Conley
11-12-2011, 10:34 AM
WASHINGTON — For the second time in two years, European debt troubles threaten to slow the momentum of the fragile recovery in the United States.
Although American financial institutions have taken steps to protect themselves from Europe’s long-simmering problems, the likely slowdown in Europe could damage consumer and business confidence in America and strengthen the dollar, making United States exports less competitive.
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It further estimated American banks’ exposure to German and French banks at in “excess of” $1.2 trillion, equivalent to about 10 percent of total commercial banking assets in the United States. Similarly, the Bank for International Settlements reports that at midyear banks in the United States had $757 billion in derivatives contracts and $650 billion in credit commitments from European banks.
“Europe is very clearly in a Bear Stearns environment,” said Stephen Wood, chief market strategist at Russell Investments, referring to the investment bank that collapsed in early 2008 without setting off broader financial panic.
http://www.nytimes.com/2011/11/12/business/global/european-turmoil-could-slow-us-recovery.html?_r=1&hp
Even though efforts are being made to reduce exposure to the Euro, it seems we're going to go down with them.
Here's what I don't get: If the dollar becomes too strong and threatens our export business, can't the Fed just print more money to weaken it back down to a more acceptable rate? I'm not saying they should, I'm just saying it seems like something they could control if they wanted to and if they felt it would benefit. To me a strong dollar sounds great but I don't know how much of our economy is dependent on exports. It does seem a middle ground could be achieved, and better to have it under one's own control rather than at the mercy of the global economy.
Although American financial institutions have taken steps to protect themselves from Europe’s long-simmering problems, the likely slowdown in Europe could damage consumer and business confidence in America and strengthen the dollar, making United States exports less competitive.
---
It further estimated American banks’ exposure to German and French banks at in “excess of” $1.2 trillion, equivalent to about 10 percent of total commercial banking assets in the United States. Similarly, the Bank for International Settlements reports that at midyear banks in the United States had $757 billion in derivatives contracts and $650 billion in credit commitments from European banks.
“Europe is very clearly in a Bear Stearns environment,” said Stephen Wood, chief market strategist at Russell Investments, referring to the investment bank that collapsed in early 2008 without setting off broader financial panic.
http://www.nytimes.com/2011/11/12/business/global/european-turmoil-could-slow-us-recovery.html?_r=1&hp
Even though efforts are being made to reduce exposure to the Euro, it seems we're going to go down with them.
Here's what I don't get: If the dollar becomes too strong and threatens our export business, can't the Fed just print more money to weaken it back down to a more acceptable rate? I'm not saying they should, I'm just saying it seems like something they could control if they wanted to and if they felt it would benefit. To me a strong dollar sounds great but I don't know how much of our economy is dependent on exports. It does seem a middle ground could be achieved, and better to have it under one's own control rather than at the mercy of the global economy.