The crisis of the American dollar
Miércoles, Marzo 12th, 2008
What includes the crisis of the American dollar? During these last months the principal newspapers of the world have not done any other thing that talk about the devaluation of the American dollar and the possible crisis that we will have if this situation continues.
The fall of the American dollar against tje euro has been very important since October 2000 until the end of 2007: the european currency has been appreciated 65%, from 0,82 to 148 dollars.
Actually the American economy is supported by two fundamental bases. One is the commercial deficit of 25% that it has with China, principally as a consecuence of the excess of imports that China exports to the United States. The income received by the Asian countries because of the sale of products make their reserves grow very fastly. The problem is that the American dollar is falling and the Asian countries notice that their profits lose value.
With the devaluation of the American dollar, it is put in risk the devaluation of the Asian investment, this means that for attracting dollars to cover the deficit, the American federal reserve raise the interest rates, making the demand in United States fall and also the Asian imports.
What is actually true is that while we discuss the situation of the American dollar, there are others that want the euro to become the currency of world reserve. The principal issue is that throught the stimulation of the commercial deficit, United States generates an economic cycle where consumption is its principal motor, as Asian imports come into the United States and because of them they receive dollars and at the same time these countries buy bonds of the American Exchequer, making dollars come back to their original place. Moreover the big advantage that the United States have is that it is the one that has the power to issue dollars.
What includes the crisis of the American dollar? During these last months the principal newspapers of the world have not done any other thing that talk about the devaluation of the American dollar and the possible crisis that we will have if this situation continues.
The fall of the American dollar against tje euro has been very important since October 2000 until the end of 2007: the european currency has been appreciated 65%, from 0,82 to 148 dollars.
Actually the American economy is supported by two fundamental bases. One is the commercial deficit of 25% that it has with China, principally as a consecuence of the excess of imports that China exports to the United States. The income received by the Asian countries because of the sale of products make their reserves grow very fastly. The problem is that the American dollar is falling and the Asian countries notice that their profits lose value.
With the devaluation of the American dollar, it is put in risk the devaluation of the Asian investment, this means that for attracting dollars to cover the deficit, the American federal reserve raise the interest rates, making the demand in United States fall and also the Asian imports.
What is actually true is that while we discuss the situation of the American dollar, there are others that want the euro to become the currency of world reserve. The principal issue is that throught the stimulation of the commercial deficit, United States generates an economic cycle where consumption is its principal motor, as Asian imports come into the United States and because of them they receive dollars and at the same time these countries buy bonds of the American Exchequer, making dollars come back to their original place. Moreover the big advantage that the United States have is that it is the one that has the power to issue dollars.