Monday, October 6, 2008

Why is the dollar appreciating?

My knowledge of economics tells me that if the government borrows money, either from taxpayers or from external funds, two things should happen:

1. The currency should depreciate.
2. The credit rating of the government securities should worsen.

Why is neither happening? I think Shyamal Roy was wrong.

3 comments:

Nothing Spectacular said...

in my humble opinion - i think the things you mention should happen in a rational market. currently we are seeing panic, and there is no creditworthy name left anymore - not marquee banks, not corporates, not even hugely powerful governments. in this scenario, there will be a flight of capital to any safe haven, and unfortunately right now the only 'safe' place is US treasuries

bluesky said...

Its a flight to safety all around. Dollar is reaffirming its status as the reserve currency of the world. Gold is rallying. I know people who are opening bank accounts in SBI.

Monsieur K said...

are you still pondering over this Q?
u havent written a word since October. been busy, eh?