dc10s4ever
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Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:23 pm

I travel internationally 4-5x a year. Over the past two years I have seen the USD go from 3-1 against the Brazil Reis down to 2-1. We are basically now 1-1 with Canada now and the USD against the British Pound? Dont even go there...It seems as though the USD is just getting weaker against other international currencies.
 
viv
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RE: Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:25 pm

Because the U.S. has a huge trade deficit - and is one of the most highly indebted countries in the worlsd.
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dc10s4ever
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RE: Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:27 pm

Quoting Viv (Reply 1):
Because the U.S. has a huge trade deficit - and is one of the most highly indebted countries in the worlsd.

Thanks GWB! One of my co-workers is a HUGE Bush fan. He thinks that a weak USD is GOOD for our economy....
 
viv
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RE: Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:34 pm

Quoting Dc10s4ever (Reply 2):
He thinks that a weak USD is GOOD for our economy

A weak dollar helps U.S. exporters, but makes life difficult for U.S. consumers, who must pay more for imported goods. As I mentioned above, the U.S. is running a large trade deficit and this will not change in the short run, even with a weak dollar.
Nikon D700, Nikkor 80-400, Fuji X Pro 1, Fujinon 35 f/1.4, Fujinon 18 f/2
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:36 pm

Because it's in the US's best interest. A stronger dollar makes it more attractive for US buyers to purchase foreign goods (i.e. the purchasing power of the currency is greater). A weaker dollar makes it more expensive to purchase foreign goods (you need more US dollars to equal the same number of local currency units).

Furthermore, a weak dollar encourages foreign investment in the US. You get more bang for the buck.

The FX game is very complex. While it may make you proud to say that your country has a strong currency, too strong a currency puts you at a distinct disadvantage in global trade. For example, as the Euro strengthens against the dollar, the cost of Airbus planes in dollar terms rises. A plane that costs E100M (equivalent to US$100M) when the exchange rate is at parity, cost US$120M when the exchange rate rises to 1.20:1.

Similarly a Boeing plane that costs US$100M (equivalent to E100M at parity) costs only E83,333,333 when the exchange rate rises to 1.20:1.

Since the majority of Boeing's costs are US$ denominated and the majority of Airbus's costs are Euro denominated, they must either bear the loss or hedge their FX exposure at a cost. Either way, exchange rate has a dramatic effect on trade flows.

In addition, the weakness of the dollar makes US vacations for Europeans much more attractive.
Hypocrisy. It's the new black for liberals.
 
Alessandro
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RE: Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:40 pm

Problem is when you need to buy something like oil, then the problem starts...
From New Yorqatar to Califarbia...
 
Derico
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RE: Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:51 pm

The US dollar has really depreciated against all the Latin American currencies, except the Argentine peso which has actually depreciated against all other world currencies. The South African Rand is also stronger, as are the 'little' dollars (CAN, AUS, NZ).

I think that the US dollar will remain the major currency for decades to come, but no longer dominate like it did. The Euro and Yen are finally taking some of the market out of the dollar, and the smaller 1st world currencies too. Also, emerging market currencies are now more stable than ever and thus attractive. And in the medium future the Chinese Yuan will become a major world currency. So the dollar will remain at top or share the top, but no longer have supremacy.

If everyone really wants their local currency to go far, Argentina is the place. You will be amazed how cheap everything is yet at the same time the services and food are for the most part 1st rate even for the developed world.
My internet was not shut down, the internet has shut me down
 
vc10
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RE: Why Is The US Dollar Getting So Weak?

Tue Mar 07, 2006 11:53 pm

I thought oil prices world wide were quoted in US dollars so a falling dollar affects the oil producing countries as they get paid in dollars and so to keep oils buying power the same the price of a barrel of oil in dollars goes up
 
Klaus
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 12:00 am

But since many oil-producing countries import more from the non-dollar-denominated part of the world than from the USA, they are motivated to increase the dollar prices for oil. Within the €uro-zone the declining US $ buffers some of the increase.

But if the dollar-denomination for oil would be abandoned, things might be moving even faster...
 
ltbewr
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 12:21 am

Our deep Federal Government deficits, consumer debts and our trade deficts as to China and other Asian countries also contribute to the value of the US Dollar decline vs. other currencies.
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 12:57 am

Quoting Derico (Reply 6):
If everyone really wants their local currency to go far, Argentina is the place. You will be amazed how cheap everything is yet at the same time the services and food are for the most part 1st rate even for the developed world.

