''We now find ourselves at a juncture where the US (in its efforts to continue to paper-over its excesses and their consequences) absolutely MUST have a lower dollar. A lower dollar has the twin benefits of (a) lowering the monstrous current account deficit (reflecting trade plus investment-flow imbalances), and (b) propping up the competitiveness of US exporters, hopefully leading to more investment by these firms, and eventually to increased employment.
The US-Fed and US administration know that the Euro's ultimate aim is by necessity to slowly attract foreign investors and central banks to the euro and away from the dollar. But they also know that any strong upward move of the Euro will have major negative consequences on the Europeans' economies. As a result, it looks like the US game is to allow the dollar to drop lower - and faster than the Europeans' fragile economies can absorb, largely helped by bickering and partly blatantly incompetent European governments.
What the newspapers and financial commentators call a policy of "benign neglect" turns out not to be so benign at all: by pursuing its current strategy, the dollar-establishment is killing three birds with one stone: they get the benefit of (1) higher US export-competitiveness and better economic performance, (2) simultaneously lower EU export competitiveness resulting in European economic stagnation, and (3) shifting the entire burden of smoothing out the dollar's Forex movements onto the Europeans' backs. In essence, the dollar faction is playing a game of "chicken" with the Europeans.''
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