Thursday, April 30, 2015

Will the dollar get destroyed if the U.S. goes into recession?

I really did not like what I saw in the Q1 GDP report. Both personal consumption expenditures and state and local government spending was either slowing (PCE) or contracting (state and local gov't).

This is not good.

Maybe it's temporary like some are saying, perhaps due to weather.

We'd better hope so because at the same time, Federal Government spending is no longer growing vis-a-vis last year. I don't know if that's related to the debt ceiling or the budget or what, but if the Federal government is slowing along with household spending and local and state government's contracting then the economy is in real trouble and headed for recession.

What will happen to the dollar?

If the U.S. goes into recession I expect the dollar to get slammed.

5 comments:

commchf said...

$ needs to get slammed.

Unknown said...

Panicky as everyone has become I expect that's about right, Mike. The question is what will they dump their dollars for?

Ryan Harris said...

In the latter half of 2015 the first LNG shipments begin and and then accelerate toward 2018-20 on long term contracted sales. As the volumes ramp up and more facilities open, it should offset a significant proportion of the drag that NetExports has contributed to GDP in recent years. It comes back to fiscal spending because it allows the government in Washington DC to pursue their smaller government spending objectives without doing as much damage to the US economy and USD as would otherwise be expected.

NeilW said...

"The question is what will they dump their dollars for?"

But more importantly who to?

Where's the other side of the trade?

Vytautas Vakrina said...

"But more importantly who to? Where's the other side of the trade?"

Back to private sector "dollar liquidity manufacturers", of course.

In recession part of horizontal money just annihilate.