Monday, November 08, 2004
Keep an eye on the dollar
I noted earlier the danger of a currency crisis (sharp decline in the dollar, rise in interest rates) as a result of the ballooning Bush deficit. Currency traders have certainly reacted negatively to the re-election of Mr. Deficits Don't Matter.
See BDL here and here. I've heard of "damning with faint praise." What John Taylor is doing is more like "frightening with weak reassurance." We don't need to worry about the dollar because Bush has pledged to cut the deficit in half by 2009? The same pledge that doesn't include spending on Iraq or Afghanistan, or his planned reduction of the AMT, or anything else new? The same pledge that isn't even linked to the actual deficit, but to some cockamamie overestimates of the deficit for last year? Great. Now I'll go shift my remaining investments overseas.
My friend Victor note that China is about to switch to a basket peg, and is selling dollars in anticipation, which will put continuing pressure on the dollar.
One of the comments to Brad DeLong's page includes this amusing note:
See BDL here and here. I've heard of "damning with faint praise." What John Taylor is doing is more like "frightening with weak reassurance." We don't need to worry about the dollar because Bush has pledged to cut the deficit in half by 2009? The same pledge that doesn't include spending on Iraq or Afghanistan, or his planned reduction of the AMT, or anything else new? The same pledge that isn't even linked to the actual deficit, but to some cockamamie overestimates of the deficit for last year? Great. Now I'll go shift my remaining investments overseas.
My friend Victor note that China is about to switch to a basket peg, and is selling dollars in anticipation, which will put continuing pressure on the dollar.
One of the comments to Brad DeLong's page includes this amusing note:
...some time ago I saw an interview with Jeremy ("Stocks for the Long Run") Siegel of Wharton and Robert ("Irrational Exhuberance") Shiller of Yale. In response to the interviewer's question about where their own personal assets were invested, both replied "Outside the U.S."
