> I wonder what this will mean for the world economy. Are we limping from one recession into the next?
Check out the USD / AUD exchange rate for a good example of the danger.. A company I worked for used to do a lot of business in Australia. We made the decision to go there when the currency was favorable from the US perspective (about $0.85 USD/AUD), tried to stick it out but got crushed since our money was raised in the US but the rate spiked to $1.1 USD/AUD and stayed above $1 for years. Today, the rate is more like $0.73 USD/AUD. 30+% swings in a few years are poison for international investment.
The Australian economy and currency have been hugely propped up by all of the Chinese demand for raw materials and commodities and is going to really start hurting if there's a prolonged pull-back in China.
Check out the USD / AUD exchange rate for a good example of the danger.. A company I worked for used to do a lot of business in Australia. We made the decision to go there when the currency was favorable from the US perspective (about $0.85 USD/AUD), tried to stick it out but got crushed since our money was raised in the US but the rate spiked to $1.1 USD/AUD and stayed above $1 for years. Today, the rate is more like $0.73 USD/AUD. 30+% swings in a few years are poison for international investment.
The Australian economy and currency have been hugely propped up by all of the Chinese demand for raw materials and commodities and is going to really start hurting if there's a prolonged pull-back in China.
http://i.imgur.com/UbxUeVA.png