Re: Currency and deficit
From: anon (me_at_privacy.net)
Date: 10/22/04
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Date: Fri, 22 Oct 2004 09:30:14 -0400
"Steve" <steven_hyh@yahoo.com> wrote in message
news:3029ed06.0410212133.2fa98450@posting.google.com...
> I think this is a bais question: what is the relation between
currency
> and deficit? If we want to narrow our national deficit, we
should have
> strong dollar or weak dollar? It is easy to see strong/weak
dollar
> will affect import/export, but does more import really relates
to high
> deficit? Where is the deficit really from?
the market value of currency is eventually psychological. if the
market has faith in the currency it will hoard it. if it doesn't
it will get rid of it and run to hard assets.
eventually if deficits (fiscal and trade) are never-ending,
people will start getting rid of hoarded currency assets.
as always it depends on the past history. correction for
argentina and turkey came quick. for large economies
it takes time...because their currencies are not only
used for international trade but for reserves.
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