Niall Ferguson believes that the dollar will fall another 20%
I'm not sure that his opinion counts for much, but famous historian Niall Ferguson told Bloomberg in a recent interview that he believes the value of the U.S. dollar will drop by another 20% versus the euro over the next several years.
His argument that policy makers are actually intentionally orchestrating the drop in the dollar in an effort to spur a recovery from the Great Recession actually makes sense. Specifically Ferguson said:
A weak dollar is “the simplest solution to most of America’s problems right now. 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.
This is basically what I have been saying lately. Despite the chirping from some kooks that the U.S. doesn't export anything but garbage, America actually does produce real goods that we export to the rest of the world. Of course, part of the reason that we are in the mess that we currently find ourselves in is that we produce too little and consume too much. A weaker currency would encourage additional production of exportable goods in the United States over time and make imports more expensive. Even foreign companies would begin to build plants here if it made economic sense to do so, as many of the Asian automakers did during the last bout of dollar weakness.
Ferguson went on to say:
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.
Again, I'm not sure how much weight we should assign to Ferguson's opinion, but the above statements make sense. At least this discussion is a lot more worthwhile than looking at the story of "balloon boy" which seems to be running on a constant loop on MSNBC today. Good grief, he didn't even get in the thing for Pete's sake.
Dollar May Drop 20% More on Deficit, Harvard’s Ferguson Says