KennyK
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Why Are Airliners Sold In US$

Sat May 28, 2005 4:24 am

Is it true that Airbus and Boeing sell their aircraft in US$?
If so, then why, and would it not be better for Airbus to sell its aircraft in Euros?
 
Arrow
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 4:30 am

For the same reason that oil, gold, copper, and whole bunch of other things are sold in US dollars -- it's the world's strongest and most reliable currency. Or at least it was. If the US doesn't stop running it's debt up to the moon with billions in annual deficits, the world will make a switch. That will be a momentous day for the US economy, especially if it's triggered by Asian banks bailing out of US debt instruments. That's when the US will learn the real cost of the Iraq adventure.
Never let the facts get in the way of a good story.
 
legacy135
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 4:34 am

It is for sure also because the US have by far the largest demand for aircrafts and many parts like avionics and engines are produced in the States as well.
 
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Starlionblue
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 4:46 am

Quoting Arrow (Reply 1):
US dollars -- it's the world's strongest and most reliable currency

Really? That's in no way a given.

The reason for most trading currencies tends to be tradition.
"There are no stupid questions, but there are a lot of inquisitive idiots." - John Ringo
 
dutchjet
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 4:52 am

Airliners have historically been priced in US dollars for several reasons - in the pre-Airbus days, a huge proportion of airliners were produced in the US by US manufacturers, in the pre-Euro days, the US dollar was considered the most stable widely traded currency for international transactions, and a good percentage of airliners produced by the manufacturers were sold to US carriers.

Of course, some of that has changed in recent times, Airbus, Embraer and Canadair sell lots of airliners, the Euro has come into existence, and the US carriers no longer dominate aircraft orders, but dollar pricing has remained. Reasons for this include, airlines (and sometimes the governments that support or finance them) have currency reserves in US dollars, many components of non-US airliners are produced in the US, many components of US built airliners are produced outside of the US, many worldwide currencies are directly or indirectly linked to the US dollar, historically, the US dollar has been much more stable than the South American currencies (think Brazil and Embarer) and for competitive reasons, its easier to price airliners in one currency. That being said, in the future, I would not be suprised to see Airbus price certain deals in the Euro for non-US customers....remember, the Euro has only been around for less than 5 years and its weak start did not help.

All of that being said, US dollar pricing can be a headache for the manufacturers....the very strong dollar was a major problem for Boeing at the beginning of this decade and, currently, the strong Euro does create some competitive problems for Airbus.
 
legacy135
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 4:54 am

During a deal with Embraer lately we had in the contracts set up by the seller the price determined in US $ at the actual exchange rate. Anyhow, they included a formula that the final price was recalculated at the day of the transaction by the daily exchange rate.
So if the manufacturer is not US the prices for new aircrafts are more like an informational indication. For sure, on the used aircraft market someone can loose or earn a lot of money only by exchange rates.
 
Planesmart
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 5:01 am

A & B quoted prices are in USD. These price lists are for armchair execs.

A prices aircraft to customers in just about every currency under the sun, including multiple currencies.

Since late last year, B has become more willing to price in currencies other than the USD.

The USD is the currency of international settlement for airline seat sales in global alliances, and IATA.

Some airlines have considerable non-USD income streams, especially if they operate in their country's domestic market, or intra-Europe for example.

Some airlines with domestic and international operations prefer pricing based on the currency of revenue streams. For example, an A32 order for aircraft used domestically could be priced in a mix of local currency and USD (reflects some offshore bookings for domestic flights), while 777's used only for international flights would likely be priced in USD.

Remember engines are often purchased and financed separately. RR will price in other currencies, including for maintenance and power by the hour, PW tried it, and GE still prefers USD.
 
EMBQA
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 5:14 am

Really? That's in no way a given


Go anywhere in the world and drop a US $10 bill down and they'll take it for a purchase....you can't say that about any other currency.
"It's not the size of the dog in the fight, but the size of the fight in the dog"
 
UAalltheway
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 5:28 am

Why can't the whole world use the same currency?! It's so damn confusing.
 
