Posted on 03/13/2008 1:19:47 PM PDT by NormsRevenge
SAO PAULO, Brazil - Antique store owners in lower Manhattan, ticket vendors at India's Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don't want U.S. dollars.
Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.
Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.
Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency — and dollar aversion is even extending to some quarters in the United States.
At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry into the palace. But because of the falling value of the dollar, the government implemented a rupees-only policy a month ago. Indian merchants catering to tourists have also turned bearish on the dollar.
"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator in the city of Agra where the Taj Mahal is located. "Now we prefer the euro. It gives us more riches."
In Bolivia, billboards feature George Washington's image on a $1 bill alongside a bright pink 500 euro note, encouraging savers to turn to the euro to tuck away money earned abroad or sent home in remittances.
"If the dollar's going down ... save it in Euros!!!" say the signs popping up around La Paz for Bolivia's Banco Bisa.
And in neighboring Brazil, the Confidence Cambio money-changing service was the first to start offering yuan so travelers to China no longer have to change the money into dollars first. The service is already a hit because Brazil does big business with China, and lots of Brazilians are heading to the Olympics this summer.
"Now we tell people not to take dollars when they go abroad, it's better to change it directly to the local currency," said Fabio Agostinho, one of the firm's managing partners. "If people leave here with dollars and go abroad, they lose when they exchange them. It's the same thing whether they're heading to China, Europe or even Argentina."
In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.
"Whip out dollars at the French flea market now, and they'll shoo you away," he said at his store near apartment buildings where Europeans are snapping up units because they've become dirt cheap. "Before it was like the second coming of Christ, but now they don't want it or if they do take dollars, they're going to take their pound of flesh."
The dollar has steadily eroded in value against the euro and other currencies since 2002 as U.S. budget and trade deficits ballooned, but fears of an American recession and credit crisis have sent the dollar to stunning lows amid predictions the slump will continue for a long time.
The euro traded for a record $1.5625 before declining to $1.5586 Thursday while the dollar dropped below 100 Japanese yen for the first time since November 1995. It traded as low as 99.75 yen before recovering some ground to 101.68 yen. The dollar also recently hit a 10-year low against the Chilean peso, and fell to its lowest level against Brazil's real since the nation floated its currency in 1999.
While low dollar cycles have come and gone for decades, experts caution that it's now much more difficult to predict when this one will end because the euro didn't exist as competition for the dollar before.
During previous U.S. economic downturns, big foreign funds typically snapped up U.S. treasuries, helping to shore up the dollar to a certain degree. But the euro and currencies from other nations are now seen as legitimate options, and interest rates are higher outside the United States — meaning the funds can get better returns on investments elsewhere.
"You have the U.S. still holding this trade deficit, but now you have the possibility of a U.S. led recession, and you have a weakening currency. So it's a very dark outlook for the dollar," said Gareth Sylvester, senior currency strategist with the British firm HIFX Inc., which executed $40 billion in currency trades last year.
Nations that were once seen as incredibly risky for investments — such as Brazil — are now seen as good long-term bets. And countries such as China and Russia, with burgeoning coffers of money to invest abroad, are thought to be shifting some of their reserves or diversifying fresh income to destinations and currencies outside the United States.
It used to be important for most countries "to accumulate dollars as a precautionary element against rainy days, but the accumulation of reserves has become so large in most emerging market countries that the balance is way beyond what's needed for precautionary reasons," said Eliot Kalter, a fellow at Tufts University's Fletcher School of Law and Diplomacy and a former International Monetary Fund official.
While most experts believe the dollar will eventually regain strength, no one is willing to predict when that will happen.
"I think the factors that are affecting the weakness of the dollar will be reversed, but no time soon," Kalter said.
The problem right now, is that "people just don't want to be holding U.S dollars and U.S.-based equities," Sylvester added. "If you are an investor with a million dollars to invest, you look for the highest yield — you're looking at South Africa, Australia, New Zealand."
And it's not only the big time investors that are looking for other options.
In Peru, where savings in U.S. dollars were long a popular hedge against inflation, many citizens are closing dollar accounts in favor of Peruvian soles.
At the same time, businesses like supermarkets, movie theaters and cable TV companies that used to accept dollars are now demanding soles.
Edwin Figueroa, a 29-year-old systems engineer, switched his checking account from dollars to soles seven months ago as the dollar's decline started worrying him. He doesn't think he'll be going back anytime soon.
The Peruvian sol "is stable now," he said. "And maybe in a year, the dollar will even go lower."
a ‘cheery’ little piece..
where’s muh damn rebate check 8-?
