What happens to the U.S. economy
is the key issue for the global economy
by Dr. Kurt Richebächer
September 16, 2002

"...For a long time, we have been warning that the dollar’s strength is pure bubble strength. Gross illusions about the U.S. economy’s health and strength have engendered capital inflows of fantastic but unsustainable scale. The collapsing dollar will spell doom for the U.S. financial markets, both bonds and shares. In fact, such a collapse is the single greatest risk for the world economy..."

Led by Wall Street, their slide, lasting now well over two years, has sharply accelerated. Worsening market psychology is the conventional and also comforting explanation, suggesting a disconnection between the economy and stock market. Not for the first time, we vehemently dissent. Incidentally, it is an explanation that passes over the truly decisive, objective causes underlying this dismal development of the markets.

In fact, irrespective of the stock market’s slide, official mantra and public opinion in America remain in flat denial of the tremendous dislocations that the egregious credit excesses of the past several years have inflicted on the U.S. economy and its financial system.

This article is devoted to what we regard as the single worst threat not only to the U.S. economy and its financial markets but also to the world economy, implying to foreign investors huge currency losses on top of their huge losses in shares and bad loans. Careful analysis of the potential destructive forces suggests that when the dollar’s plunge develops in earnest, it will - in contrast to its steep decline in the 1980s - be brutal for the U.S. financial markets, which have become hostage to massive foreign capital inflows. . .

more >>