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April 7th 2006

Laws of Economics may soon catch up with Dollar

This year, the US current account deficit is projected to reach $800 Billion, an astounding 7% of GDP. If current trends continue, the deficit will jump to 13% of GDP by the end of the decade. Moreover, this year will probably mark the first ever that the net US return on foreign investment will be less than the money earned by foreigners on US investments. For this trend to be reversed will require a massive depreciation in the value of the USD. Unfortunately the US is tightening monetary policy at a faster rate than the rest of the developed world, which renders such a reversal unlikely. The Economist reports:

Not only is the yen relatively weak in nominal terms, but falling prices in Japan have made it even more competitive.

Read More: The Yen also Rises

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Posted by Adam Kritzer | in Economic Indicators, Japanese Yen, US Dollar | 2 Comments »

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2 Comments of “Laws of Economics may soon catch up with Dollar”

  1. J Klein Says:

    How soon?

  2. Rick Says:

    I postulate that the USD is plummeting in line with the rising price of gold.
    Read Harry S Dents latest book for an interesting take on when it will all end (2009-2010).

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