B744F
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 5:34 am

Because every country involved in business has agreed to price their currency compared to the US dollar. This has been going on for many years. The US Dollar is currently the most stable but times are changing, the trade deficit is extremely high as well as the national debt, and the biggest owners of American debt are China and Japan, 2 countries that can cause havok on the American economic system in the future if they decide to cash in their bonds.
 
Pope
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 5:41 am

If AB priced it's wares in Euro's the price for one of their aircraft would have gone up by over 44% in just a couple of years as the Euro strengthened relative to the dollar.

This would have effectively priced AB out of the market for any country who doesn't have the Euro as its currency (with the possible exception of the UK whose currency has appreciated in relative lock step with the Euro).

One of the reasons why you don't see any real action by the US government to talk up the US$ is that a weak dollar makes US manufactured goods very attractive to foreign buyers.

Take China for example, if they float their yuan (which most people estimate to between 20% and 40% undervalued relative to the US$ right now) they can purchase Boeing aircraft at a sizable discount. Who do you think is going to win the next round of contracts with China when purchasing a Boeing product gives them a 20% to 40% discount relative to Airbus?
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scott0305
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 6:36 am

Quoting EMBQA (reply 7)
"Go anywhere in the world and drop a US $10 bill down and they'll take it for a purchase....you can't say that about any other currency"

Proper quoting thing isn't working for some reason. Anyhow - this is typical American arrogance. Have you ever been outside the States? I'd like to see you take that US $10 bill and try and buy anything in any store in the UK. Not gonna happen, pal.
 
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Starlionblue
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 6:44 am

Quoting EMBQA (Reply 7):
Really? That's in no way a given

Go anywhere in the world and drop a US $10 bill down and they'll take it for a purchase....you can't say that about any other currency.

I think the person behind the counter is about as likely to take British Pounds, Yen, Euro and Swiss Francs. It's somewhat regionalized too.

Quoting UAalltheway (Reply 8):
Why can't the whole world use the same currency?! It's so damn confusing.

Lol. Well if you're serious, it's because if you don't control your own currency, you give away a lot of the controls you can place on the economy through monetary policy. And therein lies one of the big anti-Euro arguments.
"There are no stupid questions, but there are a lot of inquisitive idiots." - John Ringo
 
zvezda
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 6:49 am

Quoting Scott0305 (Reply 11):
Proper quoting thing isn't working for some reason. Anyhow - this is typical American arrogance. Have you ever been outside the States? I'd like to see you take that US $10 bill and try and buy anything in any store in the UK. Not gonna happen, pal.

Been there. Done that. Next.
 
roseflyer
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:16 am

Quoting Scott0305 (Reply 11):
Anyhow - this is typical American arrogance. Have you ever been outside the States? I'd like to see you take that US $10 bill and try and buy anything in any store in the UK. Not gonna happen, pal.

I am sorry, but things are not quoted in US dollars because of American arrogance. The dollar is the world international currency. It has been that way since WWII. Before that it used to be the British Pound.

The dollar is the international currency because:

  • The US economy is the largest in the world and the US economy consumes the most goods
  • The dollar is one of the lowest inflation currencies in the world
  • The world needs a common currency for big purchase items (like Gold, Oil, industrial products, agricultural products, and manufactured goods) so that price comparisons are easy


Large purchase items are often sold in dollars. Around 50% of trade within Asia is in dollars (there is a wall street journal article on this that has more specific info). The Yen picked up ground drastically in the 80s and 90s, but its usefulness as an international currency dwindled with the Asian Currency Crisis of the late 90s.

However the Euro is the new big player. The Euro has the potential to surpass the dollar since the EU is growing into a larger economy than the US. Also the European Central Bank is hard nosed monetary authority. They value a low inflation rate more than the dollar. The European economy is hurt by the strong value of the Euro because the dollar has been depreciated in order to stimulate the US economy. The strong devaluation is having effects on the use of the dollar, but only time will tell if the Euro does surpass the Dollar.

Overall a company like Embraer will benefit greatly by pricing its planes in dollars. The Brazilian Real is a weak currency that has a high inflation rate. By pricing its planes in dollars (just like Bombardier) it allows airlines to effectively compare the products on equal grounds. The same is true for Airbus and Boeing. Airbus has been hit by a devalued dollar. The company cannot be as aggressive with pricing since many of its costs are in Euros (around 50% with labor being the biggest factor) while its revenue is in dollars. This hurts the company as it is forced to use financial instruments such as hedging and futures contracts in order to protect itself from currency fluctuation. The order book shows this hit because as the value of the dollar went down, so did the number of orders that Airbus was securing.

