After getting a call this morning from my financial advisor suggesting that I put some of my money in European stocks, I decided to post this article to get some opinions:
Greenspan concerned with weak dollar
http://money.cnn.com/2004/11/19/news...ex.htm?cnn=yes
Federal Reserve chairman says U.S. must address trade, budget deficits or face future woes.
November 19, 2004: 8:59 AM EST
NEW YORK (CNN/Money) - Federal Reserve Chairman Alan Greenspan warned the U.S. must deal with the causes of the weak dollar -- the U.S. trade deficit and the federal budget deficit -- or the country could run into economic problems down the line.
Greenspan said that while history has shown that developed countries are not necessarily hurt by a weak currency, "we cannot become complacent. History is not an infallible guide to the future," he said in a speech delivered in Europe.
"More will need to be done in Europe as well as in the United States to ensure that our economies are sufficiently resilient to respond effectively to all the shocks and adjustments that the future will surely bring," he concluded.
Greenspan focused on the nation's current account deficit, the measure of both trade and investments across the national board, which he said has risen to more than 5 percent of the gross domestic product, the broad measure of the nation's economy.
"It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point," he said.
Greenspan said it is therefore important that the U.S. budget deficit be cut, a move that would reduce the current account deficit.
"Reducing the federal budget deficit (or preferably moving it to surplus) appears to be the most effective action that could be taken to augment domestic saving," he said. "Corporate saving in the United States has risen to its highest rate in decades and is unlikely to increase materially. Alternative approaches to reducing our current account imbalance by reducing domestic investment or inducing recession to suppress consumption obviously are not constructive long-term solutions."
The value of the U.S. dollar, which has been hitting a series of four-year lows versus the yen and record lows against the euro during the last couple of weeks, fell following Greenspan's remarks.
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