I think US is going into recession. Fiscal spending is limited by politician and by country debt level, business spending is not growing because of pessimism, consumer spending is not growing due to high inflation, therefore, aggregate demand is not there. Monetary policies already being used till limit.
Europe is worse in terms of fiscal spending as their country debt is higher and more complicated. They still can play with monetary policy to generate demand by lowering interest rate.
Are we on the right path? Making USD stronger will let American to feel rich, consume, encourage people invest in US, generate job, and American can pay down debt? Can politician convince investor this is long term solution that they can be persevere about it?
But in this way economy between china and US will be more unbalance, thus create bigger future problem. But making USD depreciate neither can solve problem as we experienced in last 2 to 3 years. Cosumer and Business just won't spend and money piled up in inflating asset price in stock equity, commodity and property.
Or this strengthening of USD is just temporary? Until US economy gain foot, money will flow back to china and emerging market, push up china and emerging market currency again. If long term depreciation of USD is undeniable, I think this process will continue rentlessly, until china is on par with US. Every time crisis happen in advanced country, they will request china for help, and in return, china get something advantage from them. China buy more raw material when the prices come down significantly during crisis time. China is a high growth country, they are still very flexible and can always expand when others face difficulties. Until when china reach a size where growth is limited domestically and their growth is significantly depend on those big advance economy, China is more or less on par with US.
What will happen then? I think we need to find another China......
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