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Recession Will Pass, but Dollar May Be Doomed

By Jason Farago, Newser Staff

Posted Aug 26, 2009 7:07 AM CDT

(Newser) – The American economy is heading out of recession, but the long-term fate of the dollar may not be so bright, writes the Wall Street Journal. Growing numbers of economists and investors, including Warren Buffett, say that stimulus spending and rate cuts will boost inflation and weaken the greenback. At the same time, emerging economies like China and Brazil are using the crisis to diversify their reserves out of the dollar.

A weakening of the dollar would have to take place over many years; China, which holds more than $1 trillion, is still buying US debt and would suffer huge losses if it started selling its reserves. But anxious investors said yesterday's White House prediction of a $9 trillion budget deficit to 2019—$2 trillion more than first projected—is the latest sign that the American currency is in trouble.

[Images (2)]

[Quotes (1)]

The Obama administration projected a $9 trillion budget deficit over 10 years yesterday, $2 trillion higher than previously thought. (©MOmilkman)

Increasing numbers of economists and investors are bearish on the dollar. (©Tetsumo)

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There has been a lot of disappointment with the way the US credit crisis was handled. The dollar's loss of influence is a steady and long-term trend. - Claire Dissaux, managing director at a London currency investment firm

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COMMENTS

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Showing 3 of 24 comments

Snowleopard

Aug 27, 2009 5:35 AM CDT

dontlikeyou: firstly, the dollar isn't going to drop to a third of it's value. Look at what happened to the pound when it's currency devalued. they pushed up interest rates to make it a sound investment again. secondly, a dropping of the U.S. dollar might be the best thing possible for this country, since it would make U.S. exports more attractive, and would help our trade deficit.

cognitivefilter

Aug 27, 2009 4:04 AM CDT

buy gold

DontLikeYou___

Aug 26, 2009 12:36 PM CDT

If you are optimistic, then I invite you to invest your money in the stock market. The market manipulators always can use a few new suckers.

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World • Money

inflation • currency • debt • national debt • US dollar • weak dollar

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