IMF warns trade gap could bring down dollar

[adios]

IMF warns trade gap could bring down dollar (http://www.guardian.co.uk/usa/story/0,12271,1045369,00.html)

Treasuries have had a decent bounce back rally and emerging market bonds have been doing well too as the dollar has been tanking again against the Yen, Euro, British Pound, Canadian $, and Aussie $.

[Wildbill]

I commented on this elsewhere on the net and got a bunch of anti-American bashing responses. The whole problem that the IMF, the World Bank, etc. overlook is that unlike the Japanese or others around the world, we let our currency float 99.9% of the time. The few interventions were done at someone else's request/need. And the world's traders just see the reality that the dollars can continue to flow out of the US because it creates economic growth as a whole. There is nothing a country can do to stop a trade deficit short of confiscatory tariffs or outright import bans. People from around the world will continue to sell here and people will continue to buy. And as the currency changes in value, people still seem willing to export stuff to the US for the simple reason that there are no other large markets to sell it to. So why make a fuss about all this? There is no way to turn it back, we take on a risk of currency adjustment, but that is the price we pay for having a lower cost of living and a vibrant economy to boot. Is that so bad?

[adios]

No it's not bad at all IMO. If the US dollar totally tanks who in the world is going to be able to pick up the slack so to speak if the US slows it's consumption of imported goods. The fact is that there is a tremendous amount of foreign investment in the USA and those investments have tended to pay off very well. Lot's of doom and gloom about the US dollar out there, perhaps a good contrary indicator.

[brad]

well to talk some horse sense, how big does US obligation have to be (10 tril, 100 tril, etc.) before (foreign) investors realize they aint gettin paid back.

i dunno.

remember when nixon closed gold window to foreigners oil shot thru roof because arabs realized they would have to take worth-less dollars so they needed more of them.

anyway its probably moot as real world economics is not smooth function, but rather puncuated by wars, etc. (eg, destruction of huge amounts of capital and reassigning of ownership, etc.)