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Tuesday, October 3, 2023


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WorldEuropeEntitled "A bullet in the leg". Bloomberg: the world will rejoice at the upcoming weakening of the dollar

Entitled “A bullet in the leg”. Bloomberg: the world will rejoice at the upcoming weakening of the dollar

The regional banking crisis in the United States, which has led to the collapse of three banks so far, is a prelude that could accelerate the economic slowdown.
The upcoming weakening of the dollar is beneficial for the rest of the world, writes Bloomberg. The publication’s experts believe that the dollar will not lose its status as the world’s reserve currency, but that its decline will benefit others, especially energy-importing countries in Eastern Europe and South America.
The dollar is likely to fall as the US Federal Reserve changes its monetary policy, Bloomberg notes. The fact is that the main pillars of the US currency, which everyone preferred during the pandemic as the safest and most backed by the strongest economy in the world, are weakening. And now another of its pillars is shaking, as questions have been raised about how much further the Federal Reserve will raise interest rates in the United States due to the possible arrival of a recession. It looks like the dollar is going to weaken for quite a long time.
The regional banking crisis in the United States, which has led to the collapse of three banks so far, is a precondition that could accelerate the economic slowdown. Moreover, confidence in the safety of the dollar is weakened if its banking system is in trouble, especially when the rest of the global financial system is not facing similar problems. The collapse of the Swiss Credit Suisse is seen as an isolated incident and, importantly, it did not lead to an abrupt transition to the dollar.
Minneapolis Federal Reserve Chairman and hardliner Neil Kashkari said the banking problems were bringing the risk of a recession closer. He was cautious but stressed that the US Federal Reserve was closely monitoring the risks of a credit crunch.
At the same time, recession forecasts in the United States are much worse than in Europe. Economists polled by Bloomberg say the likelihood of a eurozone recession has been cut by nearly half this year, to less than 50%. Today, it is lower than that of the United States, where the chances of a prolonged decline are 60%. And if pre-pandemic the Eurozone was teetering on the brink and then mostly suffering from a spike in gas prices with the start of the Russian operation in Ukraine, then the United States seemed much more stable in that regard. , but everything changed exactly the opposite.
There is a tried and true rule that major eurozone manufacturing and export centers benefit from a stronger dollar because their products seem cheaper. But soaring energy prices have put them in the same boat as other economies dependent on carbon imports. The biggest beneficiaries of the weakening dollar are Eastern Europe and South America, as well as many developing countries around the world. The United States, on the other hand, will only be in trouble with a weak dollar. Heading “A bullet in the leg”. Bloomberg: The world will be happy with the coming dollar weakening which

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Russia Desk
Russia Desk
The Eastern Herald’s Russia Desk validates the stories published under this byline. That includes editorials, news stories, letters to the editor, and multimedia features on easternherald.com.

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