Argentina is a very interesting example of how improper controls over currency can get you into a lot of trouble. One year and four days before the last currency crisis in Argentina the WSJ ran an article that pointed out how the Brazilian Real had depreciated against the dollar over the past year.

At that time, the Argentine peso was tied to the US dollar through a currency board. This implied that the Argentine peso had appreciated against the Real by the same amount that the US$ had. Unfortunately, Argentina's economy wasn't performing as well as the rise in the Peso would indicate.

Brazil being Argentina's largest trading partner found it increasingly more difficult to purchase Argentine goods because they were much more expensive on relative terms. As Brazilians stopped buying Argentine goods, the Argentine economy slowed at an ever increasing pace. The government tried to make up for the shortfall in domestic tax revenues by increasing export duties - further exaccerbating the problem of their goods being priced out of the market.

Though the writing was on the wall, Argentina continued to stick to a policy of 1:1 parity with the dollar. They spent hundreds of millions in the open market to try to shore up their currency but it was becoming an harder and harder task as the market tried to equalize at a sustainable level. The rigid adhearance to the peg was done in order to control the hyperinflation that had beset the country several times since the 1980's.

On the date of the WSJ article we had about $2.4M outstanding in trade receivable in Argentina. I immediately ordered our accounting department to revoke open credit terms to Argentine customers. Our sales to Argentina fell from $6M to almost zero over night. COD or LC was the only way we were going to sell. Selling to Latin America on open credit is always a risk - and we carried credit insurance to control our exposure. However, credit insurance comes with large deductible and co-insurance that would have meant that we were looking at almost a 25% haircut if all the receivables went bad.

We managed to get our last dollar of receivable paid six days before the currency collapsed.
Hypocrisy. It's the new black for liberals.
 
MD-90
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 1:49 am

Quoting Pope (Reply 4):
Because it's in the US's best interest.

It's not in MY best interest, and it's not in the interest of 99% of American individuals. Inflation destroys wealth, and it's happening because the Fed continues to create money out of nothing, which devalues the fiat currency that's backed by nothing but politicians.

It will most likely get much worse when M3 stops being reported in a few weeks. And if January's trend continues for the year, inflation will be 9% or higher in 2006.
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 2:02 am

Quoting MD-90 (Reply 11):
It's not in MY best interest, and it's not in the interest of 99% of American individuals. Inflation destroys wealth, and it's happening because the Fed continues to create money out of nothing, which devalues the fiat currency that's backed by nothing but politicians.

Have you compared what the US inflation rate is versus the rest of the world. If you think we have an inflation problem, which major economy is performing better?

The fight to keep inflation under control is precisely why our dollar keeps devaluing. We keep sending more and more dollars out of the country to China, Taiwan, Indonesia etc... which sell us low cost consumer goods. If those currency flows didn't exist, what do you think the price of goods would do in the US? The dicotomy of the Wal-Mart effect is that it sows the seeds of our own destruction.

Businessweek about two summers ago ran a piece that highlighted a plant worker in the last US Levi's manufacturing facility. His wife, in order to stretch the family's purchasing power shopped almost exclusively at Wal-Mart because of the good prices. However, he ultimately lost his job because Levi's in order to keep the Wal-Mart business decided to shift its production overseas.

So you can go around blaming this administration all you want, but the sad reality is that WE THE PEOPLE through our purchasing habits and our constant drive to have more stuff is driving our trade deficit. We drive big cars which consume lots of oil (imported). We like to buy cheap (imported) consumer goods (how many plasma TV's are manufactured in the US?) and have a negative savings rate (therefore we're not the ones purchasing our treasury securities). What would you like the government to do with respect to any of these issues?
Hypocrisy. It's the new black for liberals.
 
Derico
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 2:13 am

Quoting Pope (Reply 10):
Argentina is a very interesting example of how improper controls over currency can get you into a lot of trouble. One year and four days before the last currency crisis in Argentina the WSJ ran an article that pointed out how the Brazilian Real had depreciated against the dollar over the past year.

