Face-Off: The Dollar’s Doldrums
Last fall, the dollar surged as the world turned to U.S. Treasuries as a safe haven. But its recent decline has some wondering: is the dollar headed for a crash?
Peter Schiff
Absolutely. "At some point, the world will want out of the U.S. economy, and the dollar will rapidly lose value. The bailouts and stimulus have only worsened our problems. We can't afford our huge government because we don't produce enough, so we spend borrowed money. We're sealing the fate of our currency by printing it into oblivion."
Brad Setser
Not so fast. "Whenever a country runs a large trade deficit for a long period of time, there's some risk for a disorderly correction. But there are two things mitigating that risk: the trade deficit has come down signif- icantly, and our savings rate has gone up. If sustained, together they reduce the risk of a crash and the needed adjustment is smaller."
Our Verdict
The potential for a crash depends on what happens abroad, as the dollar's value is relative to that of other currencies. As long as the U.S. doesn't get left behind in a global recovery, the dollar will be fine.
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