevent
further downside for now, and the dollar remains stuck
between these levels.
FWIW, the dollar bottomed in March, so it has been 5 months,
and 2-4 months more does define a change of intermediate
term trend -ggg- The long term trend is down. I think gold
just might decouple from the dollar, but we'll see.
Reduced US current account deficit means much less printing
on part of Foreign Central banks, which has been a major
drive under commodities. No, it was not Fed printing,
it was the accumulation of USD reserves by FCBs with printed
money. Granted, the Fed printed some too, but 20 billion per
year is nothing compared to a trillion a year printed
by FCBs to buy dollars
And, the debt IS contracting.
We need to watch the developments. |
