The Incredible Falling Dollar

An interesting article supporting and adding to the following posts, was published in the December 22, 2003 issue of Business Week mag, starting on page 36.

The Bankruptcy of the United States

United States to go with the Euro?

Although the suggestion from the article is that this will help us mfgr's recover, there is also a minor warning if the buck accellorates it's decline.

www.businessweek.com...

Behind the dollar's weakness is the gaping U.S. trade deficit and America's increasing difficulty in attracting foreign money to finance it. The composition of the capital that is coming to the U.S. and who's providing it has changed, putting downward pressure on the dollar. Rather than huge corporate investments such as Daimler Benz combining with Chrysler, now the U.S. is dependent on more fickle financial flows into stocks and bonds from foreign investors and support from Asian central banks.

With foreign private investors less willing to hold dollars, Asian central banks are taking up the slack, says consultant David Gilmore of Foreign Exchange Analytics. To avoid appreciation of their currencies that would hurt exports, central banks in China, Japan, and other Asian countries are buying up dollars to invest them in U.S. Treasury debt. Foreign central banks now own more than $1 trillion of U.S. securities.

U.S. investors, too, including Warren E. Buffett and George Soros, are moving money out of dollars. Through the first nine months of this year, U.S. investors bought $57.9 billion of foreign equities; in the same period last year, they sold $8.3 billion. Much of that has gone to Japan and other markets in Asia.


The online article representation, is not as complete as the actual magazine printing, but has the essence of the author's intent.

The uneven nature of the dollar's decline is also a concern. The dollar has fallen much more against the euro -- which is up 46% vs. the greenback since October, 2002 -- than against Asian currencies, including the yen, which is up less than half that. One especially controversial exchange rate -- the yuan-dollar rate, pegged by China to prevent fluctuations -- hasn't changed at all.


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Watch a day's worth of Fox News programming.

They are trying like hell to tell us a weak dollar is a good thing.

Or any infomercial for excercise equipment: Running in place isn't pointless when you've got full range of motion like this.

Agreed, and yet the position of the US Gov is one of a strong dollar.

It wasnt until the last year, while still trying to prop up the dollar after the last recession, that the tune changed to 'weak is good'.

The low fed interest rates along with rising strength in the Euro dollar, is making the USD less appealing to those who finance our gov,... asian countries.

Europe will be crying soon as its currency continues to appreciate.

The strong dollar was not entirely a good thing for the US.

Is the rise of the Euro vs the US dollar part of an engineered economic battle between Europe and the US?

A weak dollar or good dollar. Doesn't matter at all. If the US $ goes down the world economy goes down so I favour everything that's good for the US $
Same goes for the Euro now.

I don't know why people tend to talk one of those currency into the bad, you should all be grateful it is quite stable at the moment.

Originally posted by shoo
I don't know why people tend to talk one of those currency into the bad, you should all be grateful it is quite stable at the moment.

But that is the whole point.

There will never be parity in exchange.

AND they are not stable right now at all, actually quite dynamic in the last year.

Originally posted by smirkley

Originally posted by shoo
I don't know why people tend to talk one of those currency into the bad, you should all be grateful it is quite stable at the moment.

AND they are not stable right now at all, actually quite dynamic in the last year.

Sorry for the misunderstanding.
I think stable doesn't need to mean that it won't change at all. It just means that ups and downs circle and that's the situation all in all becomes something constant/stable.

I doubt we are running towards some crash.

[Edited on 17-12-2003 by shoo]

Originally posted by shoo
A weak dollar or good dollar. Doesn't matter at all. If the US $ goes down the world economy goes down so I favour everything that's good for the US $

Yes it does matter. If opec decides to dump the dollar and go with the euro we are #ed. China would also start dumping dollars and peg it against the euro instead of the dollar. So all of a sudden our cheap chinese goods become expensive over night. Don't think the value of the dollar doesn't matter! Your salary has been cut 30% in the last year alone because of the dollars slide. The rich are allready moving their fortunes to other countries all of a sudden over night we will go from the richest country to nothing. Our market is saturated with goods. Europe isn't as bad but wal-mart and china will change that.

