/ world today news/ The day is not far when the sunset of the US dollar will come. Already today, we can observe the first stages of the rapid decline of the US national currency. In the period from May to August this year, the real effective exchange rate of the dollar fell by 4.3%. This indicator is very important for trade operations, inflation, competitiveness of the country’s economy and its monetary policy.
The fall in the dollar’s exchange rate is a consequence of three main reasons: the increased role of the euro and the yuan as alternatives to the dollar, the methodical loss of the so-called American aura of exceptionalism, thanks to which its currency remained stable in the post-war period, and also macroeconomic imbalances of the USA.
We must also not forget about the rapid decline in the level of net national savings. For the first time since the 2008-2009 crisis, this figure is minus one percent. The growing federal budget deficit played a significant role in this. Over time, this will cause the US current account balance to decrease.
The US Federal Reserve has chosen an intermediate inflation targeting strategy that will keep interest rates at zero. It is noteworthy that the overwhelming majority of countries solve the problem of devaluation of the national currency by adjusting interest rates (their growth). Financial authorities in Washington have taken a path that increases pressure on the dollar.
In other words, the US dollar, which thus far remains overvalued, is falling into a slowly shrinking pincer.
Obviously, the US Federal Reserve will not be able to fix the situation in the near future, as the main focus is on supporting the stock market, not on fighting inflation. Therefore, the fall of the dollar is just beginning. The show is coming up.
Translation: V. Sergeev
#economy #entering #inflationary #abyss
