Epic financial crisis threatening to engulf both the US and EU

[dArKeR]

There were two stories this month that will have world-shaping implications. The first was in a Paris hospital and a compound in Ramallah. The other, unfolding in the world's foreign exchange dealing rooms, hardly made it beyond the business pages, but deserves to be taken just as seriously. We witnessed the storm warnings of what promises to be a financial crisis of epic proportions, threatening both the US and the EU.

Europe and Asia have both been on the receiving end of massive foreign currency speculation for the past 20 years and the countries concerned have been left badly scarred. Italy, France and the UK have suffered currency crises that have overshadowed their politics for years. In Asia, the experiences of Indonesia and South Korea tell a similar story.

The one country to have blithely sailed on through all this turbulence has been the US, but that is what is about to change. The political consequences for US President George W. Bush promise to be every bit as difficult as they have been for other governments. The dollar has been insulated because it is the linchpin of the international financial system. The US possesses the currency that is the everyday unit of account in international trade and finance; even al-Qaeda uses it to finance its terror network.

http://www.taipeitimes.com/News/edit/archives/2004/11/17/2003211451

[xray s]

1. I chuckle when I read the Bush crowd say a cheap dollar helps US exports

Export what? Oil? Nope, don't have near enough to meet our own demand, much less export any. Manufacured goods? Nope, those plants have left the US to countries with cheap exploitable labor and no environmental regulations. You can't just box those plants up and ship them back to the US. Ag products? There is too much yellow #2 corn anyway. That will keep prices down regardless.

It seems to me the main impact of the collapsing dollar is higher prices in the US for imports, a balloning trade deficit, inflation and higher interest rates to try to keep all those foreign investors in dollars.

Shit storm on the horizon. Have a nice second term monkeyboy.

[phantom power]

2. This may result in the re-establishment of domestic manufacturing.

Costly imports could eventually make it economically necessary to make more things in the U.S. again.

Eventually. Meanwhile, it will also be quite a shitstorm.

[Kolesar]

5. We still have lots of manufacturing in the US

All products are not commodity products that can be outsourced on a whim to a cheaper country. A lower dollar can protect our high value industries like electronics and auto parts.

[FloridaPat]

3. There was some talk about a cheap dollar will stop the export of jobs.

Something about wages being the same across the globe. So we wouldn't have to export all those computer jobs to India. And with imports so expensive, all the manufacturing jobs would come back.

[phantom power]

4. That's creepy, considering that Indian workers get paid 1/5

what we do here in the US. Does that imply the dollar is going to fall to 20% of it's recent value?