[Edited on 17-12-2003 by DiRtYDeViL]

Originally posted by DiRtYDeViL
Yes it does matter. If opec decides to dump the dollar and go with the euro we are #ed. China would also start dumping dollars and peg it against the euro instead of the dollar. So all of a sudden our cheap chinese goods become expensive over night. Don't think the value of the dollar doesn't matter! Your salary has been cut 30% in the last year alone because of the dollars slide. The rich are allready moving their fortunes to other countries all of a sudden over night we will go from the richest country to nothing. Our market is saturated with goods. Europe isn't as bad but wal-mart and china will change that.

[Edited on 17-12-2003 by DiRtYDeViL]

Wal-Mart sucks in Europe I saw some closing down as we have good discounters here and don't need some import.
Anyways I don't get some of the things you said. My salary has been cut by 30% in the last year because of the US $ ???

The rest of your post is speculation, I really doubt that the Euro will be the trading currency for oil and other goods in near future. So don't worry, it's not all damned

People seem unwilling to talk about WalMart - China and America's emergence as a 'retail' society forgoing our manufacturing infrastructure.

We are retruning the the COMPANY STORE concept in small towns all over America. You work at Super Walmart, you shop at Super Walmart... Super Wal Mart sends flowers and a bill to your family when you die.

We are a nation gorged on debt. Retail McJobs make it worse, not better.

I realize they can't win. But the only Presidential candidates that really seem to 'get it' are Gephardt and Edwards. Edwards especially having watched NC slowly DIE. There are no huge 'cities' here. Just strings of former Mill towns.... 'saved' by Super Walmarts. It's sick.

It's third world. Thank God for Tobacco.

Originally posted by RANT
Edwards especially having watched NC slowly DIE. There are no huge 'cities' here. Just strings of former Mill towns.... 'saved' by Super Walmarts. It's sick.

It's third world. Thank God for Tobacco.

Ummm ....watch out for Edwards...he had nothing to watch during his tenure in NC except NC growing by large anounts,...not dying. Tobacco and mfg in NC are hit right now, but is recovering slowly.

Edwards is a lier to the voting public, and an issue-monkey when he is running for office.

But after he is in office...

Just do some google searches on edwards,....his past, his politics, his person. You may be enlightened. He is a super rich lawer made from lawsuits, ran for senetor, as has spent very little time not running for president.

But he will be very content with the Vice Presidency nomination he will accept.(for now). And he will accept, but the party will lose anyway!

I attribute his watching NC die to his personal experience growing up in Robbins, NC and his mill working family going from middle class to poverty line, like most blue collar North Carolinians. Not his outsider status from his very short term in politics.

I would love to see any perspective on Edwards "lying". But believe it's more likely "lies" about Edwards. I'm aware he initally was a very scary candidate to the RNC and this area was flooded with the "ambulance chaser" propaganda...

Yes, he's rich, but he wasn't. Totally self made. As for who lied to get in office around here, both Dems and Republicans agree it was Libby Dole... the most universally hated Carpet Bagger NC has ever seen.

No one is happy about her retirement in the Senate on our dime. The running joke is Where's Libby? They made mock milk cartons with her picture on them. Bush has visited NC more than Libby Dole since winning.

The former Red Cross matron was RUDE and acted put out during her ONE tour after a hurricane. As for Edwards, he has stated his main reason for running for President was to actually accomplish something. The effectiveness of Junior senators is stacked against progress...though he has made great strides on the Senate Intelligence committee, as has Gephard on Armed Services.

You know real stuff, like closing border loopholes, passing laws against fake ID shops, paying for homeland security, protecting our water and power plants.... not just chasing boogey men in holes.

I will have to post later about my perception of him lying, with links.

But he did make a promise when running for senator, that he would not be detracted from his job in the state.

But when he announced his pres attempt, he also stated that he would be devoting all of his time running for office....while still a senator!. Also, he made the announcement after a study determined he would probubly not be re-elected as senetor.

Hi smirkley,
Hope all is going well.
I found this article and wondered what you would make of it:
"EU's Prodi Says Euro Gain Makes Recovery `Difficult'"
Link:
quote.bloomberg.com...

