Wednesday, July 11, 2007

Collapse of the US dollar?

If the US dollar collapses what could be the most important repercussions around the world?
Firstly what are the reasons for the possible collapse of the US dollar?
Huge trade and Budget deficit of the US .America had been living beyond its means for far too long now .Trade deficit with China alone is $202 billion. ­The $US has declined 40% against the Euro over the last 2 years, and during this time America's trade deficit has continues to deteriorate.The decline of other currencies against the US dollar is not offsetting the balance.

China,Russia and Japan who have huge amount of dollar reserve are planing to shift a considerable amount of their reserves to the Euro .This will only hasten the lack of confidence in the dollar, creating a global lack of confidence in the currency, and setting it into free-fall. It will soon bring about the total collapse of the dollar, and the American economy.

The US invasion of Iraq and hostile relations with Iran has prompted the Oil producing countries to shift crude oil transactions to Euro .This will also set the dollar into free fall.

Its impact on US and rest of the World

The collapse of the dollar will throw the world into a global depression. Those nations with large external debts will not be able to trade sufficiently to earn the income to service their debts, and will slide into bankruptcy. The economies of New Zealand, Australia, Canada and the UK will also totally collapse, as a result of their indebtedness and not being able to service their borrowings. Crime will become rampant. Law and order will cease to exist. Disease will become widespread.
Though Asian economies will also be affected....they will recover after a mammoth turmoil.

Impact on India

Millions of Indians in US...academia and industry will fly back home back launching India into utter chaos.Back in India the IT/ITeS industry will collapse and Infosys/TCS/Wipro/Sathyam will close down.

Who will recruit the thousands of Engineering graduates passing out each year other than the IT firms which are closing now.?

Highly qualified Indian Engineers from IBM/Bell Labs/Intel/Microsoft and Profs from MIT/Berkeley/Stan/CalTech might soon be applying for Faculty positions in the Europe/India.(Will this make IITs/IISc/TIFR leading centers of Research as their highly reputed alumni have come back to their alma mater ?

Will the leading US Universities be able to attract and fund the bright students of Asia and Europe?
where will the toppers of IITs/Beijing University and other leading Asian universities go ?
so "brain drain" to the US will come to halt? and Europe will be the new destination?

I think this will give a great opportunity for India to 'rise and shine" in this post American collapse world.


diyadear said...

nothing like that is goin to happen.. u just wait n watch

varun said...

Weakening of US dollar will definately affect the indian economy but to an extent only.Afterwards the business will shift to europe in other countries... This phase can be a turning point for indian economy's dependence on US and will inturn make our economy more stronger,if we continously fight to grow.

salmanspeaks said...

Dollar's free fall is over. It is going to enter into a consolidation phase right now.......
I am going to back my contentions with solid argument in my blog....

and hello, a weaker dollar doesnt leads to spread of disease, u r being too imaginative....

Raj said...

Huge foregn exchange with china, india, russia, brazil etc is actually a debt for US. US will have to deliver goods or services against this in future. If dollar gets cheaper US will be delivering less for large sum of dollars hence reducing the actual debt position. May be Fed is intentionally doing all this depreciation of dollar.