Monday, November 15, 2004

Weak dollar

The LA Times (registration required) has an editorial today about the weakened dollar. A quote:

The weak dollar reflects growing concerns that Washington is unwilling or unable to get its books in order. Foreign investors also worry that the president and Congress will bend in the face of growing protectionist pressure from apparel companies, furniture makers and other industries being pummeled by cheaper foreign goods. Anything that hurts confidence in this country's economy would be bad news, because the United States is increasingly dependent on foreign investment...

...he dollar will remain hamstrung by the administration's refusal to raise taxes or cut spending. The danger is that in order to continue attracting foreigners' money, the day will come when the Fed will have to respond to a weak dollar and widening federal and trade deficits by raising interest rates more abruptly than otherwise prudent.

Continuing on the the theme, The American Street reports on the same issue.

The BBC reports that, thanks to Secretary Snow, the dollar's slide has halted today. But they also note:

Policy makers in Europe have called the dollar's slide "brutal" and have blamed the strength of the euro for dampening economic growth...

That is where the concerns come in, economists said, adding that the fundamentals, or key indicators, of the US economy are looking far from rosy.

Domestic consumer demand is cooling, and heavy spending by President Bush has pushed the budget deficit to a record $427bn (£230bn).

The current account deficit, meanwhile, hit a record $166bn in the second quarter of 2004.

For many analysts, a weaker dollar is here to stay.

As I complained

during the election, where was the discussion about fiscal policy and foreign policy and how they are tied.

Oh, no surprise here, but the BBC also reports that Colin Powell is resigning.

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