Dollar danger

Article Abstract:

The drop in value of the US dollar in relation to the Japanese yen could lead to problems for the world economy. The US has undergone economic expansion reaching record levels, but the stock market has been left overvalued, the personal-savings rate is negative and there is a large current account deficit. The economy is vulnerable if foreign investors will not finance the current account deficit. US monetary policy has been too loose and this means a recession is likely to be deeper than if interest rates had not been so low.

Exchange Rates, Editorial, Economic aspects, Stock-exchange, Stock exchanges, United States economic conditions, Dollar (United States), Balance of trade

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Alan's key

Article Abstract:

US inflation is low, and this could mean that interest rates do not have to rise, yet stock prices could also be taken into account in interest rate policy. Higher stock prices help fuel consumption, since consumers feel wealthier, and they also cut capital costs so can boost investment. The economics team at Goldman Sachs sees loose financial conditions in the US, taking stock prices into account. There are divisions within Goldman Sachs, and not all analysts see a need for higher interest rates.

Economic policy, United States. Federal Reserve Board

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The extraordinary edginess of crowds

Article Abstract:

There is speculation about where problems could lie in the US financial system following interest rate reductions.

Financial Services, Finance and Insurance, Financial services industry

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