USD: When will it stop... falling?

[Kasz216]

Timmah! said:

nintendo_fanboy said:
That is too easy Timmah. Sure it does not look too bad for the people at the moment, but there is a way bigger bubble growing than the one that blew up in the housing market recently.

One thing to consider is why the USA, a huge country with a lot of resources, has such a negative trade bilance. This leads to a lot of dollars in the hands of Europeans, Asians and other foreigners. This fact, in combination with a low, sinking dollar is very dangerous. If those central banks will start to sell their dollars, nobody will be able to stop the inflation anymore, and lowering the interest rates won't help here either.

Of course, those problems did not come up in bush's era (Reagan is responsible for most of them, in fact), but he hasn't done anything to solve them either.

I agree that the trade deficit is a problem, but I just get sick of so many people blaming that (and everything) on Bush. It's been going on since Regan, through Bush 1, Clinton, and now Bush 2. What's a president supposed to do in this circumstance?? In a free market, the government isn't supposed to just limit imports. If all of a sudden we couldn't buy imported products, prices on everything from TVs to Microwaves to Cars would shoot up and there would be mass shortages. This would cause just as much or more problems than the existing trade deficit. Tariffs have been suggested, but that causes price increases, strained relationships with countries, etc. It's a really tough problem, and the 'catch-22' nature of the issue has made it very difficult for our political leaders to deal with it (they're damned if they do, damned if the don't).

Most western 'developed' economies have a trade deficit. This comes from the fact that we have transferred over to a more service-based economy. That means many people have decided they don't want to work in product production and would rather be technicians, doctors, lawyers, etc. Also, the cost to pay a living wage to production employees makes it hard to compete with emerging foreign countries that do not have the same standard of living and high wages as the US (or any other developed economy). This leads to most developed economies having trade deficits with less developed countries that can still produce cheap goods.

I say we get the countries who we are losing money to on the trade deficit hooked on Indian opium.

...hey it worked for the UK.