Fiscal Policy A Sinking U.S. Dollar Dominates the Debate at Davos

Essay by turtle2179University, Bachelor'sA, February 2005

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The article I have chosen to analyze is from printed on January 27, 2005. The title of the article is A Sinking U.S. Dollar Dominates the Debate at Davo. This article discusses the relentlessly sinking dollar and the inability to find and an answer to the problem. It indicates how economists, politicians and business executives are very concerned about the imbalances in the global financial system, which is reflected in the dollar's steep fall against the euro and other currencies. But most were unsure that the Bush administration would reduce the trade and budget deficits, which have led to those imbalances.

The article indicates that The White House has said that it does not view these issues as a major problem because foreigners still view the American economy as a good investment. Some at the forum said they doubted that China, which is financing much of the American debt, would bow to pressure to allow its currency to rise against the dollar this year.

The Bush administration, which has all ways sent a prominent representative in the past Davos meetings to defend the Iraq war and other foreign policy actions, did not send a similarly prominent economic policy maker to this gathering. That gave the World Economic Forum proceedings an imbalanced tone.

The problem of the sinking dollar combine with United States not paying enough attention to the risks of its growing indebtedness could create unsustainable multiple burdens of household and public debt in the United States, leaving American consumers like an accident waiting to happen. The article states that it depends upon how well fiscal policy is applied, I believe there needs to be some change in U.S. fiscal policy, with the dollar already trading at $1.30 to the euro, near the level of economic unacceptability for Europe...