Quote from tradestrong:
Well, I'm going to both agree and disagree with you. First, I'll agree that the value of the USD has to a great degree been based upon consumption, which is precisely why it is in a free-fall.
I'll disagree on the impact that cutting interest rates and increasing the money supply will have though. Yes, inflation is going to be a serious problem and the USD will continue to fall in the short-term and credit is going to choke consumers and corporations alike. In the short-term, things are going to get a lot worse. Inflation, the credit crunch and the devalued dollar are going to force consumers in the US into a virtual grid-lock
But in the longer-term, the balance of trade will reverse direction which should bring the trade deficit (at least closer) back into line. The US is still perceived as a safe place for international investors and I seriously don't see that changing in our life-times. This "political safety" still makes the US a very attractive place to invest money. The key is for the FED to not continue cutting interest rates one day too long once it is apparent that the BOT has reversed significantly. That will be the sign to start again raising interest rates. When that day comes, job growth should rebound and many new international companies will most likely take advantage of the cheap dollar and low interest rates to do their export business from.
