Report By: Nandika Chand | Last Updated June 16, 2020
A dollar crash is inevitable in this changing global landscape with a massive US budget deficit amid the COVID-19 pandemic. Experts have been pointing out that the US economy has been inflicted with significant macro imbalances for sometime now.
Former Morgan Stanley Asia Chairman Stephen Roach forecasted that the “dollar is going to fall very, very sharply. He said there would be a 35 per cent drop against other major currencies in the world.
The US Dollar Currency Index is up more than one percent over the past two weeks and has been relatively flat this year. Roach said problems are going from bad to worse.
“The national savings rate is probably going to go deeper into negative territory than it has ever done for the United States or any leading economy in economic history,” he said. “America is walking away from globalisation and is focused on decoupling itself from the rest of the world.”
The Yale University senior fellow described this as a lethal combination. Roach said a dollar crash is virtually inevitable. “Its a risk investors shouldn’t ignore. And its a negative implication for US assets. It points to the probability of higher inflation as we import more higher cost foreign goods from overseas and that’s negative for interest rates,” he explained.
Experts have expressed concern that a crash could spark a 1970s type stagflation crisis – prices rose sharply as economic growth watched as a mute spectator. X