What happens to the rest of the world if the US economy crashes?

[Kidlicious]

Originally posted by Agathon

There's a tremendous amount of drag that you are ignoring. Something like that would take at least a decade to occur if there were any movement in that direction at all.

Sure, but it will be worse for the US than for the other countries. If your dollar sucks, and your government is trying to use it to freeload off of the rest of the world, what's the point in trading? You no longer have what they want.

It would be worse in the nations who stay the present course and depend on the free market. Probably that would be the US though.

[Kidlicious]

Originally posted by Agathon
I don't understand anyway. If China moves to Euros as a reserve, then the Europeans will have to spend the money they receive for the Euros (I can't see the point of sitting on a pile of yuan), so the goods that went to the US will now go to Europe, since the Europeans can now afford them.

Becoming a reserve currency takes time too. The Euro can't just take over for the dollar over night. One of the requirements to be a reserve currency is to have a sufficient quantity of that currency.

[Lawrence of Arabia]

the dollar isnt dropping like a rock, its appreciating because as the economy heats up, interest rates increase, and the currency gains in value. plus the fact that oil is also price is USD, increasing prices also means more demand for USD, and appreciation, so we can keep on spending on imports.
now if china dropped its peg, then we would see the USD depreciate, but prolly not significantly.

[Kidlicious]

Europe would be probably least hurt although hurt significantly. It doesn't matter so much that they don't trade with the US that much. What matters is their over all trade, because the whole world would be affected.

[chequita guevara]

Originally posted by KrazyHorse
60 billion a month. 60 billion a year would be peanuts.

That's what I meant.

[chequita guevara]

Originally posted by Lawrence of Arabia
the dollar isnt dropping like a rock, its appreciating

When did the dollar stop falling?

[Lawrence of Arabia]

Since Jan 1, the USD has climbed from 0.73 euroes to 0.78 euroes, and appreciation of 5% over three and a half months.
Since Jan 1, the USD has climbed from 1.14 CHF to 1.21 CHF, an increase of 6%

[Lancer]

The recovery of the $ amazes me. How can we export so many $ and the value increases?

[Kidlicious]

I think that's mostly because of the increase in the price of oil.

[Lancer]

Because we're less dependant on foriegn oil?

The fact that oil is traded in dollars was mentioned earlier as a reason, but I don't get it. The dollars used for oil don't go away, they just end up in someone elses hands, yes?

[Lawrence of Arabia]

its on the strength of the interest rates. when the fed raises interest rates, they also sell bonds that suck money out of the market, making each dollar worth more. our economy heats up partly because of stronger exports (which is a depreciation of the currency) and to slow it down, we increase interest rates, which makes our exports weaker and appreciates the USD.

good news for me, cuz im planning on going abroad next year, and prices in geneva are disgusting. the dollar needs to be around 1 USD = 2 CHF for it to be a deal.

[Kidlicious]

Originally posted by Lancer
The recovery of the $ amazes me. How can we export so many $ and the value increases?

1) The status of the dollar as a reserve currency.

2) The desire of other nations to export to the US. They don't tend to raise the price of their exports.

[el freako]

Originally posted by Lawrence of Arabia
Since Jan 1, the USD has climbed from 0.73 euroes to 0.78 euroes, and appreciation of 5% over three and a half months.

And that means that the depreciation of the $ has stopped?

Between 1st Jan 2004 and 17th April 2004 the dollar also rose by 5% against the euro (from .795 to .834) yet then fell by 12% to end the year at .733

This looks much more like a 'pause for breath on the way down' than a rally.

[Kidlicious]

You don't have to sell all of your goods at the same price. You have to cover your variable costs though with each unit. You can have higher prices in your domestic economy to cover your fixed costs and export at lower prices to use spare capacity and it will still be advantageous for you.

[Lancer]

Switzerland is too expensive. I spent $35 for 2 gin & tonics in Zurich about ten years ago. I have family there but it's just too expensive to visit.