Barack Obama will take a whopping 825 billion dollars to heal the wounds of the U.S. economy which will bring the U.S. public debt to 70%, a record, and the budget deficit to 8%. Such an explosion of public spending, although it is certainly inevitable in this period of acute crisis, arouses the concern of many in the foreign exchange market.
Of course, none sees the euro as a way to escape the crisis. No one is fooled about the economic outlook for the euro area and the fate seemingly inevitable, the European single currency on the foreign exchange market. However, given that apart from the yen, no other currency seems able to have the favor of investors, they nevertheless begin to question the sustainability of their investment.
However, this fear seems unwarranted. Admittedly, private debt, both businesses and individuals is enormous, but for the moment, the United States still largely the means to borrow money. Suffice it to Americans to turn to the Chinese. This is not, of course, the charity that so willingly accepts China, like Japan, to buy bonds issued by the U.S. Treasury. In fact, China is stuck because on the one hand, it can not allow a devaluation of the dollar due to a collapse of the U.S. economy, or risk seeing war chest is melting like snow in the sun and, on the Furthermore, it exports 25% of its GDP to the USA. A collapse of the economy across the Atlantic severely jeopardize the growth in China is already losing momentum because of the global recession and increase social tensions.
However, even if the optimism is necessary, China will not lend indefinitely in the United States, partly because of financing its own relaunch plan amounting to almost 455 billion euros. If the U.S. can find no one else to finance their deficits, drying credit and higher interest rates, which would obviously be detrimental to businesses, could be on the horizon. In this case, the Treasury would be forced to rely on the good old method of boarding ticket to clear the debts. However, the downside is inflation falling sharply as the dollar on the foreign exchange market. Be sure that the new Treasury Secretary, Tim Geithner, will do everything to avoid such a scenario, who has already reaffirmed its support for the strong dollar policy.
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