Downturn in US Economy

The US election has come and gone and the world still faces an economic crisis rivaling that of 1929. The president elect faces the challenges of an unpopular and expensive war and a downturn in the US economy. This year alone the US has lost almost a half million jobs and the national debt is at an all time high. So far the US dollar is holding its own and Forex traders have flocked to the dollar to avoid risk. At present the US dollar is the world’

s reserve currency but what if that changes?

Some Economists Pessimistic

Some analysts and economists are pessimistic about the ultimate future of the dollar citing several economic factors that could contribute to the dollar’

s demise. Some are even going so far as to suggest a total collapse of the dollar.

US is Exporters Dream

In the past the US has been an exporters dream. The US was the best customer the exporting nations had. And US consumers snapped up foreign made goods as fast as exporting nations could produce them. Because the US had such a lucrative consumer fueled economy other nations bought Treasury Bonds, and financed the national debt in many ways.

Consumer Confidence Low

Fast forward to 2008 and the economic crisis and the US consumer lacks confidence in the economy and is buying less. If the US cannot be such a good customer anymore trade partners will cease buying Treasury bonds and financing the national debt possibly causing currency devaluation. The US has traditionally been the engine that drives the world’

s economy and if that engine stalls a worldwide depression could result and the dollar could become worthless affecting Forex traders and investors globally.

Possible Future Devaluation

In the past the US was able to avoid currency devaluation because since WW2 every time the economy soured the US was able to recover and grow. Some economists think that this time attempts to stimulate the economy will not work. Interest rates have been drastically lowered and yet the economy continues to deteriorate.

Credit Crunch Still With Us

The world economy runs on credit and despite bailouts in the US ands Europe banks are hoarding cash and covering their own needs and are not lending it. Many businesses find themselves in dire straits because of the credit crunch resulting in layoffs and job losses. The whole world is addicted to credit and without credit the global economy stalls.

If a full blown depression should hit the US the national debt, now in the trillions, could cause massive flight from the dollar sending Forex markets into chaos and forcing Forex traders to find other safe havens.

For Now Dollar is Currency of Choice

At present the US dollar is performing well on world Forex markets and is still proving Forex traders and investors with a safe haven in the global economic downturn. There are two sides to every story and it is hoped that the above scenario does not take place.

Quick Forex Tip: If you have extensive knowledge of forex markets, you may want to trade forex futures. A forex future is an agreement to buy or sell a specific amount of currencies at a predetermined price on a set date in the future. Essentially those who trade forex futures are hoping to profit from a currency’s future fluctuations.