IMF warns trade gap could bring down dollar

[ze_dscherman]

The International Monetary Fund yesterday warned that the colossal United States trade deficit was a noose around the neck of the economy, emphasising that the once mighty dollar could collapse at any moment.
Arguing that the world's big economies were already too dependent on the willingness of American consumers to live beyond their means, the IMF said the US could not continue to run a current account deficit of 5% of GDP.

The IMF's chief economist Kenneth Rogoff said that it was just a matter of time before the gap closed, tipping the dollar into a potentially steep fall.

"If we were looking at a poor developing country, the world gives them just enough rope to hang themselves. A country like the United States, they give them enough rope to tie the noose around their neck several times. But it does happen in the end," he said.

More: http://www.guardian.co.uk/business/story/0,3604,1045193,00.html

[Guaranteed]

1. What IS the trade deficit at the moment?

Maybe I'll read the article.

[Gman]

2. This is a continuing story...

Be smart... by Euros now.

[Resistance Is Futile]

13. Buy gold.

It's that bad.

[UpInArms]

3. if you want to watch the dollar

you can do so at:

http://quotes.ino.com/chart/?s=NYBOT_DXY0

you can look at charts for the past two years here:

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=dmax

you can get historical information here:

http://www.frbatlanta.org/econ_rd/dol_index/di_index.cfm

[htuttle]

4. The dollar was dropping fast against the Yen this morning

Last I checked, it was at 114.4 and still dropping. I don't think it's been that low for some time (not sure how long...but not in the last 2 years).

Dropping against the Euro too, which is even more telling, since the Euro itself is weakened a bit by the NO vote in Sweden this week.

[UpInArms]

5. the BOJ has routinely intervened

to weaken the yen and bolster the dollar - there appear to be questions on whether this policy will continue.

http://www.businessreport.co.za/index.php?fArticleId=239959&fSectionId=552&fSetId=304

"The appreciation of the yen through the 115.00 level against the dollar for the first time since February 2001 has intensified speculation that the Japanese authorities have abandoned their policy of intervention to forestall yen appreciation," said Derek Halpenny from the Bank of Tokyo-Mitsubishi.

"We doubt this is the case and believe that the authorities will continue to oppose excessive yen strength," he said, while adding that any intervention thus far has been "very modest indeed".

[jiacinto]

6. Doesn't the IMF usually reserve these press releases

for third world countries?

[salin]

10. Second time in maybe a month that the IMF has issued

a warning to the US (the other was about our soaring deficits). I can't remember EVER reading such a warning before.

And yes, Carlos, I do think warnings from the IMF are usually for developing countries.

[jiacinto]

12. That's what I thought

I have studied the IMF and rarely have I ever seen them attack a first world country.

[bpilgrim]

14. welcome to the THIRD WORLD

:hi:

peace

[denverbill]

7. Between the trade gap, budget deficit, and low interest rates,

we are really teetering on the brink of financial disaster.

Unfortunately, the sheeple, in their infinite wisdom, just don't care. They will only care when the economy is in abject ruins, their life savings gone, and they are selling apples on streetcorners.

[JNelson6563]

19. you are so right

and if we keep the stock markets pumped up regularly enough everyone thinks it's all good! We've got troubles in the fundamentals of our economy though and I think the opposite of what the pundits say is true. Instead of jobs being a lagging indicator of recovery I believe the stock markets are a lagging indicator of ruin. All their one trick ponies they've pulled out each quarter over the last couple years are almost used up. Soon they will be painting pictures that are no so counter-intuitive with the trade-deficit, deficit spending, unemployment numbers and weak dollar. That tranlsates into one ugly-ass picture friends.

Like Resistance is Futile said above, gold is the way to go.

Julie--who thinks you all should join the week-day stock market watch thread! :hi:

[Nottingham]

8. Pretty soon the dollar is going to be meaning less!

Nixon did it and Bush is too!

This is Horrendous News! :bounce:

[Lydia Leftcoast]

9. I work in both yen and dollars, and frankly

the dollar seems slightly overvalued at the moment. For some reason, a level of about 110/dollar feels right for making prices equivalent.

Japan likes to keep the yen low to help its exports (and admittedly, it is nice to have a low yen when I go over as a tourist--the 2002 level of 136/dollar was heavenly.), but its "natural" level is probably closer to 110.

[bpilgrim]

11. "report was highly critical of Europe's labour markets and WELFARE states"

"The report was highly critical of Europe's stagnating economies, blaming governments for failing to embrace deep structural reforms of their labour markets and welfare states."

WTO/IMF motto = Every man, woman and child for themselves! :bounce:

peace

[Dirk39]

15. His words aren't bad either, to describe the strategy of the IMF/WTO:

"Give them just enough rope to hang themselves."
No comment,
Hello from Germany,
Dirk

[pippin]

16. Found This Article Helpful

As an economics dunder head I found this explanation as to how we got ourselves into this pickle helpful, especially tthe following:

"Trading countries do not necessarily balance their exports with imports on an annual basis. Some enjoy trade surpluses year after year, while others are consistently left with trade deficits. For instance, from 1996 to 2002, the American trade deficit jumped from $191 billion to $485 billion. We enjoy one of the highest standards of living in the world, partly because Americans import vast quantities of cars, shoes, watches, pots and pans, cameras and DVD players.

Statistics relating to our imports and exports are mind-boggling. In 1996, the United States imported $1.31 of goods for every $1 it exported. By 2004 we will import $2 for every $1 worth of export. . . .Everything I have thus far said may lead you to believe that overindulgence on our part is the main reason for our current troubles. Fortunately for us, that's not the whole story. Foreign countries must also take part of the blame for our troubles.

According to the International Monetary Fund, since 1996, the foreign exchange reserves of some major Asian countries have jumped from $500 billion to more than $1.3 trillion. Japan's have risen from $217 billion to $534 billion, China's from $107 billion to $345 billion, Hong Kong's from $64 billion to $116 billion, Taiwan's from $88 billion to $182 billion, South Korea's from $34 billion to $128 billion and Indonesia's from $18 billion to $33 billion. These funds are invested mostly in U.S. Treasury bonds which, as mentioned, leads to some special problems for us.

But the larger problem created by this hoarding mentality is that it has broken the trading circularity, which is essential for the smooth functioning of a system of free trade."
http://www.zwire.com/site/news.cfm?newsid=10186487&BRD=988&PAG=461&dept_id=141274&rfi=6

[Dirk39]

17. Many see this as the reason behind the Iraq-invention...

The USA needs inventions and the only argument for this is their military strenght, their role as a world leader. I guess, this was even the reason for not attacking Saudi-Arab. They would have taken 20 billion dollars out of the US-market in a day...
The same guy who has foreseen the collapse of the Sovietunion long before others, Emanuelle Todd, has written a book about the collapse of the USA one year ago. It's very interesting.
Hallo,
Dirk

[JNelson6563]

18. Hello Dirk from Germany!

Glad you're joining us! Tell the folks over there we're working on getting our house in order and will have a psychologically healthy leader again in time for '05. Thank them for their patience. ;-) We are going through a growing pain at the moment.....

Julie

[indepat]

20. Is this country bound to become a banana republic under the rudderless

stewardship of this Administration?

[young_at_heart]

21. Where are all those former "tax and spend" critics?

The GOP congress under Clinton continually carped about money....why are they so silent now?