LEAP/E2020 anticipates that the loss of confidence sector by sector will converge in June 2006, and tend to generalise in each sector, resulting in an acceleration of the crisis. The acceleration will occur over a period of three to six months and have seven major consequences.
Consequence N°1 – Accelerated decline of the US-Dollar
Since LEAP/E2020 first published its Crisis Alert on the global systemic crisis (February 15, 2006), at a time when the vast majority of analysts anticipated a year which would be beneficial to the US-Dollar, the EURUSD-exchange rate has climbed from 1,18 to 1,29. The US-Dollar in parallel has depreciated against all other major currencies (Yen, Suisse Franc, Sterling, Yuan,… ).
For three months, international media and analysts treated this evolution with indifference, as if this was only a brief interruption of an evolution necessarily beneficial to the US-Dollar. The vast majority of players intervening on the monetary markets and influencing the collective psyche of financial market operators, remained calm and did not take any action likely to destabilize a system based on this very US-Dollar. Indeed, a loss of confidence in the US-Dollar today equals a loss of confidence in the US economy, as, since 1971 and the decision by Nixon to end the US-Dollar’s convertibility into
Gold, the US-Dollar is only based on the trust its holders have in the strength of the US economy. Since that date one US-Dollar (or one asset in USD) is no more than a small fraction of the US economy. For several decades, trust in the US-Dollar was one of the major assets of the US-economy (and of the US altogether). The flipside of the argument is that a strong and enduring crisis of confidence in the USD automatically brings about a weakening of this power…
Read more in the GEAB No 5 / 16.05.2006