As a Canadian, I look at America like a good brother, a close neighbour whom I’m quite fond of.
When I see their falling dollar continuing to plummet, it worries and saddens me.
There are so many good Americans who work hard and pay their taxes only to have a President destroy their economy and their currency.
So my question is this:
Is there anything that can be done to save the American economy, restore investor confidence, and make the dollar strong again?
I’m worried bad times lie ahead and I really would like someone to tell me I have nothing to worry about.
There is no such thing as a perfect economy, so it’s not like a car that can be “fixed” and just run properly from then on. Anything you do to alter one part of an economy hurts another part, you just have to balance the pain and benefits.
At this point I think the answer is “no”, there’s nothing that can be done to avoid at least a recession. But even if there was anything that could be done, I’m certain it won’t be done.
There’s horrendous budget, trade and current account deficits. Theoretically the dollar will continue to fall until the at least the trade deficit balances. When the US dollar finally bottoms out inflation should be raging, or interest rates will be sky high.
Things aren’t going to improve for many years if at all. And only then if the government and consumers start showing some fiscal discipline and living within their means.
The average American citizen has had a negative savings rate for many years now and their houses aren’t going to bail them out any longer.
I think it’s been sufficiently ‘f-ed’ to the point where there’s no quick fix. I wouldn’t be surprised if it took the entire term of the next president to even START to get the economy back in order. And I also doubt we’ll ever see gas below $2 a gallon again, but that’s a whole other discussion in itself.
The economy is doing fine. Relax. Unemployment and inflation figures are the two most important measures. They are both low, extremely low. And the stock market is near an all-time high.
And that horrible, awful, disastrous budget deficit? Down to 1.5% of GNP, with a good chance it will be balanced by next year.
The problem is that there are a lott of leftists out there who will criticize anything GWB does. They refuse to acknowledge how well the economy is doing since 2002.
While there are advantages to the dollar being the currency of the world, a falling dollar also encourages foreign investment (which is a good thing) and domestic manufacturing.
Ending the war in Iraq will help to “fix” the US economy. War an uncertainty are not good for anyone (well…unless your a defense contractor).
I disagree with 99% of what GWB says and does, but I’m also pretty confident that the economy of the US will do fine despite him. As Plan B said above, the fundamentals are good, and as far as we know, they are the best indicators.
Currencies and trade deficits are expected to fluctuate around an equilibrium point, so what goes down will eventually go back up. That’s the beauty of free market capitalism.
Admittedly, our national savings rate is low, and there will be some rough times for some folks, but the banks have no interest in mass foreclosures or anything like that, so will tend to eat some of the losses while waiting for the market to bounce back. We also have the Federal Reserve which can help some.
Energy will continue to be more expensive, but barring a world government with enforcement powers, there’s not much anyone can do about that. That said, the energy companies will be able to switch to coal and other sources when oil hits a certain price, so we may get squeezed of the cost to change over, but the Peak Oil doom and gloom is just that.
And to the extent that our national government can actually influence the economy, a new set of leaders will probably step in and try and get the budget under control, relieve debtors, end the war, etc.
So on my list of things to worry about with the US, the economy is pretty low.
I’m not sure if you meant this a joke or not. If you meant it seriously, thanks for proving my point . It’s all about Bush. We can always find something, even if it doesn’t matter, that was better in 1999.
I’m not really sure how it proves your point. But there are plenty of other things to criticize Bush about.
But as issues that face the US economy, the deficit is fairly low.
Energy and global warming will probably be the two biggest issues facing the economy over the next few decades, however those will be issues for everyone, everywhere.
The real estate markets are probably my biggest concern right now. Mostly because I want to get a bigger place.
If I went all out and started borrowing I could live an extremely fine life for a period of time. Then when the bills start to pile up, whooboy.
Never, ever base your personal or national economic view on the result of excessive borrowing. It is pure illusion.
Give me a $9 trillion Visa card and I could have done a whole lot better than what you’ve seen.
The US is nearing the end game of its borrowing spree. The fundamentals are actually in horrible shape, and have been since the early 1980s. You can’t go forever borrowing and borrowing.
