As a result of the mortgage crisis and the current US account deficit, some ask for a depreciation of the value of the dollar. Allan Greenspan, the former chairman of the US Federal Reserve, on the contrary states that there is no need for that. Greenspan emphasizes the difficulty of forecasting currency movements.
National Markets are so enormous and often volatile that they are difficult to be grasped or predicted, and they don’t respond according to a single economical law.
According to Greenspan, the current international economic imbalances are perfectly normal and nothing unhealthy. They merely reflect differences in specialization between economic entities.
There might be a need to adjust some financial variables, but a need for a dollar decline may be one step to far.
I agree with Greenspan that economic markets and national economics are difficult to asset or / and predict. Changes in the economy may be caused by so many different variables that we can’t know for sure what will come next. The only thing we can hope for, is the fact that something has to change when everything seems to become negative. But economies are always subjected to fluctuations. After a down period there is always a time of up.
Sarah Struyf
http://www.ft.com/cms/s/0/fc460b7a-8029-11dc-b075-0000779fd2ac.html
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I think Greenspan has a good point. The variables, which we use, are still those of some decades ago. In the meanwhile there has been lots of specialization.
The depreciation of the dollar was perhaps necessary. But how far do we have to go?
Thomas
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