Send me all your worthless dollars - I collect them, as a hobby.
Tell me again how a weak dollar makes American stronger?
Do you want us to have a strong manufactoring base or a strong dollar? You can’t have both so pick, do you want us to import like crazy or import less and export much more.
It works right up to the point where it stops. I guessi it came to a hard stop.
Actually, its the weak manufacturing base that is causing this loss. The huge trade deficit is at work here. Tell me again, why free trade is a good policy?
I was just listening to the idiot on CNN tell me that Cuba doesn’t want our dollars either.
According to CNN - the world is collapsing, we’re all going to be in sackcloth and eating dust.
Oh, and Obama is the savior of all mankind.
This is not a good sign - for as long as I have lived here - the US dollar was king.
I see the dollar getting even weaker than it is now.
I’ll take a strong dollar and industry devoid of anti-competitive socialist unions, thankyouverymuch.
I’ve been pessimistic about the U.S. dollar for the last couple years, but the contrarian in me thinks that articles like this one signal that the dollar has just about bottomed. When the “man on the street” in some garden-variety, third-world country is convinced that the Euro is a much safer currency than the U.S. dollar, it’s a fairly safe bet that the Euro is headed for a crash.
It is often the case that by the time the media gets around to writing about a trend that trend is due to turn. Is that the case here?
Your suggestion that the two are mutually exclusive suggests a lack of understanding of many things and they way things are currently going, we could end up with very little of either.
>Do you want us to have a strong manufactoring base or a strong dollar?<
Are you trying to say that we have never had both?
Yup me too. Send me your “worthless” US dollars.
I said the same thing about the canadian dollar many years ago, and look where it is right now. Just like life, the economy is cyclical, the dollar HAS to bottom out before it starts to rise again.
“Do you want us to have a strong manufactoring base or a strong dollar? You can’t have both so pick, do you want us to import like crazy or import less and export much more.”
I’m as old as dirt and remember quite clearly in the 1950’s we had a strong dollar and strong manufacturing.
We have shipped our patrimony into the global ether and dismantled our financial superiority.
IOW, it ain’t comin’ back as long as Americans are paid what they are paid, and I don’t mean union wages, but wages across the board from sales clerk to professional, and as long as the corporations pander to the enormous numbers of new consumers in Asia and Africa and care less about some paltry 300 million in the USA.
You know those new medical junkets? Surgery in India is tens of thousands of dollars cheaper than here and those docs have been trained in the US. Our docs are going to live less large in the future. As will all of us.
I hope you all have taken steps to protect yourselves and your families.
You know that is basically true. The really smart money gets in on a trend at the beginning and the middle. Towards the end, they use the media to convince the little guys to buy or sell, so they can offload to them and take their profits.
Be of good cheer-New hires received $14.00 per hour and no benefits. The day is here; all those anti-competitive socialist unions are pretty much dead. Of course the people who can no longer get health care from the companies they work for will vote in droves for the Democrats who are dangling health care programs. Oh and Social Security will be increased since no one gets pensions anymore. Wow, happy days are here again.
It was funny - they were doing “man on the street” interviews (which were at a convention inside CNN’s building no less). The set-up was so incredibly biased:
“So, the economy’s not doing so good, as you’ve probably heard. Is this the worst you’ve seen it?”
“Oh yeah, this is the worst I’ve seen it! We’ve had to make some cutbacks in our house!”
“What do you mean?”
“Like, I used to go out to eat every day, now I can only do it once a week!”
...the freakin’ horror....
“So, because of the slow-down of the US economy, have you had to adjust your living habits?”
“Oh yes, we cut coupons and shop for specials at the grocery store. We only drive when we have to. Things like that.”
...good grief, like any normal frugal person would do?...
I was speaking of those who work for General Motors-not some small company-one of the big three...well not so big now I guess.
Interesting you say it is the weak manufacturing base causing a low dollar. I would peg it initially to our insane national debt with no end in sight to US government spending. With low interest rates not helping the dollar either.
Great, for that scenario to be true again we just need the entire rest of the world and their economies to be war ravaged, gutted, bombed out, etc. That was a unique time in American history.
Free trade is a GREAT policy!!!
It allows some people to make a fortune moving their plants away from America with all its affirmative action rules, union problems, environmental controls, etc to an area where they can manufacture products unfettered by environmental controls, use peons who receive no benefits and a subsistance salary, and then ship their products back here and sell them to the American public at the SAME price it would have cost if it was made here, or even a little lower, in case some American manufacturers are still trying to make a living!!!