But it is all a cycle. The Euro will probably depreciate as Europe faces a recession and the United States is in a growth cycle. Airbus benefited greatly when the Euro was first introduced since it was undervalued at the time. Airbus was aggressive with pricing and won a lot of orders, which is a major reason why it is delivering more planes than Boeing now. Yes Boeing and Airbus have product differentiation, but they are a classic duopoly that is studied in many macroeconomics courses.
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Starlionblue
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:20 am

Roseflyer has it right. It's about tradition and stability.
"There are no stupid questions, but there are a lot of inquisitive idiots." - John Ringo
 
N1120A
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:24 am

Quoting Arrow (Reply 1):
US dollars -- it's the world's strongest and most reliable currency.

Actually, it is neither currently. The US Dollar has severly weakened and taken been on an out of control roller coaster.

Quoting EMBQA (Reply 7):
Go anywhere in the world and drop a US $10 bill down and they'll take it for a purchase....you can't say that about any other currency.

Sure, Euros are often accepted in the same way.

BTW, the reason for trade in US Dollars is because according to all major trade treaties, the Dollar is the international reserve currency. This means that countries stockpile the Dollar for international purpose. With the attack on the dollar instigated by the Bush Administration, the world has taken a strong look at changing the international reserve currency to the Euro
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bennett123
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:24 am

I doubt that UK shops would be happy to take dollars. I reckon that they would refuse.

Does anyone have experience about Non US shops accepting USD.
 
KennyK
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:24 am

Glad I asked the question now  cry 
 
roseflyer
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:31 am

Quoting N1120A (Reply 16):
The US Dollar has severly weakened and taken been on an out of control roller coaster.

Sorry but that is a huge overexaggeration. The value of the dollar is strictly controlled. The Fed has intentionally devalued the currency so that US exports will be cheaper and imports will be more expensive. This will decrease the trade deficit, which is one of the government's goals as a lower current accout deficit means a lower government budget deficit. US exports are up and the economy is growing at a good rate because the currency has a low value. It is not an out of control roller coaster. However the US economic policy obviously favors the US economy which isn't neccessarily good for other countries that have dollarized (abandoned their own currencies like Ecuador etc) or pegged them to the dollar. This is the same method that China has used with its foreign exchange policy (by keeping the Chinese currency pegged to the dollar at an undervalued state, but there is pressure on China now to remove the peg and float their currency) to keep its export driven economy strong.

Quoting N1120A (Reply 16):
BTW, the reason for trade in US Dollars is because according to all major trade treaties, the Dollar is the international reserve currency. This means that countries stockpile the Dollar for international purpose.

I am not flaming, but just curious. What you said was true in the past, but the dollar is not the only currency that is held as a reserve. Foreign reserves are essential to every country's economy since it allows the governments to regulate the value of their currency by buying or selling it while using its foreign reserves. The only major treaty that required stock piling of US dollars was the Bretton Woods system. That is where European countries pegged their currency to the dollar after WWII. This was done because the dollar was one of the few currencies in the world pegged against the dollar. What huge treaties stipulate that foreign reserves must be in dollars and only dollars. From what I understand foreign reserves are usually a mixture of eight currencies in this order (Mexican Peso, Canadian Dollar, British Pound, Swiss Franc, Australian Dollar, Japanese Yen, Euro, US Dollar).

The IMF does require foreign reserves of member countries. However these are not strictly regulated to only dollars. While it is true that countries may be required to keep foreign reserves with some of them denominated as dollars, this is not a reason for why the dollar is an international currency. It is the other way around, reserves are kept in dollars because the dollar is the dollar is an international currency with strong demand. A country would easily be able to increase the value of its currency by selling dollars and buying its own currency back.

