Friday, May 12, 2006

Dollar Devaluation and Global Economic Stability

Amazingly lucid article about the current global market of currency trade and what it bodes for Global Economy – Marc Chandler in RealMoney.com (by subscription). Those who blindly believe ideologically driven rightwing policies and do not understand the disastrous economic policies followed by Bush Administration; should find this as a useful lesson.

Following are the key points Marc is making:

- G7 and IMF are effectively signaling to the world that currency devaluation is the only mechanism favored by Western Governments who do not want to take any important decisions due to political expediency. What else the message can be to the world market when Bush Congress rushes for more tax cuts when America needs to address it’s Fed and Trade Deficits?

- Dollar devaluation is the only path what these weak Western leaders want. Marc is categorical – dollar devaluation is nothing but effectively ‘default by USA’ since dollar is essentially the world currency.

- Marc gives concrete numbers to show that it is unlikely that simply by dollar devaluation, America’s Trade Deficit will be reduced. It does not. As a result import costs increase and with domestic production so much reduced in so many areas, America still need to import expensive goods and commodities. Inflation is the result and higher interests cannot be avoided. So how far dollar devaluation can be the answer?

- World currency, bond and equity markets will be jolted by this devaluation destabilizing Global Economy. As a result, so far booming economies of emerging markets will suffer too, probably heavily.

So not only Bush Administration is fooling around Americans about their security, privacy; it is hell bend on dooming them economically too. God knows what more bad times this country has to endure under this incompetent, immoral, rich favoring liar occupant of White House.

Umesh Patil
San Jose, CA 95111
May 12, 2006.

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