The US media, of course, refuses to deal with the problem. You find people, both left and right, who make the most ridiculous claims regarding the state of the SS trust fund. (Note: An IOU to yourself is worthless.) So, in about 5 years that will start killing the economy no matter what else happens.
Now, overseas, the US media doesn’t have any control so those folks are really worried about the long term US financial prospects. Hence, the dollar is falling. (The Loonie is only rising a small amount on it’s own.) Once the Chinese stop buying T-bills, things will get dicey really fast.
As to can it be fixed: It was well on its way to being fixed until 2001. Then the usual tax cuts for the rich + increased spending mania took over.
The “wiggle room” to cut the national debt in order too make room for dealing with SS and Medicare is now gone.
Everybody in the US owes about $30,000 as their share of the national debt. Kids, retirees, people living on minimum wage. Where is that money going to come from?
Certainly not. I think it’s time we all started at looking to the advantages of going back to being hunters and gatherers. Civilization is definitely over rated (though the new expansion was pretty fun to play)…
True, ftg, but wouldn’t you expect that countries like Sweden, whose national debt is greater than the US in terms of GDPcite, would go belly-up first? Or do you think the economic importance of the US would cause it to get hit earlier?
You are not a country. You don’t have millions of people paying you taxes. You cannot issue debt. People have no faith in you. You do not have a money supply or trade relations with entities as big as yourself. What you do and what the government does is of a completely different scale. What you do personally does not apply to a government.
For personal finances, yes. For market economies (particularly free ones), it depends on the fundamentals behind the economy. Guess what? The US has the best fundamentals and the best flexibility of any country out there. The rest of the world is so entrenched in our economy, they have a vested interest in seeing the US economy succeed.
One of the reasons free market economies work so well is because there isn’t a dictator pulling the strings. There are laws and procedures at work to guard investment and property rights, to help quell the risk of losing one’s investment.
Really? Please share. You thought the early 80’s were good? High inflation and high unemployment of Jimmy Carter? Or, the monster budget spending under Reagan?
Really 5 years? Should I pull out my money now and stuff it in my mattress? What are you doing? Are you going to start shorting the market? The flexibility of the market is so good that people betting against it can make money. The one thing, imo, that will kill the economy is lack of capital investment, or a massive depletion of resources, particularly people.
Once the Chinese stop buying T-bills, their Yuan will rise making investment in their country and their goods more expensive, leading to massive unemployment and possible social upheaval as their market controls have not accounted for the massive inflation soon to follow, investment capital and resources have a very difficult time going to where they are most needed. Chinese goods stop being so dominant in the market and other goods become more competitive. Meanwhile, the rest of the world hums right along.
I’ve never heard of a situation where spending was bad for the economy. As for the rest, we could always raise taxes. Or, we could do what we’ve been doing since Hamiltonian finance, run up debt and grow our way out of our problems. There is plenty of GDP left.
As regards foreign investment, I’d say there’s an important distinction to be made between low and volatile, low and stable, falling etc. Right now the USD isn’t too attractive. OTOH I think I’ll cancel my Airbus order and get a Boeing for my birthday.
As to the US economy per se, well the Dollar’s been falling pretty steadily for the last 5 or 6 years, and the US has been engaged in a fair amount of minimally productive spending, from Iraq to imported consumer goods, so some adjustment is in order.
OTOH Europeans are in a dither because the too strong Euro’s hurting the economy, and we’re ‘throwing our money away’ on social programs. Meanwhile, China’s artificially depressing the Yuan to favor its economy. So clearly a strong currency’s not good, a weak currency’s not good, a volatile currency’s not good.
A couple of days ago the new French president explained how the public deficit was going to be resolved by reducing taxation, which would in fact increase overall tax revenue, clearly he hasn’t been reading the SDMB. Or maybe it’ll work in a higher taxation environment, or something.
I don’t think a falling dollar is such a bad thing. IIRC, economists considered the dollar seriously overvalued for the last 15 years. We do have real problems, like a trade deficit (which the falling dollar may ameliorate) & a lack of liquid savings.
Unless you invested in subprime loans. :::