[Edited 2005-05-28 00:45:59]
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stirling
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:33 am

Quoting Pope (Reply 10):
Take China for example, if they float their yuan (which most people estimate to between 20% and 40% undervalued relative to the US$ right now) they can purchase Boeing aircraft at a sizable discount. Who do you think is going to win the next round of contracts with China when purchasing a Boeing product gives them a 20% to 40% discount relative to Airbus?

This is a major trade issue at the moment between the US and China.
The Yuan is pegged to the dollar, which the US government wants it to change...it makes Chinese imports artificially cheaper.
The Chinese however see it as a way to catch up with the rest of the world. And a part of that is the purchasing of those things on the world market it needs to raise the standard of living for the 1.3 billion Chinese, who, beyond the major cities, live in a world not unlike that of centuries before.
Airplanes fall into this mix. A Yuan not tied to the Dollar, as the Pope has stated, makes them much more expensive. But also, Airbus products are marginally more expensive, and when talking in the quanities needed by the Chinese, it adds up, to billions.
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lightsaber
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:42 am

Quoting Starlionblue (Reply 15):
Roseflyer has it right. It's about tradition and stability.

???? Traditon doesn't make a currency liquid. While the US deficit *must* be brought under control, the reality is so much business is done in dollars because its a very liquid currency. I was just in Mexico. They really preferred my dollars to pesos... I've had no trouble spending dollars in Candida... The Wall Street Journal had another article noting how 60% of the US paper currency is abroad! I've yet to hear of a country where there isn't a significant amount of trade in dollars.

Quoting Scott0305 (Reply 11):
I'd like to see you take that US $10 bill and try and buy anything in any store in the UK. Not gonna happen, pal.

With a bill? Probably not. But my visa was happily charged.  Smile As to "American Arrogance..." Its only because there hasn't been another currency to challenge the dollar since WWII. Oh, the Euro is rising to the challenge, but it really won't be a totally viable alternative until Britain and a few others join in.

Quoting B744F (Reply 9):
The US Dollar is currently the most stable but times are changing, the trade deficit is extremely high as well as the national debt, and the biggest owners of American debt are China and Japan, 2 countries that can cause havok on the American economic system in the future if they decide to cash in their bonds.

Alas, true that China and Japan could rock our boat. Although I'm not sure if a 20%+ drop is "the most stable" currency.

Quoting Legacy135 (Reply 2):
It is for sure also because the US have by far the largest demand for aircrafts and many parts like avionics and engines are produced in the States as well.

True true. Recall that about 40% of the value of an airbus is made is the US (Honeywell avionics, GE/Pratt engines, APUs, BF Goodrich nacelles, etc.)
Lightsaber
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flyAUA
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:43 am

Quoting EMBQA (Reply 7):
Go anywhere in the world and drop a US $10 bill down and they'll take it for a purchase....you can't say that about any other currency.

 eyebrow  I've had less problems with the Euro than with the dollar.

This might have been the case 10 years ago, but not anymore buddy.

Boeing should stick to dollars where as Airbus should adopt the euro... after all the low dollar and high euro at the moment make airbus aircraft seem more expensive and this can not be an advantage to them.
Not drinking, also isn't a solution!
 
N1120A
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:43 am

Quoting RoseFlyer (Reply 19):
Sorry but that is a huge overexaggeration.

Wrong

Quoting RoseFlyer (Reply 19):
The Fed has intentionally devalued the currency so that US exports will be cheaper and imports will be more expensive.

Actually, the Fed did not devalue the currency. Irresponsible fiscal policy since 2000 did that

Quoting RoseFlyer (Reply 19):
This will decrease the trade deficit

It hasn't

Quoting RoseFlyer (Reply 19):
which is one of the government's goals as a lower current accout deficit means a lower government budget deficit

Wrong again. The current account deficit and budget deficit have grown exponentially through recent irresponsible fiscal policy. The reason for this is a decrease in government income and a major increase in government spending. That is a recipe for disaster

Quoting RoseFlyer (Reply 19):
US exports are up and the economy is growing at a good rate because the currency has a low value.

Actually, when the currency was strong in the 1990s, the economy was also at its strongest.
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
 
SeaMeFly
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:56 am

They could put it in Euro or Poundsterling, but then again the buyers would ask," What's that in US dollars?" Big grin
 
atmx2000
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 7:56 am

Quoting B744F (Reply 9):
The US Dollar is currently the most stable but times are changing, the trade deficit is extremely high as well as the national debt, and the biggest owners of American debt are China and Japan, 2 countries that can cause havok on the American economic system in the future if they decide to cash in their bonds.