That policy was over 5 years ago... While I appreciate your story I'm not sure what bearing does it have on things today?

Today, Argentina is artificially weakening it's currency, the opposite of the peg.
My internet was not shut down, the internet has shut me down
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 4:15 am

Quoting Derico (Reply 13):
While I appreciate your story I'm not sure what bearing does it have on things today?

Today, Argentina is artificially weakening it's currency, the opposite of the peg.

I intended it to show that "strength" or "weakness" of a currency oftentimes has very little to do with strength or weakness of the underlying economics.

Countries often time have a very good reason for favoring a weak currency. I think that toward the end of 2003/early 2004, the US Treasury secretary intentionally did not try to talk up the dollar as a way of punishing Germany (who was in the midst of its own economic problems) for not supporting the war.

That being said, I for one find it absurd to think that if anyone is betting on which region will have stronger economic performance over the next 30 years, they would choose the Eurozone over the US. By just about every measure of economic performance the Eurozone substantially lags the US and with the aging population demographic the problems will probably get worse.

While the US definitely has to address the twin deficit problem (fiscal and trade), the economic problems facing Europe seem much bigger to me. Social spending is growing by leaps and bounds. Taxation is a constant disincentive to undertake entreprenurial risks and the multilayer multijurisdictional framework of overlapping and oftentimes conflicting sovereignities makes it a mine field for businesses to operate.
Hypocrisy. It's the new black for liberals.
 
cfalk
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 4:24 am

Speaking as an economist, I'd just like to say that Pope is dead-on in his analysis.

I would go into more detail, but it would probably bore you to tears, or get you frustrated if you are trying to blame Bush. And in anycase, I have a headache...  Wink
The only thing you should feel when shooting a terrorist: Recoil.
 
halls120
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 4:57 am

Quoting Pope (Reply 12):
So you can go around blaming this administration all you want, but the sad reality is that WE THE PEOPLE through our purchasing habits and our constant drive to have more stuff is driving our trade deficit. We drive big cars which consume lots of oil (imported). We like to buy cheap (imported) consumer goods (how many plasma TV's are manufactured in the US?) and have a negative savings rate (therefore we're not the ones purchasing our treasury securities). What would you like the government to do with respect to any of these issues?



Quoting Cfalk (Reply 15):
Speaking as an economist, I'd just like to say that Pope is dead-on in his analysis.

I would go into more detail, but it would probably bore you to tears, or get you frustrated if you are trying to blame Bush. And in anycase, I have a headache...

Pope is indeed correct. While eliminating the US budget deficit would help matters, as long as we as Americans keep buying more foreign products than we sell US products, and as long as we don't save and keep "living for the moment" instead of investing in the future, the dollar will remain weak.

Ben Stein had a chilling commentary on CBS's Sunday Morning program the other day. He urged all baby boomers and young people to begin saving as much as they can as soon as they can, although for the older boomers, it's too late. He noted how little retiring boomers had in savings, and how drastic a cut of living standards they will soon experience.
"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself." Mark Twain, a Biography
 
Klaus
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 5:15 am

Quoting Pope (Reply 14):
I think that toward the end of 2003/early 2004, the US Treasury secretary intentionally did not try to talk up the dollar as a way of punishing Germany (who was in the midst of its own economic problems) for not supporting the war.

The falling dollar merely helped buffer the oil price hike as a result of the Iraq invasion, while the german export boom continued unabated, and still does.

Quoting Pope (Reply 14):
While the US definitely has to address the twin deficit problem (fiscal and trade), the economic problems facing Europe seem much bigger to me. Social spending is growing by leaps and bounds. Taxation is a constant disincentive to undertake entreprenurial risks and the multilayer multijurisdictional framework of overlapping and oftentimes conflicting sovereignities makes it a mine field for businesses to operate.

Nonsense.

Social spending is actually stagnating or falling; Major structural reform programs are already on their way, and the "multilayer multijurisdictional framework of overlapping and oftentimes conflicting sovereignities" may look foreign to you, but it's structurally the same as your own federal, state and local one. And the level of taxes actually paid is actually somewhat lower in Germany than in the USA to my knowledge. Nominal rates are next to useless for a realistic comparison.

