Trouble Ahead
By I think Paul Krugman tried to warn us about this. Yikes.
The dollar could slide still further, in spite of hitting an all-time low against the euro last week in the wake of George W. Bush’s re-election, currency traders have said.
The dollar sell-off has resumed amid fears among traders that Mr Bush’s victory will bring four more years of widening US budget and current account deficits, heightened geopolitical risks and a policy of “benign neglect” of the dollar.
Perceptive bunch, those traders.
China, which has $515bn of reserves, was also said to be selling dollars and buying Asian currencies in readiness to switch the renminbi’s dollar peg to a basket arrangement, something Chinese officials have increasingly hinted at.
Who’d have thought expanding decifits as far as the eye can see might start to cause problems?
Via Yglesias, who’s tossing some cold hard math on the President’s flowery deficit talk.
On an unrelated note, I saw the deeply underappreciated 80’s band Camper Van Beethoven play a great set (refreshingly free of ill-conceived Freetwood Mac covers) last night. I think David Lowery’s been reading the blogs; after some pro forma bitching about the election, he dedicated the next song to “the reality-based community.”