But they would wreak havoc on their economies as well, because their economies are geared towards exports. That's the reason why they accumulate dollars and dollar investments.

Besides many European countries and Japan have public debts that are much larger fraction of GDP than the US. Actually in Japan's case, the national debt is much larger than annual GDP. And they have bad loan problem in the private sector. China has a similar bad loan problem. An increase in currency valuation due to dumping of bonds can cause serious problems for banks holding these loans and for companies trying to finance their debt payments if exports get squeezed.
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kl911
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 8:04 am

Quoting Arrow (Reply 1):
it's the world's strongest and most reliable currency. Or at least it was.

You are so right, it was and never will be again...
 
flyAUA
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 8:06 am

Quoting Seamefly (Reply 24):
They could put it in Euro or Poundsterling, but then again the buyers would ask," What's that in US dollars?"

Hehehe Big grin

That would make sense if it were say JetBlue ordering A320s from Airbus. But if it were say, Austrian ordering them from Airbus, what makes you think they'd want to know what it is in US dollars? We work with Euros here and the Finances are done in Euros as well. I think it's easier to ask "what is that in EUR" than "what is that in USD" for an airline such as Austrian since otherwise they'd have to convert it into what it would be in EUR anyways. OK, it WAS the standard but I don't see why it still should be around this side.

Get my point?
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sacflyer
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 8:20 am

I don't even like to think about how complicated the price of an aircraft gets when offsets become part of the deal. That just sounds like a huge headache.
I'm just happy that RR ratings can't be in negative numbers!
 
PHXinterrupted
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 8:40 am

Quoting KL911 (Reply 26):
Quoting Arrow (Reply 1):
it's the world's strongest and most reliable currency. Or at least it was.

You are so right, it was and never will be again...

Ah, a typical anti-American statement from KL911.

It's okay KL911, don't lose sleep over the fact that the US economy is larger than the euro zone and is certainly growing faster.
Keepin' it real.
 
milemaster
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 8:48 am

Quoting KL911 (Reply 26):
Quoting Arrow (Reply 1):
it's the world's strongest and most reliable currency. Or at least it was.

You are so right, it was and never will be again...

Interesting.. Why do you say that? I'm assuming you had your crystal ball calibrated recently.

I will be dumping my broker immediately because of this wonderful discovery that I found somebody who can predict with complete certainty the future value/fate of a foreign currency. This is truly remarkable.

Hands off everyone, I discovered KL911 first.. Seriously, all mine.
 
B2707SST
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 9:07 am

Quoting N1120A (Reply 23):
Actually, the Fed did not devalue the currency. Irresponsible fiscal policy since 2000 did that

According to the most broadly accepted theory of exchange rate determination, the uncovered interest parity theory, the decline in the value of the dollar is largely due to the record low interest rates seen in the US over the past three years. These extremely low yields prompt investors to move their money into higher-yielding foreign assets, reducing demand for dollar-denominated assets and increasing demand for foreign currencies.

The so-called "carry trade" -- borrowing cheap funds in US dollars to invest abroad at higher rates -- was extremely profitable when short-term rates were near zero here, and from an FX perspective, involved shorting the dollar and going long the foreign currency. Many of these trades were not hedged, as dollar weakness became a persistent theme. As the Fed has raised rates, however, the spread between US and foreign yields has begun to collapse. This led to the unwinding of the carry trade, a sell-off in emerging-market debt, and a rally of the USD.

Money aggregates also tell the same story. The Fed provided large amount of additional liquidity in the 2001-2003 period in an attempt to pull the economy out of recession. Printing more dollars necessarily dilutes their value versus foreign currencies. More recently, the Fed has started to tighten the money supply growth rate, as reflected in their rate hikes, which is supportive to the dollar. Of course, both interest rates and money supply growth rates impact FX values on at least a several-month lag.



