U.S. dollar's freefall to have global effect

Sun, January 2, 2005
U.S. dollar's freefall to have global effect
Add China's banking system to the mix, Eric Margolis writes, and it's a recipe for disaster
By ERIC MARGOLIS -- Contributing Foreign Editor
Toronto Sun
Here are what will be the big stories of 2005, according to my cloudy crystal ball: - The killer tsunami that struck Indonesia, Sri Lanka, and India a week ago will cause years of ongoing economic damage and human tragedy. Damage to Thailand will be quickly repaired. But Indonesia and Sri Lanka, both rent by decade-old civil wars, will particularly suffer.
- The biggest problem the world faces this new year is the continuing fall of the U.S. dollar. The Bush administration's reckless spending, ruinously expensive wars in Iraq and Afghanistan (now costing as much as the Vietnam War), America's galloping trade deficit and credit spending frenzy are creating the perfect economic storm.
Japan and China's central banks may give up trying to artificially shore up the U.S. dollar by buying U.S. currency and securities. A plunging dollar could cause foreign investors to start dumping U.S. securities and assets. The result: A potential worldwide financial crisis that could collapse the housing bubble, cause interest rates to soar, and send securities markets into freefall....