Are we headed for another depression?
President Bush pledged Wednesday to work with Congress to reduce the government's huge budget deficit as a key step in assuring the world that his administration supports a strong dollar.
"We'll do everything we can in the upcoming legislative session to send a signal to the markets that we'll deal with our deficit, which, hopefully, will cause people to want to buy dollars," Bush told reporters.
Bush's comments came following a meeting at the White House with Italian Prime Minister Silvio Berlusconi, who had raised the issue of the dollar's plunge in value against the euro, the currency of Italy and 11 other European nations.
"The policy of my government is a strong-dollar policy," Bush said during a brief news conference following the Oval Office meeting, echoing statements he and Treasury Secretary John Snow have made numerous times over the past three years as the dollar's value has fallen sharply against many major currencies.
Bush's comments did not prevent financial markets on Wednesday from pushing the dollar's value lower against a range of currencies, including the euro. Currency markets focused more on a Treasury Department report showing that foreigners' purchases of U.S. stocks and bonds in October fell to the slowest pace in a year.
Bush's comments on the dollar came one day after the government reported that the U.S. trade deficit hit a monthly record of $55.5 billion in October.
The swelling size of the trade deficit has raised concerns among economists that the dollar's decline, which has been gradual so far, could suddenly accelerate as foreigners grow worried about the ability of the United States to keep attracting enough foreign capital to finance trade deficits at such high levels.
If the dollar were to suddenly plummet in value, that could cause foreign investors in U.S. stocks and bonds to rush for the exits. Such a development would send stock prices plunging and interest rates soaring. Some analysts believe the shock would be enough to push the country into another recession.
"We'll do everything we can in the upcoming legislative session to send a signal to the markets that we'll deal with our deficit, which, hopefully, will cause people to want to buy dollars," Bush told reporters.
Bush's comments came following a meeting at the White House with Italian Prime Minister Silvio Berlusconi, who had raised the issue of the dollar's plunge in value against the euro, the currency of Italy and 11 other European nations.
"The policy of my government is a strong-dollar policy," Bush said during a brief news conference following the Oval Office meeting, echoing statements he and Treasury Secretary John Snow have made numerous times over the past three years as the dollar's value has fallen sharply against many major currencies.
Bush's comments did not prevent financial markets on Wednesday from pushing the dollar's value lower against a range of currencies, including the euro. Currency markets focused more on a Treasury Department report showing that foreigners' purchases of U.S. stocks and bonds in October fell to the slowest pace in a year.
Bush's comments on the dollar came one day after the government reported that the U.S. trade deficit hit a monthly record of $55.5 billion in October.
The swelling size of the trade deficit has raised concerns among economists that the dollar's decline, which has been gradual so far, could suddenly accelerate as foreigners grow worried about the ability of the United States to keep attracting enough foreign capital to finance trade deficits at such high levels.
If the dollar were to suddenly plummet in value, that could cause foreign investors in U.S. stocks and bonds to rush for the exits. Such a development would send stock prices plunging and interest rates soaring. Some analysts believe the shock would be enough to push the country into another recession.
posted by Andrew at 8:29 PM
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