The American meltdown made its presence in 1990 and gradually rose to hit with wild ferocity in 2006-7. That despite the soaring economy, a recovery in housing prices, the dot-com boom, and a bull market in stocks, America was on the verge of one of the worst financial meltdowns the world would ever see. Ask any Indian exporter, he would say his woes of dollar depreciation and Rupee appreciation began to surface slowly in 2001 and reached menacing proportions after 2006.
The Indian exporters and the Government should take this opportunity to diversify their markets from America, slowly and steadily. It is the need of the hour that alternate markets are found, so that the rhythm of exports would be maintained. Given the present circumstances, the green back getting back to its original glory looks very slim and the American economy is on the throes of a crisis which with least turbulence can bubble.
The supremacy of America as a trading nation has sunk. It is no more a mass market for exploitation, even though markets are open and in plenty but there is no money in these markets. The dollar is not strong. In fact, it’s sinking to record levels of weakness, and it’s going to stay that way for at least some time if not for all the time. .
First, the U.S. Federal Reserve is running a zero-interest-rate policy and has announced that it intends to continue doing so. While it does, there’s easy money to be made out of borrowing dollars and lending almost anything else! That will actually make the dollar drop.
Second, the Internet and all the cheap money slashing around have made it attractive for U.S manufacturers to outsource production to emerging markets, more so than ever before. That leads to big U.S. balance-of-payments deficits. This would help emerging-market wage levels rise fast against U.S. wage levels. This is happening so fast that U.S. wage levels will probably have to drop resulting in higher unemployment levels. This unrest would lead to choes and would affect the outsourcing countries. This is not a win-win situation for the suppliers.
The U.S. government is running huge deficits and pretty much everyone in the United States has one or the other debt in his name. A weak dollar will make all those debts get smaller.
There are some very good reasons why the U.S. dollar is weak. This would force sovereign Governments not to go for U.S. Treasury Bonds with the result that the United States would face liquidity crisis. The budget deficit for the 12-month-period that ends next September will be even larger than the $1.4 trillion shortfall recorded for the 12 months that ended in September of this year.
The only way America can get out of the precarious situation is to stop printing money. The stimulus to sectors would not boost real growth. Fed Chief’s zero-interest-rate policy is sending gold through the roof, and will cause huge trouble down the road. Interest rates need to be higher than inflation. Only then, the Savers get benign interest for saving their money. This would propel other spenders to conserve and save money. Today, as it is, with no incentive for saving, people are not encouraged to save.
The U.S. dollar fell to a 15-month low against a basket of currencies as investors questioned U.S. Federal Reserve Chairman’s ability to return it to strength. The dollar declined to an intraday high of $1.48 against the euro even though the Fed is "attentive" to fluctuations in the value of the greenback and "will help to ensure the dollar is strong." Meanwhile, the falling dollar grew investors' appetite for hard assets, which resulted in the price of gold once again rising to a record $1,140 an ounce on the New York Mercantile Exchange (NYMEX).
India, as a Country has to look at enhance bi-lateral trade to emerging markets and other developed markets instead of trying to persist with the US Market which may go for a tail spin. The present economy in the United States and the distress signals emanating from it does not augur well for India to depend upon exclusive American market. Better abandon them slowly and steadily, and try to penetrate into new markets. This is what China is stealthily doing. This is simple arithmetic.
The Indian exporters and the Government should take this opportunity to diversify their markets from America, slowly and steadily. It is the need of the hour that alternate markets are found, so that the rhythm of exports would be maintained. Given the present circumstances, the green back getting back to its original glory looks very slim and the American economy is on the throes of a crisis which with least turbulence can bubble.
The supremacy of America as a trading nation has sunk. It is no more a mass market for exploitation, even though markets are open and in plenty but there is no money in these markets. The dollar is not strong. In fact, it’s sinking to record levels of weakness, and it’s going to stay that way for at least some time if not for all the time. .
First, the U.S. Federal Reserve is running a zero-interest-rate policy and has announced that it intends to continue doing so. While it does, there’s easy money to be made out of borrowing dollars and lending almost anything else! That will actually make the dollar drop.
Second, the Internet and all the cheap money slashing around have made it attractive for U.S manufacturers to outsource production to emerging markets, more so than ever before. That leads to big U.S. balance-of-payments deficits. This would help emerging-market wage levels rise fast against U.S. wage levels. This is happening so fast that U.S. wage levels will probably have to drop resulting in higher unemployment levels. This unrest would lead to choes and would affect the outsourcing countries. This is not a win-win situation for the suppliers.
The U.S. government is running huge deficits and pretty much everyone in the United States has one or the other debt in his name. A weak dollar will make all those debts get smaller.
There are some very good reasons why the U.S. dollar is weak. This would force sovereign Governments not to go for U.S. Treasury Bonds with the result that the United States would face liquidity crisis. The budget deficit for the 12-month-period that ends next September will be even larger than the $1.4 trillion shortfall recorded for the 12 months that ended in September of this year.
The only way America can get out of the precarious situation is to stop printing money. The stimulus to sectors would not boost real growth. Fed Chief’s zero-interest-rate policy is sending gold through the roof, and will cause huge trouble down the road. Interest rates need to be higher than inflation. Only then, the Savers get benign interest for saving their money. This would propel other spenders to conserve and save money. Today, as it is, with no incentive for saving, people are not encouraged to save.
The U.S. dollar fell to a 15-month low against a basket of currencies as investors questioned U.S. Federal Reserve Chairman’s ability to return it to strength. The dollar declined to an intraday high of $1.48 against the euro even though the Fed is "attentive" to fluctuations in the value of the greenback and "will help to ensure the dollar is strong." Meanwhile, the falling dollar grew investors' appetite for hard assets, which resulted in the price of gold once again rising to a record $1,140 an ounce on the New York Mercantile Exchange (NYMEX).
India, as a Country has to look at enhance bi-lateral trade to emerging markets and other developed markets instead of trying to persist with the US Market which may go for a tail spin. The present economy in the United States and the distress signals emanating from it does not augur well for India to depend upon exclusive American market. Better abandon them slowly and steadily, and try to penetrate into new markets. This is what China is stealthily doing. This is simple arithmetic.
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