Business Economic Impolitic

Finally a little good news for the dollar

<![CDATA[ / World / US – Dollar surges on Greenspan US deficit comments :

The dollar rallied on Friday to a near three-month high against the euro following reassuring comments on the US current account deficit by Alan Greenspan, chairman of the Federal Reserve.

Speaking at a conference ahead of the Group of Seven meeting in London, Mr Greenspan listed a range of factors poised to contribute to the narrowing of the US current account deficit.

These included market forces – an increasing unwillingness by international exporters to see their profit margins squeezed by the low dollar as well as growing success by US exporters – and a changed political environment.

In afternoon trading, the dollar rose against the euro to $1.2947, the strongest since November 12.

Mr Greenspan said the US economy might be approaching, if it had not already reached, the point at which exporters to the US would not longer choose to absorb a future reduction in profit margins due to the declining dollar.

He then mentioned political pressures: “Besides market pressures, which appear poised to stabilise and over the longer run possibly to decrease the US current account deficit and its attendant financing requirements, some forces in the domestic US economy seem to head in the same direction.”

He added: “The voice of fiscal restraint, barely audible a year ago, has at least partially regained volume. If actions are taken to reduce federal government dissaving, pressures to borrow from abroad will presumably diminish.”

And more, but, basically, it’s still just dollar PR for the time being. The U.S.’ current account deficit may narrow, but the absurd federal deficit spending is only going to widen. Every time President Bush promises a contraction of the debt, we get an unbudgeted surprise. If the Social Security “reform” goes through, it will add another several trillion dollars of debt, but all we hear is that he will cut the deficit in half by 2009 (there was no deficit when he got into office). Amazing that Greenspan parrots this shit.