The dollar is now at its lowest value since the collapse of the 1971 and the gold standard.
1 is now worth around 1.35$, 1 British pound is now worth around 2$..
Just from the currency fall alone the European economy has grown from 14.25 trillion to 14.85 trillion. This is the numbers of the end of last year, and real growth is not taken into consideration, which would bring it at around 15 trillion.
The US economy is shrinking with a falling dollar, which is trying to compensate the huge gap between import and export by falling. I wouldnt be surprised to see the REAL value of the dollar at 1.5-1.75 to the Euro and 2.25-2.5 to the pound.
By real value I mean the value where the imports and export is synced at around the same level, and how low the dollar has to fall for this to happen.
Not only will the falling dollar lead to a decline of purchasing power in the US as imports will be far more expensive, but as a result the whole economy might go into recession and outright decline. The federal reserve is trying to keep the US economy attractive by raising interest rates, but having a 10-15% interest rate in the US when the dollar hit the REAL value wouldnt be very healthy for the economy, so it can only go so far, and when it stops it will be felt in the pockets of the people in the US.
Economic conditions and sentiment in the US is very bad, and I think all of you will agree with me when I say this is the fault of the current US administration. They turned a perfectly good cherry red situation after Clinton into economic crisis, that all Americans now will feel the coming decade.
Im not saying this is the fault of Bush alone, but his whole administration is incompetent and should walk out of their offices in shame when Obama takes over. A heck of a large job is left for the next president, lets hope he can handle it..
What he should do:
1. Remove the troops from Iraq, which will slice away 100 billion in spending annually.
2. Reduce military spending to 2000(pre Bush) levels, this will save around 150 billion every year.
3. Use that money to pay down trade debt, which will stabilize the situation slightly.
4. Work his *** of to make trade deficit non existent without crushing the dollar while doing so. This means slicing imports and increasing exports, the difference is around 850 billion annually, so it will take awhile..
Good luck to the next president, and may this current administration walk in shame their whole lives, and may history remember them as the true fools they were.