If you want to calm your nerves with your imaginings it's more or less fine with me, but I'd worry more about the stagnated structures and imbalances in the US with all the risks which are merely postponed but still remain unresolved...
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 5:27 am

Quoting Klaus (Reply 17):
The falling dollar merely helped buffer the oil price hike as a result of the Iraq invasion, while the german export boom continued unabated, and still does.

Source? Statistics? I can't believe that a stronger Euro is a boom for German Exports. Given the level of aggregate unemployment in Germany, this boom doesn't seem to be helping much.

Quoting Klaus (Reply 17):
Social spending is actually stagnating or falling; Major structural reform programs are already on their way, and the "multilayer multijurisdictional framework of overlapping and oftentimes conflicting sovereignities" may look foreign to you, but it's structurally the same as your own federal, state and local one. And the level of taxes actually paid is actually somewhat lower in Germany than in the USA to my knowledge. Nominal rates are next to useless for a realistic comparison.

Source? Statistics? Does your analysis include VAT? If not, what is the VAT rate?

What would a family of four earning $80,000/yr (E66,666) pay in income taxes in Germany?

What would a company with taxable income of $500,000/yr (E416,666) pay in income taxes in Germany?

Let's not debate theories, let's discuss real numbers.

If you'll compute and post the answers for Germany, I'll compute the US equivalents using the following assumptions. Standard deduction, resident in a state with no income tax.
Hypocrisy. It's the new black for liberals.
 
Klaus
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 5:41 am

Quoting Pope (Reply 18):
Source? Statistics? I can't believe that a stronger Euro is a boom for German Exports.

It's not - but it has turned out that it hasn't slowed down the export boom either. People actually want to buy our products, and it's not primarily a matter of price.

Quoting Pope (Reply 18):
Given the level of aggregate unemployment in Germany, this boom doesn't seem to be helping much.

Not as much as one might hope, but with ever-growing efficiency in our industry that was not to be expected. I doubt that we'd fare much better overall, however, if we had the level of working poor without health insurance you do.

Quoting Pope (Reply 18):
Source? Statistics?

It's all publicly available, and we've been over this a few times already. I'm not in the mood for research right now.
 
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yowza
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 6:30 am

Trade deficit.
US gov borrowing from foreign creditors.
Illegal exchange rate fixing from China.
Flow of money out of the US to major entities in the EU, India and China.

YOWza
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 6:31 am

Quoting Klaus (Reply 19):
It's all publicly available, and we've been over this a few times already. I'm not in the mood for research right now.

He who fights and runs away
May live to fight another day;
But he who is in battle slain
Can never rise and fight again.

Oliver Goldsmith
Hypocrisy. It's the new black for liberals.
 
Klaus
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 8:59 am

I don't have sufficient motivation to invest a major amount of time into defeating unfounded prejudices which are just a sideshow to the actual point. If being able to hang on to those prejudices feels like a victory to you, be my guest - at your own loss.
 
QANTAS077
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 9:32 am

like i said on my recent trip to the USA, someone asked isn't it expensive for you to travel around here, i said as long as Georgie stays at war i can afford to travel around here cheaply! Our dollar gets pretty good value of close to 80c so i'm happy to come over and have a cheap holiday!
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 9:33 am

Quoting Klaus (Reply 22):
I don't have sufficient motivation to invest a major amount of time into defeating unfounded prejudices which are just a sideshow to the actual point.

Standard response for someone who is unwilling or unable to provide any support for their claims.

I claim no victory. For their to be a victory one must be in competition. I enjoy the honest debate of ideas. However, I prefer that ideas be judged in the context of facts not in the context of what one wishes were true.
Hypocrisy. It's the new black for liberals.
 
MD-90
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 9:34 am

Quoting Pope (Reply 12):
Have you compared what the US inflation rate is versus the rest of the world.

The government does not report the real rate of inflation. Look at the prices of common things, like gasoline or soda. Up, up and away.

Quoting Pope (Reply 12):
The fight to keep inflation under control is precisely why our dollar keeps devaluing.

No, our dollar is devaluing because the government spends too much money. It spends more money than it takes in, so it has the Fed issue debt to finance it. Bankers and other governments are getting nervous about the federal debt and profligate spending.

China and Japan and a few others could pull the plug (stop buying US debt and start selling) and it would absolutely cripple our economy.

