Currency exchange rates today: Dollar, euro, pound and the effect of the phoenix

Currency exchange rates today: pound and the euro no longer will support the international exchange market

In brief: Currency exchange rates today - U.S. dollar may stabilize by the end of 2010. Euro will continue to decline.

Currency exchange rates today remain unstable and unpredictable. Will the dollar exchange rate equal to the euro? When the British pound will regain the position of absolute leader in the foreign exchange market? Can defaults in Europe finally derail the exchange rate euro? To answer these questions should consider the situation in global financial markets in a macroeconomic perspective. Again calls the followers of the old economic Religion: Repent before it’s too late; pay for financial sins – death. But perhaps time has come to save?.

At least we must recognize the existence of risks: delay saving threatened inflation and even in default; premature savings could lead to recession and even deflation. We barely survived the biggest financial crisis in history, and now must recognize that the probability of recession is very high. According to some experts, the economy is always in equilibrium, which, according to Voltaire, Dr. Pangloss, means “all for the best in this best of all worlds.” Others, led by Andrew Mellon, U.S. Treasury Secretary under Herbert Hoover, argued that after the great credit boom to “eliminate jobs, liquidate stocks, liquidate the farmers, liquidate real estate this will clean the system.”

I appeal not to the representatives of these groups. And to those who are aware that past mistakes have led the world economy into a deep crisis, and to those who want as quickly as possible to get out. Nevertheless, reasonable people believe that now the greatest danger associated with a delay of financial tightening. And there are several reasons. First, they fear that, after Greece, Portugal and Spain, financial markets will soon pounce on the UK and even the U.S., and secondly, they believe that deficits crowd out private expenditure needed for rehabilitation, and thirdly, they argue that large deficits should lead to inflation and, finally, they believe that fiscal deficits will not be able to support the demand. See what position we were trying to achieve financial balance at the initiative of the late Winnie Godley. Therefore it is necessary to understand the behavior of the private sector. According to recent forecasts by the International Monetary Fund, in 2010. profit private sectors of all countries with high income will significantly exceed the costs. This forecast is based on GDP at 7.8% for all of these countries as a whole, 12.6% for Japan, 9.7% for the UK, 7.7% for the U.S. and 6.8% for the euro area. In short, the world’s private sector covered by the epidemic of thrift, just as recommended by many doctors that specialize in economics. However, such frugality leads either to the formation of surpluses or deficits in current account. Of these countries accumulated surpluses only Germany and Japan. Others import capital. Accordingly, these countries will finance the deficits that exceed the size of surpluses in the private sector. Allegedly some of the most hysterical comrades, we have been flooded losses. What was before – a reduction in the private sector or financial deficits? Answer: the first one. In the U.S., a significant shift in balance in the private sector between the fourth quarter of 2007. and the second quarter of 2009. – The transition from deficit to 2.2% of GDP to a surplus of 6.6% – coincided with the financial crisis. The simultaneous fall in aggregate demand and long-term interest rates, shows that the collapse of private spending has led to financial deficits. Wild behavior of the private sector sparked a wild reaction of the public.

Recently Jeffrey Sachs of Columbia University wrote in a column of FT, that the need for financial incentives was not: it would be sufficient and monetary policy. I do not agree. Despite the very tight monetary policy in history, the private sector have accumulated huge surpluses. Monetary policy was trying to do the impossible. Financial balance – thanks mostly to the domestic financial stabilizers rather than discretionary incentives – have helped to support the demand during the crisis. But they proved insufficient, even with monetary support, to prevent a deep recession. It is difficult to agree with the assertion that the incentives were not needed. It’s easier to believe that they were too small, while still correctly oriented. How fast is necessary to eliminate deficits? It is recognized that there is some risk: cuts in public spending will not automatically lead to an increase in private spending. Unsuccessful reduce the structural deficit, by contrast, may cause an increase in cyclical fiscal deficits, which would either lead to stagnation or a decrease in private surpluses only because income fell even faster than costs. Any outcome does not bode well. Here, nothing can be ruled out.

While in the production slump persists, it is unlikely that financial support will lead to inflation. It also does not trigger a recession in the private sector, but rather will contribute to its growth. But the question is whether we can finance the deficits. In my opinion, yes. Remember, if the private sector accumulates financial surpluses, he should buy debt claims on the private sector, unless the whole developed world is not going to accumulate huge external surpluses. Indeed, the private sector can carefully choose among governments. However, it is unlikely that he will leave, at least from the U.S.. While nothing is said about it. The problem for residents on the periphery of the Europeans is that they have little chance to restore growth in the near future. Markets do not believe in the political stability of the repentant economy. Concern not fiscal deficits, and inability to get rid of them.

The most effective policy – combined measures to ensure sustainable growth of demand in the near future, limiting the huge deficits in the long term. One’s not a hindrance. Why this should cause such difficulties? Nevertheless, the introduction in Europe of strict financial savings at this time would cause severe damage and contributed to beggar my neighbor policy with respect to accidents States. According to Fred Bergsten of the Institute for International Economics. Peterson in Washington, such a policy can be very dangerous. Therefore, premature financial decline, which does not contribute to stabilization, threatens to destabilize the world economy. In this case, the decision to make in the euro area greater than Germany would be considered a trade war against the United States. What would be the last to tolerate deception surplus countries, which accuse the borrowers in deficits in the formation of which inevitably lead to their own surpluses? I think long, at least for now, when the U.S. government has become the world by the borrower of last resort. Yes, I understand that the huge financial deficits make people nervous. I also understand the desire to provide real credibility. However, blind adherence to financial rules and ignoring what is happening in the private sector or in the external balance – a way to frustration and political conflict. Welcomes the financial stabilization, growth-oriented. But premature financial stabilization, undermining his – another one of stupidity.

Ukrainian Globalist
2010-06-20 14:32, Economics.

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