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Re: [techy246] Falling Dollar and slowing US Economy
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I am back again with similar question.
1. Since Europe exports to usa a lot, how can they let their currency keep going up?....is it possible that they are not using USD as the currency of trade but EURO instead??
Europe adopted the EURO so they wouldn't have to use the USD as their vehicle currency. So you are right, the vehicle currency (the popular one) in European trade is the Euro.
2. from everything i am reading, even though nothing is for sure right now, it looks like the USD is going to fall atleast 30-40%. and at the same time FED will have to decrease interest rate to support the slowing economy.
30-40% would be absolutely huge. That would be a massive recession bordering on depression. I don't think it will be that must of a fall. The FED may decrease at some point merely to increase spending.
lets say slowing US economy leads to:
1. high unemployment, wage decrease
2. decreased consumer spending (leading to worse economic conditions)
3. lower interest rates (falling USD)
4. Slowing china/india economy because of decreased exports
in the previous downtime in 2001, they decreased the interest rate, and people kept spending by borrowing from the equity of their home....i wonder what will bail us out if things go south this time??
I doubt it, you have to remember a major reason for 2001 was both the crappy economy and 9/11. Consumer confidence was at an all time low so no spending was happening regardless of the interest rate.
one more thing i am not able to understand, how can the stock market keep ignoring things??
isnt the analysts 10 times more knowledgeable than layman like me, or is it possible that all the doom reports are false??
i think if the economy starts to go down.....stock market will go down atleast 20%
The stock market tends to reflect economic slowdowns in advance of any monetary policy changes in the economy. Tends to , not always. Furthermore, stock markets are generally short term, many very short term. Most macroeconomic policies are meant for medium to long term. Generally (interest rate reductinos are usually lshort term but effects are longer.)
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econmod
Broker
/ Moderator
May 4, 2007, 1:43 PM
Post #2 of 4
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