In fact, the dollar hit a seven-month high versus the Euro this week, and there is speculation that the Euro will fall further if the French and Dutch EU constitution ratifications fail:

http://money.cnn.com/2005/05/27/comm.../breakingviews/france_no/index.htm

Given western Europe's rather weak GDP growth rates versus the US, political uncertainty, and demographic problems, the Euro is not automatically a more secure currency than the USD.

The US trade deficit is worrying, but the relationship between the US and Asia (especially China) is stuck in an odd sort of symbiosis. Many Asian and some European economies are dependent on US export demand to drive their GDP growth, and in return, are willing to buy so-called "risk free" US Treasury securities with the dollars they earn through net exports. Closing our trade deficit could cause substantial damage to export-driven economies, as Europe and Asia do not seem to have enough domestic demand to drive growth. As I've said before, the same countries that berate us over our current accout deficit seem quite willing to continue selling us their goods.

--B2707SST
Keynes is dead and we are living in his long run.
 
N1120A
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 9:24 am

Quoting B2707SST (Reply 31):
As the Fed has raised rates, however, the spread between US and foreign yields has begun to collapse. This led to the unwinding of the carry trade, a sell-off in emerging-market debt, and a rally of the USD.

Except that the USD is still in far too weak a position for economic equilibrium

Quoting B2707SST (Reply 31):
In fact, the dollar hit a seven-month high versus the Euro this week

Yet still disasterously low

Quoting B2707SST (Reply 31):
the same countries that berate us over our current accout deficit seem quite willing to continue selling us their goods.

Well, of course. Nearly 300 million consumers cannot be ignored.
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
 
atmx2000
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 11:06 am

Quoting N1120A (Reply 23):
Wrong again. The current account deficit and budget deficit have grown exponentially through recent irresponsible fiscal policy. The reason for this is a decrease in government income and a major increase in government spending. That is a recipe for disaster

You really don't know what you are talking about:
         Trade       Broad     ECU
Balance Dollar or
Year $Bil %Chg Index %Chg EUR CAN JPN KOR MEX UK Events
1992 -39 76.9
1993 -70 80% 83.8 9% 11% 7% -12% 3% 18%
1994 -98 40% 90.9 8% -1% 6% -8% 0% -2% Peso crisis
1995 -96 -2% 92.7 2% -8% 0% -8% -4% 90% -3%
1996 -104 8% 97.5 5% 3% -1% 16% 4% 18% 1%
1997 -108 4% 104.4 7% 11% 2% 11% 18% 4% -5% Asian Financial Crisis
1998 -165 52% 115.9 11% 1% 7% 8% 48% 16% -1%
1999 -263 60% 116.0 0% 5% 0% -13% -15% 4% 2% Euro intro
2000 -378 44% 119.4 3% 15% 0% -5% -5% -1% 7% Dot bust
2001 -363 -4% 125.9 5% 3% 4% 13% 14% -1% 5% Recession+9/11
2002 -422 16% 126.7 1% -5% 1% 3% -3% 3% -4%
2003 -497 18% 119.1 -6% -16% -11% -7% -5% 12% -8%
2004 -617 24% 113.6 -5% -9% -7% -7% -4% 5% -11%


As you can see the current account deficit was increasing the fastest during the late 90s. From 1997 to 2000 the US trade balance went $270 billion dollars further into the red, an increase of 350%. I know you want to blame the Bush administration, but the economic changes caused by Clinton's administrations (excessively) strong dollar policy and response to the Asian financial crisis are primarily to blame for the current account deficit. The trade deficit increased dramatically after the Asian financial crisis. The period of excessive dollar strength made US producers uncompetitive and foreign production more competitive. More importantly, it allowed foreign producers to become entrenched in the market, as they earned large profits that allowed them to invest further in their businesses. The only redeeming feature (if you can call it that) of the strengthening dollar was that as foreign investors dumped their money in the US equity markets, stocks went sky high generating a temporary surge of capital gains for investors and capital gains tax revenue for government. Perversely, the dollar continued to go up while the trade deficit bloomed, and the stocks continued to go up despite the fact that P/E ratios were out of this world and the strong dollar was reducing earnings and revenues for US companies from overseas operations and making US exports uncompetitive.

Quoting N1120A (Reply 23):
Actually, when the currency was strong in the 1990s, the economy was also at its strongest.