Quoting Pope (Reply 12):

So you can go around blaming this administration all you want, but the sad reality is that WE THE PEOPLE through our purchasing habits and our constant drive to have more stuff is driving our trade deficit.

So what?
 
halls120
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 9:51 am

Quoting MD-90 (Reply 25):
China and Japan and a few others could pull the plug (stop buying US debt and start selling) and it would absolutely cripple our economy.

They could. And their economies would straight into the toilet with ours....
"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself." Mark Twain, a Biography
 
comorin
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 10:30 am

The US Dollar is not getting weak - other currencies/economies are getting stronger!

Some points:

1. The deficit story is murky - good article in the NY Times recently on how it may be a red herring. Low interest rates, inflation and unemployment + alleged high deficit does not compute.

2. Weak dollar is bad if I like foreign oil, clothes, cars, and so on. My perceived standard of living takes a big hit.

3. FX rates are based on future expectations of inflation and interest rates on both sides, not just the US economy.

4. It's the long-term trend that's important: currency swings are flows that are necessary to establish underlying trends. If US denominated assets are cheap, foreigners wont buy them if they look like they'll get even cheaper in the future.
 
LFutia
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 10:43 am

i remember last year the dollar vs the Indian Rupee was near 50 or sometimes even above... now its struggling to hold 44.

Leo
Leo/ORD -- Groetjes uit de VS! -- Heeft u laatst nog met KLM gevlogen?
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 11:38 am

Quoting MD-90 (Reply 25):
The government does not report the real rate of inflation.

Right. It's a secret that only members of the trilateral commission have access to.

Quoting MD-90 (Reply 25):
So what?

Obviously I dealing with an expert at debate and financial issues here.
Hypocrisy. It's the new black for liberals.
 
cfalk
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 2:28 pm

Quoting Pope (Reply 29):
Quoting MD-90 (Reply 25):
So what?

Obviously I dealing with an expert at debate and financial issues here.

I read that and thought the same thing. Seems, Pope that he's just smarter than either of us.  Wink
The only thing you should feel when shooting a terrorist: Recoil.
 
cairo
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 5:28 pm

Dc10s4ever,

First of all, I think it's better not to use terms like "weak" and "strong" with currencies because it brings up emotional responses that aren't applicable to currency discussions.

The Bank of Japan has generally over the last 40 years sought to constantly "WEAKEN" the yen. This doesn't mean their economoy is weaker - far from it. It means they are an export driven economy and broadly speaking, relative 'weakness' is better for them to keep their exports going.

Second of all, your memory is too short. The Euro is trading at $1.20 - precisely where it started when the Euro was invented a few years ago.

....given that inflation is not serious in either the US or EU - we've ended up precisely nowhere in the relative 'strength' or 'weakness' of the dollar and euro - although we've had some good highs and lows along the way.

As for the pound - When I used to go to the UK in the late 70s, $2.12 bought a pound; in the 60s it was closer to $3 per pound and in the 40s it was $4 per pound. There have been plenty of variations along the way, but again the pound has long term consistently lost value to the dollar.

The US budget deficit is no worse than what is typical of Europe in terms of % of GDP and is no where near its historical high of well in excess of 100% of GDP, so I don't really think that is a huge issue.

The trade deficit is misunderstood,although its negative perception among speculative currency traders is a definite force. Despite the best hopes of Klaus, et al. that the US is sailing into disaster, the deficit has gone on for 25 years and could go on forever.

Furthermore, despite the hopes and dreams of the EU centrics, the euro can't replace the petrodollar in oil transactions until the EU can defend themselves, their interests, their friends and overseas oil fields militarily.

If the US suddenly moved to a trade surplus or trade neutral, the biggest loser s would be...Germany, China, Japan, the EU in general and others that depend on exports, whether to the US or not.

Remember, the US gets imported goods while the trading partner gets mere paper (or actually - electronic dollar credits). When you are this big of a debtor, it is not the debtor who is in risk of losing much - it is the creditors who would lose plenty if the dollar fell and are more concerned about a falling dollar than the US itself.*

Finally, no one has mentioned interest rates. They are still near historic lows in the US while they are considerably higher in the EU and elsewhere. THIS ALONE plays a huge role in foreign exchange as conservative investors move money to places where banks pay a higher return on their deposits.

