The U.S. dollar continues to slide on international currency markets. Actually, slide is too polite a word: "Nosedive" seems like a more apt description of the greenback's behavior in recent weeks. Some economists now worry that a "hard landing" -- a crash in the dollar's value -- is the chief threat to the international economy. Governments have to be ready for the uncertainty that has become one of the main ingredients of the new economic order.
The reasons for the dollar's tumble are readily apparent. The U.S. economy is slowly emerging from recession, and economists fear a "double dip" -- another slide into recession. After recording 6 percent growth in the first quarter, a slowdown is inevitable. Scandals on Wall Street have eroded investor confidence, which adds to worries over unrealistic profit projections. Market gyrations -- the Nasdaq index has fallen below its Sept. 11 level -- have scared away foreign investors. Hanging over the entire situation is the fear of another terrorist attack.
Last year's tax cut eroded the U.S. fiscal balance, and war has compounded the drain on government resources. A year ago, politicians were debating what to do with a $1 trillion budget surplus. Most recently, the Congressional Budget Office has forecast a budget deficit of $150 billion this year and that is expected to climb to $171 billion in 2003. Those forecasts are going to be revised upward next month. Ominously, the U.S. government is about to run out of money. Legislation to raise the debt ceiling is stalled in Congress as politicians maneuver to blame the other party. Another fiscal derailment is a very real possibility.