No one expects that the United States dollar currency would crash. But it could, like the way the real estate and housing industry were – it fell for three straight years starting from 2006.
Moreover, many economists said that the dollar had fallen for roughly 15% through the years. And on average, it really doesn’t go beyond 20% from their long term averages. But still a dollar bust is highly possible. We need to keep prepared of our imaginations. The housing industry fall the way they were because of many institutions such as credit raters, lenders and regulators failing to imagination of the possibility.
Here are the possibilities that are probably beyond our imaginations:
Bank Blowups
Although US manufacturers would find it easy to compete worldwide, their country would fall trap to the rising cost of imported products. Ergo, foreign markets would have a hard time exporting to US, thus, hindering their growth as a nation. Moreover, it wouldn’t be easy to get a bank loan as foreign buyers pull out of the debt market causing bank blowups.
Deficits Depress Dollar
The dollar’s weakness possesses a threat to every nation. Many people would buy them and eventually selling them to buy currencies that provide better returns. Moreover, the citizens would be encouraged to spend as short-term bank interest nears zero.
Also, the continued US trade deficits, which is the amount of money the country is paying for borrowed money, might force the country to devalue its own currency to make its global debt more affordable.
Inflation Could Emerge
When inflation emerges quickly, it would be disastrous to the economy because Federal Reserve might jack up interest rates to cool it down or defend the currency while growth remains weak.
No one knows when this will happen. But there’s nothing really bad when you open your minds to it.