Cairo



*It should be clear that the principles applying to the balance of payment of the United States are the same for one region of the country, for one state, for one city, for one block, one house, or one person. Obviously no person or group can suffer only because of an "unfavorable" balance; he or the group can suffer only because of a low level of income or assets.
http://www.mises.org/story/2029

www.cato.org/testimony/ct-dg081999.html
www.freetrade.org/pubs/pas/tpa-002.html
 
PSA727
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 5:48 pm

Actually, against the Yen, Euro, and Pound, the dollar is doing better
now than it was this time last year.

Interest rates, as well as trade and budget deficits, also affect the exchange rates.

When a country has lower interest rates than its counterparts, investors
will avoid that country's banking investments in favor of those that have
a higher return rate. That is one reason the Australian Dollar is doing
so well.

However, we have seen a steady increase in the U.S. interest rate over
the past year; and it has resulted in a little bit stronger dollar agains some
of the major currencies. And it isn't because Americans are importing less,
or our federal government is spending less.
fly high, pay low...Germanwings!
 
eilennaei
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 10:31 pm

Quoting Klaus (Reply 19):
People actually want to buy our products, and it's not primarily a matter of price.

Who's that us? People that speak German? I'm seeing more and more German-minted Euro coins in my daily change, which constantly reminds me of the bitter fact that there are no longer countries and national economies in Klaus's sense in the EU.

Great thing for all of us for the Germans having (re)discovered the money-making machine in the primary sense. I bet Klaus has bought some stock?
 
Klaus
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RE: Why Is The US Dollar Getting So Weak?

Wed Mar 08, 2006 10:41 pm

I was talking specifically about the german economy in response to a specific statement.

And I don't see what your point above actually is - if your nation's existence and identity should have rested solely or even "just" primarily on a separate currency, that would have been a rather weak picture of the respective nation, don't you think?
 
eilennaei
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 2:09 am

I wouldn't know where it rests, but I know before all this EU monkey business and all liberalisation we had a net state budget deficit of zero, and an unemployment rate of down to 4%.
 
luisde8cd
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 1:04 pm

Quoting Derico (Reply 6):
The US dollar has really depreciated against all the Latin American currencies,

The Venezuelan Bolivar has depreciated constantely since 1983. In 1998 when current president Chavez started his presidency, you need only VEB 500 to buy 1 US Dollar. Now in 2006, you need VEB 2500 to buy 1 U.S. Dollar. A 500% devaluation in 8 years.... sad if you ask me.

Saludos desde Caracas,
Lusi
 
KiwiTEAL
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Joined: Fri Nov 04, 2005 12:43 pm

RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 1:19 pm

I wish it would get WEAKER! Today the Aussie Dollar was worth 72 US cents......... makes it bloody hard for me to purchase trade supplies from my American suppliers. The nadd onto that the cost of an internet banking wire transfer at $129 USD Embarrassment

KiwiTEAL  Sad
 
MD-90
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 1:45 pm

Quoting Pope (Reply 29):
Obviously I dealing with an expert at debate and financial issues here.



Quoting Cfalk (Reply 30):
I read that and thought the same thing. Seems, Pope that he's just smarter than either of us.

Who owns the dollars doesn't really matter. The total sum of dollars in circulation does.
 
cfalk
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 4:50 pm

Quoting Cairo (Reply 31):
When you are this big of a debtor, it is not the debtor who is in risk of losing much - it is the creditors who would lose plenty if the dollar fell and are more concerned about a falling dollar than the US itself.*

Well done pointing that out, Cairo.

When you own the bank a thousand dollars, the bank owns your ass. When you owe the bank millions of dollars, you own the bank.

Quoting MD-90 (Reply 38):
Who owns the dollars doesn't really matter. The total sum of dollars in circulation does.

But when you are selling so many dollars on the foreign exchange, the dollar drops. Simple supply and demand.
The only thing you should feel when shooting a terrorist: Recoil.
 
eilennaei
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 8:01 pm

Quoting Cfalk (Reply 39):
But when you are selling so many dollars on the foreign exchange, the dollar drops. Simple supply and demand.

And I thought currency trading was difficult. Silly me.
 
cfalk
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 8:19 pm

Quoting Eilennaei (Reply 40):
And I thought currency trading was difficult. Silly me.

