Saturday, December 2, 2006

Our economic quagmire


EVEN IF you are not planning an (ever more expensive) European trip any time soon, pay attention to the decline of the dollar. It could portend deeper trouble for the economy.

The dollar just hit a 20-month low against the euro. It now costs $1.32 to buy one euro, and the dollar is falling against other currencies as well.

The greenback is sinking mainly because the United States runs an immense trade deficit with the rest of the world, especially East Asia. Countries like China, Korea, and Japan have an unhealthy co dependency with the United States. Their governments help their industries capture leadership in technologies, products, and jobs. They then sell America far more then they buy. However their central banks happily lend those dollars back to us, so that we can finance the trade deficit and keep buying their exports.

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