Dollar May Drop 20% More on Deficit, Harvard’s Ferguson Say.
Oct. 16 (Bloomberg) -- The dollar will extend its drop versus the euro over the next two to five years, falling as much as 20 percent to an all-time low under a widening U.S. budget deficit, Harvard University’s Professor Niall Ferguson said.
Policy makers favor the dollar’s slide as a means of supporting a recovery from the worst economic slump since the Great Depression even as they voice support for a strong greenback, Ferguson said in an interview on Bloomberg Radio.
A weak dollar is “the simplest solution to most of America’s problems right now,” said Ferguson, author of “The Ascent of Money: A Financial History of the World.” “We are likely to see 1 percent to 2 percent growth unless exports take off, and that’s what everyone in Washington is quietly hoping: If the dollar keeps sliding, then maybe we can get some traction on exports.”
The dollar increased 0.4 percent to $1.4887 versus the euro today after depreciating yesterday to $1.4968, the weakest level in 14 months. The U.S. currency touched $1.6038 on July 15, 2008, the weakest since the euro’s 1999 debut.
The world’s largest economy shrank at a 0.7 percent annual rate in the second quarter, the Commerce Department reported last month. Gross domestic product contracted at a 6.4 percent pace in the first three months of 2009.
Economists forecast the current-account deficit will rise to 3.2 percent of gross domestic product in 2010 and 3.3 percent in 2011, compared with 2.9 percent this year.
The weakening of the dollar is “terrible news for practically all of the rest of the world’s economies,” except the U.S. and China, said Ferguson. China, which manages the yuan’s appreciation, will “intervene to make sure the dollar does not weaken” relative to its currency, Ferguson added.
Treasury Secretary Timothy Geithner said on Oct. 3 after attending a meeting of Group of Seven finance officials that it’s “very important” for the U.S. to have a strong dollar.
The administration of President Barack Obama pushed the nation’s marketable debt to an unprecedented $6.78 trillion in an effort to spur economic growth and support the financial system. The U.S. government ended its 2009 fiscal year with a deficit of $1.4 trillion, the biggest since 1945, the Congressional Budget Office reported.
Yes, and when oil was $148.50 it was going straight to $200.
This is the most sure thing of the century. Your local grocer is even shorting the dollar now, the guy who washes your car too. Its a sure thing for the populace of the world to short the dollar RIGHT NOW, for a SURE 20% drop, from here. 20% GUARANTEE DROP NO RISK.
GET ON BOARD Y'ALL, they just gave you the sure thing... :-)
wait, aren't these the same geniuses that paid 500M to get out of an interest rate swap, which they settled because they were in a "liquidity crunch? how does a school with a 14B endowment get itself into such a situation? btw, how did the harvard endowment do last year? Down 30%, eh?
dollar bears remind me "oil to 200" nonsense from last year.