I was sent an e-mail—I consider as a rumor, that China will flood the world with its dollar’s supply and the dollar will downfall like rupiah in 1998. And the US economy will suffer from this action, like Indonesia in 1998.
My first reaction was that I assumed it was just a rumor that far from reality. However, my philosophy reminded me that there is no impossibility in this world and the certainty is the uncertainty itself. I tried to search the expalantions how vurnerables of the US economy.
First.During the last two decades, US defisit was financed by foreigners and that condition is almost matched the Indonesian condition during the early 90’s, known as the golden years of growth.
Second, the successor of Greenspan is still trying tune in his new position and probably under the shadow of Greenspan. I mean, his capabilities doing his jobs is being waiting by the world. His first policy was rising interest rate like what Greespan did many times. This policy has no breaktrhrough to help US economy, but only the way in financing the defifit in the short run. That kind of policy will not last.
Eventhough those condition exist in the present situation in US economy, the fundamental economy is still strong. Then the rumor that flooding supply of dollar will hurt US economy like Indonesia has a small possibility. In addition, the worsen condition of US economy will also affect the whole world, because 25% of world production and consumption are in the US, the biggest economy in our lifetime.