Isn’t that WONDERFULL!!!!???????????
And, some day, when the average standard of living here has been degraded to that of India or Colombia, they might even come back and hire Americans under the same conditions!!!
I have to admit, free trading and globalization is a great idea. And the best part of all is ....... ITS BIPARTISAN!!!!!! Both rich Democrats and rich Republicans can get even RICHER!!!!
Now, THAT is what I call a bi-partisan spirit!!
Exactly.
Competition drives down prices in everything. That includes all services and goods.
In ten years, the landscape in the US is going to look very different. Your children will live more like Europeans today with less than we have now.
NAHH. Obama is a free trader just like his competitors Hillary and McCain.
He might be a little inexperinced, but with a little practice he will signing free trade agreements with Senegal, Mozambique, etc.
I wasn’t seeing it as intentional though, but rather the effect of a media that doesn’t seem to prize diligence.
You just don’t understand how free trade works!!
You have to listen to Bush, Bill Clinton and their buddies in Congress and they will explain to you how the entire world will be uplifted to the American standard of living
(which, of course, will have to drop significantly to meet theirs). They will explain to you how Americans simply are “addicted” to oil, don’t worry about Green plants and growing things, and how we are using too many of the world’s resources.
Moral of the story? Just complain.
How about the late 60's and early 70s? The dollar was still the world's currency and the rest of the world's economies were no longer gutted, bombed out, unless you were behind the Iron Curtain (and that didn't count).
No worries...The fedgov will just wave through 30 million more illegal aliens, and force Americans to compete with those happy making 7 bucks an hour with no health insurance. But they can forget about buying homes, new cars, trucks, investing or purchasing anything but the bare necessity's.
Ya cut the middle class wages today, the economy will have a fatal stroke and be dead before it hit the floor.
How about Bretton Woods?
What was the reason for that?
Well, I think there must be pros and cons to this.
I read last Christmas that the WA state Christmas tree farm industry was booming, and the Canadian Christmas tree farms were all going out of business, all because of the weak dollar.
It became cheaper to buy American trees than Canadian trees, and Americans are employed at the U.S. tree farms (unless they are illegal immigrants, which they probably are).
I seem to recall a time when we did have both.
>>Your children will live more like Europeans today with less than we have now.
This is my reasoning for not having children.
>>Ya cut the middle class wages today, the economy will have a fatal stroke and be dead before it hit the floor.
Everybody’s salary in the US is being cut, every time the USD goes down.
I prefer to eliminate 10,000,000 government employee positions at ever level. They’ll do just fine in the private sector.
Get them off our backs.
Macro 101: all else equal, fiscal budget deficits should cause strong currency (and trade deficits), as government need to offer high bond rates to attract buyers. The fact we’ve had the opposite is worrying: we simply make nothing anyone else wants to buy.
No one has yet mentioned the Amero.
| Congress Considers $15,000 Rebate Checks For All Home Buyers |
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03/13/2008 1:07:18 PM CDT · by BGHater · 78 replies · 1,710+ views WSBTV ^ | 12 Mar 2008 | Scott MacFarlaneSen Johnny Isakson Says Checks Would Entice People To Buy He would know. As a longtime realtor in Cobb County, Sen. Johnny Isakson has seen housing downturns before. "We had recessions in 1968, 1974, 1982, and 1991, by every measurement, this is going to be a deeper and bigger recession in residential housing. It's a significant event." Isakson is pitching an idea to his colleagues in Congress: a $15,000 tax rebate check to anyone who agrees to buy a home. Congressional budget analysts project the program would cost $14 billion over the next few years. But Isakson said the rebate... |
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That'll bring the illegals flooding across the border to get in on that gravy train.
No but in the 60’s and early 70’s they still had not caught up with the US.
“No one has yet mentioned the Amero.”
I won’t say it can’t happen. I’m waiting for currency controls which I think are in the near future. There would be two classes of money: inside the US and outside the US.
How an Amero would fit that scenario I couldn’t hazard a guess, but I don’t put anything past them.
If you don't know then Google it. If think you know, then tell us.
The good news is twofold. First, a weak dollar makes our products cheaper abroad increasing exports. Second in the last 50 years recessions have lasted roughly 8-9 months at which time economic activity rebounds as do interest rates and the value of our currency.
In the next 2-3 months I would short the euro and wait for the natural economic cycle to run its course and laugh all the way to the bank (with good ole US$.)
Oh, but I do know.
I’m asking you how that relates to the 60’s and 70’s.
How will this convertibility of currency with the conversion tied to the dollar continue as it is?
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