US dollar continues to fall

| October 4, 2007 | 0 Comments

Dr Alan Greenspan, the former US Federal Reserve chairman has warned that the US dollar is likely to continue falling on foreign exchange markets. The dollar is currently trading at an all-time low against the euro and at a 15-year low against several currencies including the Pound.

Dr Greenspan’s words have moved markets for over 20 years and commented that over the long-term, the share of world GDP going to the developing nations is likely to grow quite considerably.

Dr Greenspan continued that this is due to demographics and the fact that developing nations can borrow the developed world’s technology, meaning they will increase their productivity rates faster than the US is able to. Consequently, the real exchange rates of a lot of growing nations are going to follow.

The former US Federal Reserve chairman concluded that US inflation will rise in years to come as the underlying cost structure in the US is yet to reflect in any strong inflationary pressures. However, it is a fact that the cost structure is changing steadily in the US and he is predicting that the rate of inflation is going to be higher than it is now in approximately 5 years.

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