Pure speculations - Possible hidden agenda lowers dollar

After writing my post on Friday, link, I carried the fear of a possible World War III starting in the not so distant future with me all weekend long. This feeling stayed with me until I witnessed a sudden increase of traffic southbound.

Being landmass connected to the United States, Canadians are now some of the most blessed citizens on this planet. With the Canadian Looney being above par to the dollar, what used to be cheap to Canadians when the Looney is of lesser value has just become even cheaper. With this, it is reasonable for Canadians to flood to the States for their shopping needs.

This sudden revelation lifted the cloud of fear from my worries, at least World War III won’t be initialized on the grounds of rescuing a slowing economy. Is this flood of foreign shoppers the reason for a lower dollar? The United State’s resolution to the recent market problem is to become a foreign currency sponge? As we all know, the devaluation of the dollar is related to the deficit of the U.S. Government. This deficit is mainly caused by the non-ending war on Terrorism which lead no where. If George W. Bush were to introduce fear into the market by hinting that he plans to start another War, the Dollar might take another plunge, simply based on fear.

As all market watcher must know, the U.S. economy is heading towards a recession, the only question remain is when. This recession worries began with the low housing sales in the United States and was further more extended by the after effects of the Sub Prime problems. If there are no apparent solutions to repair or atleast contain the damages, the U.S. economy would enter a stage of retraction and drag the rest of the world with it.

How can a government ensure recession arrive and depart quickly? The answer is simple, increase its citizens’ spending and earning power! At points in histories, government had used projects to combat recessions. The theory is basic, if people can earn money, they are usually more willing to spend or invest. Spending or investing would reignite other sectors and create more jobs in those sectors. Workers in those sector would be more willing to spend or invest, and would slowly restart the entire economical cash flow cycle. However this style of recession combat can only be used in developing economies. Take Ontario for instance, the construction of the 407 might initially be planned for such purpose.

However, the challenges the states is facing right now is a nation wide problem. Construction projects such as express routes can’t be easily organized on such short notices. On top of that, the express route system in the states are already well established. With the government seeing red in their books, the next logical choice would be to lure foreign shoppers and investors into the market.

Using foreign buying power to reignite a slowing economy would have a similar effect as projects from the Government. The only difference is that this money isn’t from their own tax payer’s pockets but other countries. My guess is that the states would continue on this route of ‘foreign support’ until the market is capable of exiting the recession period and stand on its on feet.

These are my speculations on the subject.