Excerpt:
"Dec. 18 (Bloomberg) -- European Commission President Romano Prodi said the euro's gain to a record against the dollar is curbing Europe's recovery by making exports more expensive.

``I've no desire to see the euro appreciate because I think that we have already some difficulties,'' Prodi said in a televised interview with Bloomberg News in Brussels. A pricier euro poses ``remarkable difficulties to the speed of recovery.''

Prodi said the European Central Bank shouldn't sell euros to weaken the currency, which earlier today rose to the highest against the dollar since it was introduced five years ago. The euro has risen more than 18 percent against the dollar this year and bought $1.2418 at 12:28 p.m. in Brussels."

Seems that the continuing rise of the Euro is causing more problems then it is good. What do you think?


regards
seekerof

Hey Seeker...

Yes I have thought about the trade issue. And why this doesnt ring 'complete' with me in description.

Reading back a couple or so posts ago, I recall something I posted in one of my threads, and it was related to the export thing effecting other countries, the euro, and the USD.

The USD is gaining exports with the weak dollar.
The USA is losing jobs to foreign countries.
The EU is losing exports with a stronger Euro.
Asia is gaining jobs from the USA.
Middle East is getting alot of USD.
China is getting Manufacturing resources together,
while still pegging the yuan to the $.



TheTreasury is having more and more difficulty financing our gov, with bond and note sales.

This will lead to higher fed reserve rates soon, to attract further asian and foreign investment. The Asian investments are BIG business, primarily becouse they dont mind buying more treasuries with the interest they receive from the USA with the old treasuries they own.

(side note...the pres announced a new program to help less fortunate families obtain home downpayment assistance. With rates low, no problem moving the homes off the floor. But if rates begin to go up, it will out-price the new home buyer further into the future. I see this as a move to prepare to assist the new and used home market from drying up, when the rates begin to rise. One of the few strong points in our recent economy has been home sales.)


So interest rates go up, the fed has already been washing the economy with bills. Increased likelyhood of increased inflation.

I am still noticing, even though the Euro has difficulties, that their currency is still kicking the USD's butt! And now we have some of USA's more 'genius investors' bailing out of USD.


I am waiting for the next shoe to drop.

Either some big oil producing country beginning to trade in the Euro, China un-pegging their currency, another war. All the variables can change so much so quickly.

But, I still think that the Euro trade issue, really isnt the issue, just a short term concern. They are just now beginning to trend upward out of their economic correction, all while their currency power is becoming well established and more powerful.

I can agree somewhat with what you have mentioned smirkley, but the real reason I posted it is because enlight of the current economic situations in the big countries/nations of Europe, ie: France and Germany, etc., wouldn't this have above consequences?
The EU economy is currently growing at half what the current US economy is doing and thats with a "weakened dollar" as compared to Euro, etc.


regards
seekerof

Another side-effect being felt by the ever-increasing Euro?

"Germany's economy contracts on strong euro"
Link:
www.eupolitix.com...


Excerpt:

"Germany is expecting the worst growth figures in ten years as ministers prepare to discuss the euro at next month's G7 meeting.

According to provisional figures from Germany's federal statistics office, Germany's gross domestic product shrank by 0.1 per cent last year after rising a mere 0.2 per cent in 2002 and 0.8 per cent in 2001.

The statistics office chairman Johann Hahlen said "The appreciation of the euro will certainly have played a role" in the disappointing figures, as lowered exports coupled with poor domestic demand hit growth.

Concern is growing within Europe about the high level of the euro which is threatening the certainty of an economic recovery."


My understanding is that the EU, in general, is having the very same problems and concerns.


regards
seekerof

Euroland is heavily dependent on exports to the US so the current developments are not great. With the stronger Euro, goods and services are relatively expensive in comparison to the US. Those who benefit from this have their costs in USD and revenue in Euro. This will help balance US trading.

Those who rely on revenue in USD but have costs in another currency are in for a hard time. That's why Prodi doesn't like the appreciation of the Euro, because it will slow down the recovery in Europe (not just euroland countries).