Did you ever consider that the strong dollar served as a brake on the economy? Did you ever consider that the policies from earlier years can have detrimental effects in later years?

[Edited 2005-05-28 04:56:45]
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zoom1018
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 11:26 am

I wonder what are Euros for
if Airbus has to sell their planes in US Dollars? LOL
 
ikramerica
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 12:12 pm

I find it funny how Bush haters would honestly believe that a Republican administration would be worse for US business than a Democrat one. The tech bubble was not a product of any administration, but the economic collapse beginning in late 1999 (all leading indicators point to Q4 of 1999 as the beginning of the problems) was a direct result of an administration not caring about what was happening (even while their Fed Chairman was telling them.) The next administration could clean it up, and either way it would be seen after 2001 and could be fixed by 2004 (and of course, that's what happened).

The time when the Euro was weakest vs. the US dollar was also the same period when the economy was slowing and in recession. When the Euro was strongest, the US economy was strongest (mid 95-98.5, 2004-now). It's not hard to see the connection. During the strong dollar periods, Airbus passed Boeing in orders. During the weak dollar periods, Boeing has and will be doing better than Airbus (with a small lag for the markets to adjust to reality). All other claims of aircraft "superiority" and "preferred" and such sort of go out the window when looked at that way. It's all about what makes sense in the bottom line.

As for paying in dollars in anyplace on earth, that's exagerated. But for many parts of the world, it sure holds true. Anyone in a country with high inflation or unstable currency would love to have dollars or euros. And just like you can't use Euros in the US, it's hard to use dollars in Europe, either (though for large ticket items, anyone will take anything that's legal.)

And before you get all US arrogance on me, in 1998, when the Euro hadn't taken over yet as a paper currency, I traveled from Brussels to Paris (first time in Paris), and was trying to buy something in a market after walking to the youth hostel. I had exchanged for some French francs, but still had some Belgian Francs as well. I accidentally took a few of the wrong kind of coins out (and some French ones).

The old women behind the desk screamed at me in broken English: "What is dis? I do not take dis!" pushed my money and snack aside, and started serving the next person. Then two ladies behind me said "you are a british man?" I said "no, I am american" and they laughed and said "oh, big mac!" Talk about arrogance. (as if there isn't a McDonald's on every corner of paris). if only that were the last example of bad or arrogant treatment in France, Swizterland or Germany on my trips.
Of all the things to worry about... the Wookie has no pants.
 
atmx2000
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 12:13 pm

Quoting N1120A (Reply 32):
Except that the USD is still in far too weak a position for economic equilibrium

Just as the strong dollar didn't instaneously result in a $600 billion trade deficit, a weaker dollar won't instaneously result in a smaller trade deficit.

Quoting N1120A (Reply 32):


Quote:
Quoting B2707SST (Reply 31):
In fact, the dollar hit a seven-month high versus the Euro this week

Yet still disasterously low

Was the dollar disasterously low in 1996? The dollar-ECU exchange rate is where it was then. The dollar-yen rate is the same as well. And the broad dollar index hasn't even gone to 1997 levels yet, which indicates that the dollar is still rather strong compared to many of our trading partners' currencies.
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CXYYZ
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RE: Why Are Airliners Sold In US$

Sat May 28, 2005 12:38 pm

US$ are the base currency for many components of international aviation. Revenue and labour aside, landing fees, fuel and insurance are all costs that are frequently, though certainly not always, quoted in US$. It would take a massive conversion of pricing of all components of aviation to a different before I think we'll see airplanes quoted in a currency other than US$.

Quoting RoseFlyer (Reply 19):
The Fed has intentionally devalued the currency so that US exports will be cheaper and imports will be more expensive.

The Fed's actions have undoubtedly decreased the value of the dollar. So have recent fiscal policies. The voting public in most nations would prefer to see a strong currency and this is no different in the US. The US had a "strong dollar" policy for years before they accepted that the dollar had to let off a bit of steam. I don't think that you could say the Fed has intentionally devalued the USD though. I think the Fed's aim is more at keeping inflation low and growth on track and that a side effect of that has been a lower USD.

