Dollar Nearing Peak

Tomorrow, the U.S. Federal Reserve System will announce a new money supply infusion into the American financial system, New York Times analysts claim.

According to them, the Federal Reserve System will buy bonds on the open market in the amount of 500 billion to 2 trillion dollars. This is being done in order to free up the credit market and to try to spur on the economy, which right now is on the brink of recession.

“Actually, after a fairly quick revival from the economic crisis, the U.S. has entered a stagnation phase. Its growth is insufficient for reducing the high level of unemployment,” head economist for the Center of Development Valery Mironov explained to Rossiskaya Gazeta. “In view of this, the authorities decided to arrange a significant infusion that, naturally, will have an effect around the world.”

According to the expert, Americans do everything for their own good and do not always pay attention to the consequences for other countries. So the main consequence is the cheapening of the dollar and the strengthening of the currencies of many other countries — except for China, which possesses huge reserves and can regulate the yuan rate. As a result of the strengthening of national currencies in relation to the dollar, the competitive ability of exports and the competitive ability of domestic producers against imports will decrease.

“In order to compensate for their currencies strengthening as a result of the artificial weakening of the dollar, countries will introduce limitations on the inflow of capital. This leads to the world becoming more closed and economic growth rates slowing down,” Mironov reasons.

In the opinion of several experts, the intentions of the Federal Reserve System could lead to a sharp rise in U.S. inflation. But, as Valery Mironov believes, Americans are more afraid of deflation, which has been going on for 10 years. Therefore, inflation does not scare them. In order to save the U.S. economy, it looks like they are especially ready to make nothing of the problems of other countries. But it turns out that there is yet another way. “It is possible to rebuild the American economic model in the direction of a greater export of goods,” the head economist of the Center of Development suggests. “But for this to happen, it is imperative that the Americans increase their aptitude for saving and decrease the level of their consumption.” This will allow the U.S. to secure stable growth rates in its midrange prospects, and it will not undermine the global economy, the expert believes.