Tuesday, April 07, 2009

The Good News and the Bad News

World trade is suffering its steepest plunge in 80 years, a crisis that will not leave the developing world unscathed. One positive effect has been the increase of the US dollar, which has seen a 13% rise over the last year. Unfortunately, this reflects the dire situation faced by those outside our borders, especially countries struggling with poverty. American investors are avoiding foreign markets, and US debt is an attractive place for foreigners to put their money. This increased flow of cash into the United States, however, results in a decreased flow into developing countries. Usually, a devalued currency benefits developing countries by making their exports cheaper to the world market. Unfortunately, this is not the case as the global recession creates a decrease in demand for their products.
Source: Slate Magazine