HSBC Subprime Issues Continue as Dollar Drops
There is more to HSBC’s subprime fallout around the world. The American dollar is tumbling around the world. On Thursday it reached parity with the Canadian dollar for the first time in 30 years and hit its lowest level yet against the euro, also dipping relative to the British pound and hitting a nine-year low against the Indian rupee. As the U.S. Federal Reserve dropped interest rates to help a stalled American economy, other countries saw the move as a signal to return to the same lending and subprime mortgage stupidity that caused shockwaves around the world.
A lower U.S. dollar diminishes the spending power of American tourists, while attracting foreign visitors seeking cheaper accommodations, houses and shopping. The dollar’s decline means Americans will pay more for imports and trips to Paris, Rome, Bangalore and Toronto. It also may drive overseas demand for U.S. goods and help raise profits at U.S. multinational corporations.
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The falling dollar worries the U.S. government by scaring away foreign investors who help to finance the country’s debt. In view of the subprime debacle perhaps they are not interested anyway? Time will tell.