Re: The US dollar may be in for a hard landing
From: William F Hummel (wfhummel_at_comcast.net)
Date: 10/03/04
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Date: Sun, 03 Oct 2004 20:41:24 GMT
On Sun, 03 Oct 2004 13:33:49 GMT, "chris" <ctmilo@neo.rr.com> wrote:
>The trade deficit is caused by America's insatiable appetite for borrowed
>funds. Both American households and the federal governments are running
>huge deficits right now. Americans buy foriegn goods. Foreigners buy
>American securities and debt.
The conventional view is that America borrows in order to buy imported
goods. I think puts the cart before the horse. A more realistic view
is that foreigners find investing in US dollar assets very attractive.
First the dollar is the world's reserve currency and is often
preferred to the other currencies because of its wide acceptance.
Second, the US is a very attractive place in which to invest as
indicated by the many foreign-owned plants here. Third, the
population of the US continues to increase rapidly due to immigration.
Fourth, most countries have large and continuing unemployment
problems, and their exports are important in dealing with those
problems. [China, Japan, Germany, for example]
>If dollars were weaker, foreigners would be
>more likely to buy American goods denominated in those dollars.
>
Actually most foreign trade with the US is invoiced in dollars.
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