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How Will the Next Credit Crunch Affect the US Dollar?

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http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/

How Will the Next Credit Crunch Affect the US Dollar?

The combination of US dollar appreciation and more loans in US dollars may spell trouble for emerging markets and then for the global economy. A huge part of the recent financial crisis and Great Recession was a significant tightening of credit. Today, as emerging markets falter and their currencies weaken, lenders are insisting on denominating their loans in US dollars. This spells trouble for anyone who is making their money in a weakening currency. Paying back the loan will become more and more expensive and defaults are likely. The strengthening dollar is part of the reason for this problem, but how will the next credit crunch affect the US dollar?

The US Is Not Isolated from the Global Economy

As much as the current crop of US isolationists might like to think the US can go it alone, that is not true. The USA is plugged into the global economy. The trade relationships of the USA with others may change a bit depending on how the trade wars work out. We recently looked at how a stronger US dollar affects the trade war.

The dollar is going up due to the trade war. Viewed from the opposite direction, how does a stronger dollar affect the trade war? A stronger dollar and weaker yuan will make Chinese imports more attractive to US consumers, even with high tariffs. It would seem that the more the US wins and the dollar goes up, the more it loses as the yuan and other currencies become cheaper making foreign products more competitive in US markets.

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How Will the Next Credit Crunch Affect the US Dollar?

  1. 1. By www.ForexConspiracyReport.com How Will the Next Credit Crunch Affect the US Dollar?
  2. 2. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The combination of US dollar appreciation and more loans in US dollars may spell trouble for emerging markets and then for the global economy.
  3. 3. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ A huge part of the recent financial crisis and Great Recession was a significant tightening of credit.
  4. 4. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ Today, as emerging markets falter and their currencies weaken, lenders are insisting on denominating their loans in US dollars.
  5. 5. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ This spells trouble for anyone who is making their money in a weakening currency.
  6. 6. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ Paying back the loan will become more and more expensive and defaults are likely.
  7. 7. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The strengthening dollar is part of the reason for this problem, but how will the next credit crunch affect the US dollar?
  8. 8. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The US Is Not Isolated from the Global Economy
  9. 9. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ As much as the current crop of US isolationists might like to think the US can go it alone, that is not true.
  10. 10. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The USA is plugged into the global economy. The trade relationships of the USA with others may change a bit depending on how the trade wars work out.
  11. 11. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ We recently looked at how a stronger US dollar affects the trade war.
  12. 12. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The dollar is going up due to the trade war. Viewed from the opposite direction, how does a stronger dollar affect the trade war?
  13. 13. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ A stronger dollar and weaker yuan will make Chinese imports more attractive to US consumers, even with high tariffs.
  14. 14. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ It would seem that the more the US wins and the dollar goes up, the more it loses as the yuan and other currencies become cheaper making foreign products more competitive in US markets.
  15. 15. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ But, the fact is that the dollar cannot go up forever. If the US economy tanks due to a global recession, the Fed has little room to drop interest rates but they will try.
  16. 16. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ And they will print more US dollars to help with the credit crisis.
  17. 17. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ Both of these actions will likely drive down the value of the greenback against other major currencies.
  18. 18. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ How it will work against weaker and minor currencies will be different.
  19. 19. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ Falling emerging market currencies will continue to plummet creating a great divide between developed and developing nations.
  20. 20. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The US and other creditor nations will have to forgive debt on a massive scale in order to bail out the world economy and the dollar will then fall as well.
  21. 21. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The Safer Store of Value
  22. 22. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ Right now creditors across the globe see the US dollar as the safer store of value.
  23. 23. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ Will that situation last? Which will be the safer store of value if the global economy collapses?
  24. 24. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ When the dollar goes down, many flock to gold and cryptocurrencies like bitcoin.
  25. 25. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ We wrote about this earlier this year. (Flight from Dollars to Bitcoin and Gold)
  26. 26. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The main driver of currencies values if the economy collapses will be the massive devaluation of the stock markets across the globe and property markets in places like China.
  27. 27. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ The argument for the dollar as opposed to gold and cryptocurrencies is that it can be used to invest.
  28. 28. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ But, when investments have all fizzled, what use is the dollar?
  29. 29. http://www.forexconspiracyreport.com/how-will-the-next-credit-crunch-affect-the-us-dollar/ There is unfortunately, a real risk that the next credit crunch will bring down the US dollar as one of its consequences.

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