Forex Blog: Currency Trading News & Analysis.

September 29th 2008

The Bailout Irony

As the US Congress puts the finishing touches on a $700 Billion plan intended to resuscitate the ailing financial sector, analysts remain hard at work assessing the potential implications. The consensus- unchanged from when the plan was first unveiled- is strongly negative, especially as far as the Dollar is concerned. When combined with the government’s other initiatives, the bailout will add nearly $1 Trillion to America’s national debt. Additionally, the Federal Reserve Bank would have to print money to bridge a shortfall in the government’s borrowings, thereby stoking the fires of inflation. Ironically, the Dollar’s best chance to avoid a continued decline is if the bailout plan fails in its stated aim, and the American economy implodes, pulling the global economy down with it. The Wall Street Journal reports:

Investors have already begun to cut their exposure to emerging-market and other higher-yielding currencies, and this trend could continue even if the dollar is no longer the bedrock of safety it once was.

Read More: Outlook for Dollar Dims

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Posted by Adam Kritzer | in Politics & Policy, US Dollar | No Comments »

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