This is an excellent article on some of the consequences of the falling US dollar. Emotionally I wanted to punch out some of the people due to their comments about the US’s fall from grace but thats the point of the article. We are getting dangerously close to an extreme exit of US based assets including US Treasuries. We all know what that means, talk about bad timing. It’s an interesting read.
“NEW YORK, April 27 (Reuters) – The United States may have no military equals, but the challenges to its financial power have become impossible to ignore.
A stark reminder came on Friday when the weakening dollar slumped to a record low against its main rival, the euro, after the U.S. economy recorded its fourth consecutive quarter of below-trend growth.
The strength of the dollar is more than just a matter of bragging rights. Experts say the consequences of its long-term decline could have deep significance — for average Americans and for the country’s position as an unrivaled global power.
Over time, the forces behind its decline could further marginalize the United States on the world stage, lower its standard of living and tie its hands in responding to crucial security issues or financial crises.
“We can no longer view ourselves as king of the hill,” said Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange and founder of the world’s first market for financial futures. “There are a lot of other potential kings now vying to take our place.”
The solution is simple, but Americans won’t do it. We can do three things:
1. We have to quit buying imported stuff, clothes, electronics, oil.
2. We have to export more stuff and services.
3. We have to make it ourselves.
Frankly, I don’t think Americans can stomach giving up their SUV, Starbucks or paying more for their clothes, LCD TVs or other massive collection of junk that they equate with good living.
And the model of globalization has hindered our ability to do the 3 suggestions that no_such_reality wrote. Since we have had China et all do the bulk of our manufacturing for us, we haven’t really invested any money back into our own factories. All the while, China has.
Our factories are fewer in number and much more inefficient compared with the Asian countries. That makes it such that doing any of the 3 solutions will be tough, bringing us even more pain in the future. We are not even set up to exploit a weak dollar on the world stage.
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