Despised "old" Europe may have to prop up plummeting US economy
p[] | 09.02.2003 03:14
[Will] Hutton, the London Observer's commentator noted the massive U.S. indebtedness to the rest of the world, citing net liabilities of more than $2.7 trillion—nearly 30% of GDP—which puts the United States at a Latin American, basket-case level. Pointing out, as we have shown above, that this makes the United States dependent on a substantial flow of foreign capital into American markets, Hutton noted with some irony: "The Old Europe that Donald Rumsfeld mocked last week has been helping to prop up the U.S. economy."
The Danger for President Bush
The recent warnings about the effect that a unilateral U.S. launching of war on Iraq, will have on the dollar's fortunes...
This point was made with particular force in the Jan. 26 Sunday Observer of London, by its senior commentator Will Hutton. Because of the weakness of the U.S. economy and the threat to the dollar, the United States needs multilateral support for an Iraq war even more economically than militarily and diplomatically, Hutton wrote. "The United States' military capacity may allow unilateralism; its soft economic underbelly ... does not." He argued, that "The multilateralism that Bush scorns is, in truth, an economic necessity," and noted that while the United States may be a military superpower, "it is a strategic position built on economic sand."
Hutton noted the massive U.S. indebtedness to the rest of the world, citing net liabilities of more than $2.7 trillion—nearly 30% of GDP—which puts the United States at a Latin American, basket-case level. Pointing out, as we have shown above, that this makes the United States dependent on a substantial flow of foreign capital into American markets, Hutton noted with some irony: "The Old Europe that Donald Rumsfeld mocked last week has been helping to prop up the U.S. economy."
Hutton's commentary concluded that if the United States and Britain go to war without support of key members of the UN Security Council like France and China, the flow of dollars from abroad into America will slow down dramatically, and there will be a stampede of foreigners trying to sell. If the war is prolonged, or the post-war situation unstable, the pressure on Wall Street and the dollar would be severe, and "Bush might even have to turn to his despised European allies to ask for a multibillion-euro support package for the dollar, because they hold the only currency capable of shouldering the burden."
Another version of the same scenario was posed in a Jan. 25 Dow Jones story, which warned that a prolonged Iraq war could set off a vicious downward spiral in the markets, in which foreign investors liquidate their dollar holdings. The story noted the fact that Russian and Asian central banks are already beginning to dump dollars.
Business Week Online on Jan. 31 predicted that the biggest danger facing the U.S. economy "is that war could turn the dollar decline into a rout." It noted that the economy "is extremely vulnerable to a dollar decline, since America has never been so dependent on foreign capital," and added, "The threat that war may spark a run on the dollar is the largest macroeconomic threat to the economy."
President Bush, take heed.
The recent warnings about the effect that a unilateral U.S. launching of war on Iraq, will have on the dollar's fortunes...
This point was made with particular force in the Jan. 26 Sunday Observer of London, by its senior commentator Will Hutton. Because of the weakness of the U.S. economy and the threat to the dollar, the United States needs multilateral support for an Iraq war even more economically than militarily and diplomatically, Hutton wrote. "The United States' military capacity may allow unilateralism; its soft economic underbelly ... does not." He argued, that "The multilateralism that Bush scorns is, in truth, an economic necessity," and noted that while the United States may be a military superpower, "it is a strategic position built on economic sand."
Hutton noted the massive U.S. indebtedness to the rest of the world, citing net liabilities of more than $2.7 trillion—nearly 30% of GDP—which puts the United States at a Latin American, basket-case level. Pointing out, as we have shown above, that this makes the United States dependent on a substantial flow of foreign capital into American markets, Hutton noted with some irony: "The Old Europe that Donald Rumsfeld mocked last week has been helping to prop up the U.S. economy."
Hutton's commentary concluded that if the United States and Britain go to war without support of key members of the UN Security Council like France and China, the flow of dollars from abroad into America will slow down dramatically, and there will be a stampede of foreigners trying to sell. If the war is prolonged, or the post-war situation unstable, the pressure on Wall Street and the dollar would be severe, and "Bush might even have to turn to his despised European allies to ask for a multibillion-euro support package for the dollar, because they hold the only currency capable of shouldering the burden."
Another version of the same scenario was posed in a Jan. 25 Dow Jones story, which warned that a prolonged Iraq war could set off a vicious downward spiral in the markets, in which foreign investors liquidate their dollar holdings. The story noted the fact that Russian and Asian central banks are already beginning to dump dollars.
Business Week Online on Jan. 31 predicted that the biggest danger facing the U.S. economy "is that war could turn the dollar decline into a rout." It noted that the economy "is extremely vulnerable to a dollar decline, since America has never been so dependent on foreign capital," and added, "The threat that war may spark a run on the dollar is the largest macroeconomic threat to the economy."
President Bush, take heed.
p[]
Homepage:
http://www.larouchepub.com/other/2003/3005us_dollar.html
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Uncle $am deserves no ca$h
09.02.2003 03:26
"Asian central bankers are beginning to move into other currencies, especially the euro, and also into gold, whose price has jumped by 31% since Sept. 11, 2001. "If Asians pull back from investing in the U.S., there isn't much else to support the dollar," warned an economist at Morgan Stanley investment bank."
"On Jan. 25, the Russian Central Bank announced that it now has "no less than 50%" of its reserves—which amount to almost $50 billion—invested in dollar assets. But this is going to change: The Central Bank said that it will cut its share of dollar-denominated assets, and instead buy euros, British pounds, or Swiss francs."
"Two days earlier, Zhu Min, general manager of the Bank of China—one of the world's top 30 banks, with $400 billion in assets—warned that the purchase of dollar-denominated investments on a large scale, by China and the nations of Asia, may not be sustainable."
Yet another front on which to slam the war-mongering Merkins..
Phone your fund manager first thing, Monday and order him to transfer any holdings you have OUT of America Corp..
Myshon
Homepage:
http://www.larouchepub.com/other/2003/3005us_dollar.html