It isn't difficult. But it is very, very stressful. I served for about a year in the FOREX trading room at a major Swiss bank about 15 years ago, and watched a collegue next to me drop out of his chair of a heart attack. He was only 25!!!
The only thing you should feel when shooting a terrorist: Recoil.
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 10:31 pm

Quoting MD-90 (Reply 38):
Who owns the dollars doesn't really matter. The total sum of dollars in circulation does.

Wrong, the value of currency units (e.g. dollars), like everything else, depends on both the supply and the demand. There could be only $1 in circulation in the entire world and if nobody wanted it, it would be worthless.

Time to hit the books a bit harder.
Hypocrisy. It's the new black for liberals.
 
texan
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 11:05 pm

Quoting Dc10s4ever (Reply 2):
He thinks that a weak USD is GOOD for our economy....



Quoting Viv (Reply 3):
A weak dollar helps U.S. exporters

It helps the exporters, but with the continuing outsourcing of jobs, "our" products are made somewhere else, actually helping that country's economy to the detrement of our own. The individual companies will continue to do well and their executives will do well, but there are so few people in this bracket that the overall effect for the majority of Americans will be negative growth and purchasing power. Pope would be completely correct in his analysis IF the products domestic companies sold internationally were manufactured here, IF there were a large demand for our products, and IF there were not cheaper versions of our products being made elsewhere in the world. The theory is right, but the reality, when all variables are accounted for, does not quite pan out.

Quoting MD-90 (Reply 11):
Inflation destroys wealth, and it's happening because the Fed continues to create money out of nothing, which devalues the fiat currency that's backed by nothing but politicians.

Large amounts of inflation destroys wealth. A good inflation number for domestic growth is somewhere between 4.5-6.5%.

Quoting Cfalk (Reply 15):
I would go into more detail, but it would probably bore you to tears, or get you frustrated if you are trying to blame Bush.

I actually would like to have some more detail. If you wouldn't mind, could you either message or email me some of your points on the issue?

Texan
"I have always imagined that Paradise will be a kind of library."
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 11:24 pm

Quoting Texan (Reply 43):
power. Pope would be completely correct in his analysis IF the products domestic companies sold internationally were manufactured here, IF there were a large demand for our products, and IF there were not cheaper versions of our products being made elsewhere in the world. The theory is right, but the reality, when all variables are accounted for, does not quite pan out.

When a US based trader sells a foreign manufactured product to a third country, that isn't counted as an export, either under US DoC calculation or by traditional economic measures. Furthermore, the thin supply chain means that it rarely if ever economical to import a foreign manufactured product into the US only to re-export it.

When I speak of exports I mean US manufactured products, built here and sold to third countries. Take a Boeing aircraft for example. A weak US dollar definitely helps those sorts of sales.

The problem is that as a country we continue to loose our manufacturing base so less and less stuff is manufactured here.
Hypocrisy. It's the new black for liberals.
 
texan
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RE: Why Is The US Dollar Getting So Weak?

Thu Mar 09, 2006 11:29 pm

Quoting Pope (Reply 44):
The problem is that as a country we continue to loose our manufacturing base so less and less stuff is manufactured here.

Right. That's what I was trying to say, but you said it more succinctly  Smile

Texan
"I have always imagined that Paradise will be a kind of library."
 
cfalk
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RE: Why Is The US Dollar Getting So Weak?

Fri Mar 10, 2006 12:18 am

Quoting Texan (Reply 43):
I actually would like to have some more detail. If you wouldn't mind, could you either message or email me some of your points on the issue?

Well, if I'm gonna do it, I might as well do it here.

First of all, the US Dollar is a completely market driven currency. There is no more gold standard, and the dollar isn't pegged to any other basket of currencies like some other currencies. That means that the value of the dollar is nothing more and nothing less than the value that people are willing to pay for it. I.E. Supply and demand.

