Dollar Falls Again

SUBHEAD: Fed to increase inflation. Devastating news going forward on the cost of fuel, electricity & tourism to Hawaii. Image above: Pan Am 707 jet returning tourists to mainland flies over Koko Head Crator on Oahu. From (http://www.brianrolandart.com). By AP Staff on 15 October 2010 for Boston.com - (http://www.boston.com/business/markets/articles/2010/10/15/dollar_falls_again_against_euro_yen) The dollar keeps falling against other major currencies because investors expect the Federal Reserve to pump money into the economy next month to try to stimulate growth. Since late summer, when the Fed hinted it would act, anticipation has rippled across the economy: Stock and oil prices have surged. Commodities like gold, silver, and corn have risen. Treasury yields have slid. Mortgage rates have sunk, too, along with yields on money market and CD accounts. The steep decline has even raised worries of a global currency war, with nations competing to keep their currencies from rising as the dollar sags. Yesterday, the dollar fell to a 15-year low against the yen and touched its lowest level against the euro since January. The dollar has slid more than 10 percent against the euro in three months. What does this mean for consumers and businesses? For one thing, imports can cost more. So does travel abroad. Goods from US companies become cheaper for foreigners, and oil tends to cost more. Even the likelihood of some new price bubble in investments, such as stocks or real estate, could rise. But the US economy is so weak the Fed considers a cheaper dollar to be a good thing, especially when interest rates are low, too. Those cheaper rates could help rejuvenate the economy. Consumers and businesses would be more likely to borrow and spend — at least those who are able. The idea is that higher spending would course through the economy, boosting corporate revenue and creating jobs. The Fed is widely expected at its Nov. 2-3 meeting to launch a program to buy more government bonds, which would inject billions into the economy. The question is whether that would actually stimulate the economy. Some warn efforts to shrink interest rates are destined to cause inflation. Eventually, the low dollar should help boost US exports. Yet so far, there’s little evidence it has. The government said yesterday that the US trade deficit shot up in August as a surge in imports outweighed a small gain in exports. .

1 comment :

Mauibrad said...

It's a recipe for economic disaster here in Hawaii, and almost all of the local politicians appear to be unaware of these dark storm clouds developing on the horizon...

Haven't heard a peep out of the economists on Oahu that all of the politicians take their que from.

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