Read a couple of articles regarding an impending crash of the US dollar. Am curious to hear opinions both pro and con about this. Will Euro continue to be strong?
2007-06-25 14:02:35 · 3 answers · asked by chicago3200000 3 in Business & Finance ➔ Investing
I doubt the Euro will continue at this level, it is probably overvalued and the Yen is probably undervalued, with the Pound also overvalued and the Renminbi at fair market.
In the short run, currency markets are usually away from their sustainable equilibrium price due to the fact that in the short term, price is based on immediate liquidity needs and supplies and not the long run sustainable supply.
I doubt there will be "crash" of the dollar, more likely a revaluation, but relative to the European currencies it should strengthen.
The weakness to the dollar is that China holds $1 trillion in US currency bank reserves, while the entire US banking system only holds $43 billion in reserves. If China chose to decimate the American economy, it could do so, but it would be an act of war. It could destroy the dollar by simply willing to do it. But, if the Chinese would loan out the money, particularly to their own cash starved businesses, it would have the reverse effect as the dollars would be subject to a money multiplier and get repatriated slowly. It would shift the dollar downward relative to the renminbi, but would probably shift the dollar upward worldwide since there would be a demand by creditors for more dollars than exist due to the multiplier.
2007-06-26 14:34:24 · answer #1 · answered by OPM 7 · 0⤊ 0⤋
It is not highly likely. While it is true that the U.S.' fiscal position has worsened substantially under the Bush administration, it is still not as bad as that of many European countries (although if the administration continues its current policies, getting there and past is only a matter of time). Also, the highest debt levels among industrialized nations are currently observed in Japan...
Also, consider that the devaluation of the U.S. dollar may actually be beneficial to the U.S. economy; it will make life easier for exporters and those who compete with imports. In fact, this is exactly what happened during the last major devaluation of the dollar in 1985-87...
2007-06-25 21:27:43 · answer #2 · answered by NC 7 · 0⤊ 0⤋
This may be of interest...it's hard to know..I would have thought the US dollar would be down a lot more by now
given the mountain of debt.
Anyhow look at this scanning tool..read about it below:
2007-06-25 21:35:54 · answer #3 · answered by Anonymous · 0⤊ 1⤋