The largest stimulus in the history of the United States is over and the federal government’s quantitative easing plan that added trillions of dollars to the budget ended almost a year ago.
Some economists, like Justin Yifu Lin, believe that the American dollar is the cause of world wide financial instability. Lin is a professor at the University of Peking and gives financial advice to the Chinese government, and believes that there should be a single global currency used by many countries including the U.S.
Not all economist believe that the American dollar will fail in its supremacy. Christian Broda is an economist and a financial professional. He is the managing director with Duquesne Capital Management, located in New York. Formally a professor at the University of Chicago,and former head of International Research at Lehman/Barclays Capital, he is currently an associate editor of the Journal of Development Economics, a member of the editorial board of the International Monetary Fund,(IMF), Economic Review and has written numerous academic papers published with The National Bureau of Economic Research.
Brodi believes that investors should remain in dollar sparked investments, he does not believe that the federal government’s plan to opt out of quantitative easing means that the American dollar will lose its value. He correctly predicted, unlike many economists, that the quantitative easing plan would not create inflation.
Eswar Prasad,the Tolani senior professor of trade policy at Cornell University and senior fellow at the Brookings Institution,agrees with Brodi. Prasad believes that emerging foreign markets are in need of foreign exchange reserves, which are held in government bonds because their financial markets are shallow. They are more vulnerable to capital flow variation at high levels and look for the safety that can be found in foreign exchange reserves like the United States.
The IMF predicts that the American economy will grow by 3.6 percent this year. With the changes that are taking place in regards to financial policies in the U.S. and other foreign banks loosening up on their monetary policies, investors will make higher gains on dollar sparked investments.