One of the first things you learn in economics classes is the term "All Other Things Being Equal", otherwise known as AOTBE, or the Great Lie, because all other things never stay equal. For example, if the Fed raises interest rates, and assuming AOTBE, foreigners will want to buy more dollars in order to take advantage of the higher rates for a higher return on their bond portfolio. So, AOTBE, increasing the interest rate will increase the value of the dollar relative to other currencies. But, when you raise rates, all other things do not remain equal. It becomes more expensive for companies to acquire debt and do business, so the stock market might fall, driving foreign investors away and the dollar down. Then you have a hurricane that increases the need for cash, Then some country gets into a war and money is converted to dollars for safekeeping, and then you have Nigerian rebels blowing up oil pipelines etc. etc.. So AOTBE never happens as the world is constantly in motion.

But assuming AOTBE, we can agree on a few cause and effect mechanisms.

1) Raising interest rates increases the dollar value.

2) If there is a US trade deficit, the dollar value falls, because the seller wants to convert the dollars he recieved into local currency, and this results in more dollars being sold on the market than American companies are buying back in order convert their foreign sales back into dollars.

3) A US federal budget in deficit must be financed by the issuance of bonds, leading to a potential glut in the money supply and a fall in the dollar. At the same time however, in order to sell those bonds the fed might increase rates, correcting the dollar's fall somewhat.

And so on.

In my mind, the trade deficit is the biggest cause for the low value of the dollar. It dwarfs the budget deficit by 2 to 1, and represents a pure export of added value to other parts of the world. You might even consider that an $800 billion foreign trade deficit is virtually the same thing as $800 billion worth of foreign aid.

If the exporting countries like Germany, China and Japan were to keep that $800 billion in their own countries and converted to local currency, AOTBE, it would lead to an explosive decompression of the dollar, which would in turn make their products prohibitively expensive for Americans, But then American products would become much cheaper to foreign markets. Airbus would not last very long if Boeing could sell a 737 for 50% less than the price of an A320.

This of course would lead to a correction. AOTBE, a market ecomomy would eventually balance the situation so that there should be a very small deficit/surplus. But this would be a rocky ride with some wild shifts in currencies, the uncertainty of which would smash down stock prices, leading to a recession, interest rates going through the floor, etc. It is much easier for everyone to simply return the bulk of their $800 billion profits and spend them in the US.

The ONLY way to reduce the trade deficit in order to shore up the value of the dollar without throwing the US economy into a tailspin is for Americans to change their purchasing habits. Apart from buying American-made products, one of the biggest components is the import of oil. That is money going directly from your pocket directly to the Saudis, or Mr. Chavez, some of which being returned to the US, but some also being kept overseas and converted, weakening the dollar. If, for instance, the US were to introduce a law requiring 35 MPG from any new vehicle, this would cause a huge impact on the dollar, but watch out for ripple effects all over the place. BTW, I would encourage such a law just for the satisfaction of pissing off the Saudis, Iranians, Chavez and others.

Shoot, I forgot the question. Did I answer it?  Wink

Quoting Texan (Reply 43):
It helps the exporters, but with the continuing outsourcing of jobs, "our" products are made somewhere else, actually helping that country's economy to the detrement of our own.

True, but remember that the US has generally benefited from outsourcing. The last time I went through the numbers, I found that around 6.5 million jobs have been outsourced from America to Malaysia or wherever. But at the same time, foreign companies have hired 9 million workers in the US, outsourcing production of, say, Toyotas, to the US. BMW even make some cars in the US to be exported to Europe.
The only thing you should feel when shooting a terrorist: Recoil.
 
BigOrange
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RE: Why Is The US Dollar Getting So Weak?

Fri Mar 10, 2006 2:31 am

Quoting Dc10s4ever (Reply 2):

Thanks GWB! One of my co-workers is a HUGE Bush fan. He thinks that a weak USD is GOOD for our economy....

He obviously drinks the Bush Kool-Aid
 
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yowza
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RE: Why Is The US Dollar Getting So Weak?

Fri Mar 10, 2006 2:33 am

Good thing it's back to being weak, after all I currently get paid in Canadian. Good work Georgie.

YOWza
 
Pope
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RE: Why Is The US Dollar Getting So Weak?

Fri Mar 10, 2006 3:13 am

Quoting BigOrange (Reply 47):
He obviously drinks the Bush Kool-Aid

Perhaps you could shed some light on the macro-economic benefits to the US of a strong currency.

My bet is that you're just full of hot air and like to criticize but don't know enough to even understand the issues you're posting about.
Hypocrisy. It's the new black for liberals.

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