Quote:
Originally posted by fintstone
... if you are saying that a large deficit tends to decrease the value of the dollar...I can buy that. But then, what is your complaint regarding a weak dollar? A weak dollar is a good thing when trying to keep jobs from going overseas.
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This is true...it also tends to reduce the trade deficit, but fears are as such:
- Foreign nations we rely on to finance the U.S. budget deficit less apt to buy Treasury securities. The reason: a falling dollar reduces their returns when they translate their gains back to their home currency, so they might demand a higher premium to compensate them for the currency risk, which would result in higher U.S. interest rates.
- making exports to the U.S. more expensive and thus increasing the price U.S. consumers must pay for those goods, a weakening dollar can lead to higher inflation.
- More expensive exports from euro-zone countries may hurt foreign businesses that export products to the United States, thus threatening the fledgling economic recoveries in various European countries and Japan. Ultimately, stronger economies in Europe and Japan help the United States because a good number of American companies depend on those nations to buy their products and services.
summary: higher interest rates, higher inflation, Carter days.