Quoting Bennett123 (Reply 17):
Does anyone have experience about Non US shops accepting USD.

There is quite a famous scam in Hong Kong which a street vendor in tried to trick me into last year (I have an "American" accent you see, so I seem the type that is likely to fall for such a thing). The buyer and seller will start to negotiate a price. The seller will then "confirm" that they are talking US dollars and the buyer will say yes. The seller has been quoting his/her price in Hong Kong dollars but has just managed to increase the asking price eight fold. They go on to settle at a price much higher than would have been agreed upon otherwise with the buyer feeling proud with how much he/she bargained the price down and with the seller having fleeced another ignorant tourist.

With that said, countries that have "hard" home currencies, such as the US, UK, the Eurozone, etc. there will be hesitation to accept other currencies without charging a penalty for the convenience. Building on Lightsaber's example, it is relatively easy to use US dollars in Canada (or Candida as some seem to like to call it Big grin), but one would usually get C$1.10-C$1.15 for every US$1 while the market rate is floating in the $1.2x range at present.

In countries where the home currency is not one of the major hard currencies, there will always be a willingness to accept what is seen as a safer form of payment.
 
stirling
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RE: Why Are Airliners Sold In US$

Sun May 29, 2005 9:53 am

To those just checking in, may I defer to replies #31 and #33? Especially you #31...that was a real nice way of putting it in a way a caveman could understand...pipe down #33, you were spot on as well, however, I go a little cross-eyed when forced to look at charts!
And as for you #35, Well it's finally nice to see someone else jumping on my empty bandwagon.
For those of you not paying attention....IT'S THE EXCHANGE RATE!
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bill142
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RE: Why Are Airliners Sold In US$

Sun May 29, 2005 10:00 am

Quoting EMBQA (Reply 7):
Go anywhere in the world and drop a US $10 bill down and they'll take it for a purchase....you can't say that about any other currency.

If anyone comes into where I work with a US $10 bill I'm not going to accept it. I only accept Australian Currency, and I think you'll find alot of other places will be the same.
 
Ken777
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RE: Why Are Airliners Sold In US$

Sun May 29, 2005 11:27 am

Actually Bill, IU worked in retail in Perth for 8 years and when a US Navy ship came to town the procedures were in place to take the money. Cashiers called the cash office and were told how much change to five in Australian currency. I spent 17 years in retail and never saw a situation where a retailer refused to make a sale.

As for the dollar, it has hit a low, but will probably increase as interest rates increase. I believe it was too strong in the past (especially when the AUD went below 50¢) and was happy to see some adjustment. Until it hits a reasonable level Boeing will enjoy the sales a low dollar will provide and a holiday to the UK will cost more than I can afford. Pain & glory at the same time.
 
soaringadi
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RE: Why Are Airliners Sold In US$

Sun May 29, 2005 11:45 am

Its all about power.
If it ain't Boeing, I'm not going !
 
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kc135topboom
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RE: Why Are Airliners Sold In US$

Mon May 30, 2005 2:29 am

Quoting Scott0305 (Reply 11):
Proper quoting thing isn't working for some reason. Anyhow - this is typical American arrogance. Have you ever been outside the States? I'd like to see you take that US $10 bill and try and buy anything in any store in the UK. Not gonna happen, pal.

Yes, it does, I have done that in the UK, Germany, Japan, Spain, Canada (though they want to give you even exchange for Canadain dollars, then change back in Canadain currency [worth about $1Canada is around $1.28US]), South Korea, and other countries. It is commonly done around US Military Bases.

Exchange rates change 4 times each day, with all currencies. Right now, the US dollar is considered "down" against the Pound Sterling, the only other major internationally traded currency standard. The US dollar is also "down" against the Euro, in exchange rates only. I might add the US dollar is currently "up" against the Japanese Yen.
 
Motorhussy
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RE: Why Are Airliners Sold In US$

Mon May 30, 2005 2:39 am

I think you'll find that the deal will be done in whatever currency the purchasing customer wishes it to.

List prices are in US$ and increasingly in the Euro.

Interestingly, with the continuing weakness of the Greenback, Boeing must be finding their aircraft a little more affordable and attractive in countries with high performing currencies like New Zealand.

Regards
MH
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