Washington's Weak-Dollar Wish is Coming True 10/07
The US dollar tumbled to 109.37 yen today, the lowest point since November 20, 2000. The greenback also weakened against the euro and the Canadian dollar. It looks like Washington's wish of a weaker greenback is on its way to becoming reality - a reality that could have harsh consequences for recovery hopes.
With all of its other economic stimulation ammunition spent, a weak dollar is exactly what Washington wants. Washington sees this as a last chance to lasso the $474 billion trade deficit; to stave off the threat of deflation; and to boost the manufacturing sector, which has shed huge amounts of manufacturing jobs over the last two years.
But a weaker dollar could have dire consequences: By raising import prices, a declining dollar promotes inflation. A weaker greenback also discourages foreign investment in the United States by making foreigners' US holdings worth less in the home currency. And the United States needs about $1.5 billion of foreign capital a day to finance the trade and budget deficits.
If the dollar falls off a cliff, these foreign investors could drop their holdings of US Treasury bonds and dash any hopes of a sustained recovery
jobar.p9.org.uk/weiter2.gif" style="max-width:560px" >
The US dollar tumbled to 109.37 yen today, the lowest point since November 20, 2000. The greenback also weakened against the euro and the Canadian dollar. It looks like Washington's wish of a weaker greenback is on its way to becoming reality - a reality that could have harsh consequences for recovery hopes.
With all of its other economic stimulation ammunition spent, a weak dollar is exactly what Washington wants. Washington sees this as a last chance to lasso the $474 billion trade deficit; to stave off the threat of deflation; and to boost the manufacturing sector, which has shed huge amounts of manufacturing jobs over the last two years.
But a weaker dollar could have dire consequences: By raising import prices, a declining dollar promotes inflation. A weaker greenback also discourages foreign investment in the United States by making foreigners' US holdings worth less in the home currency. And the United States needs about $1.5 billion of foreign capital a day to finance the trade and budget deficits.
If the dollar falls off a cliff, these foreign investors could drop their holdings of US Treasury bonds and dash any hopes of a sustained recovery
