Wednesday, September 22, 2010
It's a race to the bottom right now
Countries everywhere have abandoned strategies to boost domestic spending because of real or perceived debt fears. Instead, growth policies have all become focused on exports. Whether you are talking about Europe, the U.S. Japan or China it's all about exports. The problem is, there's no one to sell to. In the past the United States was the buyer and because of this it was seen as the engine of global growth. But now the Obama Administration is looking to double exports in the next 5 years. How is that achieved? Currency devaluation and wage and income suppression. That's the problem, all the major countries are looking to boost growth the same way. It can't happen. That's why we're probably close to another leg down in the global economy or some kind of currency crisis.
Under this scenario it looks like the euro has the most to lose.