What the world thinks of Bush economics

Tip from Bill In DC

Dollar Falls On Fears of U.S. Deficits

The dollar continued its decline in global currency markets yesterday, intensifying worries among some economists that mounting U.S. budget and trade deficits could send the U.S. currency into a tailspin.

But John B. Taylor, the Treasury undersecretary for international affairs, defended the Bush administration view that the deficits pose no danger of a dollar collapse. He issued a detailed rebuttal of what he called "scare stories."

The election may be over but administration spin continues. But the fact remains, it's nearing new lows.

The dollar fell yesterday to within a fraction of a cent of its all-time low against the euro of $1.2930 , trading as low as $1.2898 before rallying slightly to close at $1.2867. It fell modestly against the Japanese yen, and continued a sharp slide against the Canadian dollar, which rose to 83 U.S. cents yesterday for the first time in 12 years.

It was the second straight day that the dollar has fallen despite a surge in the stock market, continuing a trend that began in early October when it started slipping against the currencies of major U.S. trading partners. The declined rekindled the fears of some analysts that the dollar could be headed for a severe sell-off unless the White House and Congress make a major effort to shrink the budget gap.

The US debt is financed by foreign investors and when they start to get nervous it is a "Security Threat".