Wednesday, October 10, 2012

Beyond The Fiscal Cliff: The Dollar At Risk?

h/t Jim Sinclair

Looking beyond the fiscal cliff, we are afraid the greenback may be at risk no matter who wins the election. We examine the risk to the U.S. dollar in the context of the likely policies pursued under either an Obama or Romney administration.

Some context: The budget deficit as a percentage of Gross Domestic Product (GDP) in the U.S. is worse than that of some of the weak eurozone countries (Portugal, Italy); the eurozone as a whole has a far lower deficit. If the "fiscal cliff" were to take place -- that is, if the tax hikes and government spending cuts were to take effect as currently scheduled -- the U.S. would still face a deficit exceeding 3% of GDP before factoring in any economic slowdown as a result of the cliff. The fiscal cliff the U.S. is facing would impose eurozone style austerity measures and -- just as in the eurozone -- not eliminate the deficit.

Story: Beyond The Fiscal Cliff: The Dollar At Risk?