Max King

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    • Fri Mar 14th 19:11 PM | Rating: 0 0
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      5 Reasons Why the U.S. Dollar Will Weaken Further
      It is interesting that people take the 1980s as an example all the time to predict the impact of a recession. Some thoughts:

      A) No more East/West conflict. A lot of erstern european countries have little dollar reserves. For them the Euro is the lead currency.
      In fact the Euro is strong because of those fast growing markets in the East. They provide two things for Europe: Cheap production facilities and hungry consumers.
      B) 20 years ago the Chinese were growing rice and the Indians cooking their curries. Today they engineer software and produce incredibly good products at unbelievable cheap prices.
      As the wealth in those countries has significantly grown, they should be seen as substantial markets of their own, that will get less and less reliant on the US.
      C)The Euro has changed the economy in Europe and the European central bank has very little to fear, while Bernanke gets grilled by the US media and politicians. That's not helping to stabilize the US system.
      D) Oil and gas producers like Russia and Saudi Arabia have now the option to switch to the Euro as the currency of choice. That's a change to the 80s as well. It removes the need for them to keep dollar reserves and they will like shift some of their reserves to the Euro, which will put more pressure on the dollar.
      E) What if the world starts to move away from the dollar for trading because of its instability? The Euro zone is less likely to be involved in silly wars and the "stability pact" prevents any member state from having a deficit of more than 3% of the GDP. In fact the Iraq war and the related US foreign policy has brought France, Germany and the other core EU states closer together than any European summit could ever have done.
      F) Lets face it: The Bush government, the Iraq war and the completely irresponsible mortgage practises in the US have led to a level of distrust and frustration in the rest of the world that will be hard to restore. If the world does not trust the US politics and economic practises, why should it trust the currency.

      It will be interesting to see how this all develops, but for sure the Bush administration has left the country in the worst state it has been for at least 50 years. For the 2-3 Triliion dollars the wars in Iraq and Afghanistan will have cost by 2011, you could have bailed out *all" home owners in one go. (That's giving 20-30M Americans a 100.000$ cheque). Let's not even talk about what that money could have done for the education system, or how it could have changed the haelthcare system.

      We need a change!
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