Posted on 10/21/2009 4:45:23 AM PDT by expat_panama
After reported currency intervention by Asian economies and Brazil, Europe today reiterated its desire for a strong dollar as well.
Bloomberg: French President Nicolas Sarkozy’s counselor, Henri Guaino, said today in Paris that the U.S. is “flooding the world” with dollars and that the currency’s weakness may become “unbearable.” Eric Woerth, France’s budget minister, said the euro’s gains are hurting the region’s competitiveness.
“We all note with considerable attention the statements made by American authorities as regards their support in favor of a strong dollar,” Trichet said in Luxembourg yesterday.
...
“We want a strong dollar; we need a strong dollar,” French Finance Minister Christine Lagarde said in Luxembourg. “We must remain disciplined” on the message, she said.
This reminds us that almost the entire world wants a strong dollar, which in turn means that they want their own currencies to be weak. It's peculiar then how many Americans are of the complete opposite mentality - they want their home currency to be strong. This is a very convenient view for foreign exporters.
Many Americans equate a strong dollar with a strong nation. Yet if this were absolutely the case, wouldn't other major nations be cheering strength in their currencies? Why does the entire world, rather, push for weak domestic currencies?
It's time to stop fighting a natural economic adjustment long overdue. Yes, the U.S. government and American people should be more responsible with their spending. Yes, a complete dollar collapse also isn't desirable. Yet we shouldn't be concerned if the dollar slides otherwise, it might actually lead to a more sustainable form of U.S. GDP growth.
(Excerpt) Read more at businessinsider.com ...
fyi...
This isn't a difference between nations. It a difference between politicians and citizens. Citizens want their currency to maintain its value, at the very least. It's the politicians who want a weak currency for various corrupt reasons.
If the collapse of dollar leads to the creation of a world currency, would that be a good thing for this country or any other? (besides the Biblical aspect)
Many foreign nations are not consumer driven. They want to export as much as they can, and use tax revenue to pay for government services. A weak local currency helps them achieve that.
As socialism comes to America, our lifestyles will decline, we will consume less, and we will depend more and more on government services. A weak dollar will help the Left take us to this brave new world.
Not every country. Many just sidestep the whole issue by pegging their money to the dollar and ditching their own currency. Spending money across borders here is like doing business across state lines.
This strong dollar shtick is just something we're getting from the 'more-patriotic-than-thou' crowd.
No, the dollar exchange rate been dropping for over half a century now and we're better off.
Patriotic considerations aside, I think in the current economic situation we should suck it up and tolerate a weakened dollar because it increases demand for our exports. But under normal circumstances, a strong dollar is the better bet because it encourages increased productivity.
When the dollar goes down, the price of imports goes up. Want to pay even more more oil?
Globalists don’t care about unemployment statistics.
If y'all honestly think the dollar's trash, let me know and I'll be happy to haul it off for you.
That didn’t answer my question. (#6)
If y'all honestly think the dollar's trash, let me know and I'll be happy to haul it off for you.
Then what am I supposed to use to mulch my garden???
ROFL!
Wow, they really think we are dumb don't they? Face it they now know that the zero is a idiot who only got a degree because of affirmative action and are now trying to lower expectations so that the naked prince can meet them.
If y'all honestly think the dollar's trash, let me know and I'll be happy to haul it off for you.
Do you honestly think that "the full faith and credit" of the Obama Regime is worth anything?
Does that roll of dollars come in 2-ply? Ouch!
Much of what we export is manufactured with raw materials and/or components that come from overseas.
When the dollar is weakened the cost of those materials go up increasing the cost of our exports.
The bigger deal is when we lose our world reserve currency status it is going to cost us dearly in a number of ways over the long term.
And as the dollar declines all of our savings are devalued making us poorer as a nation. I don’t want an artificially strong or weak dollar. I want a dollar that retains its value.
And finally, how many strong healthy economies do you know of with a weak currency? Not too many if any I’d bet.
Personally, I favor a strong dollar . . . but then I must listen to the usual clowns argue that I’m buying too many imprts with it (on credit!), and that we don’t manufacture anything anymore.
This is America today -- and some people still aren't sure if Obama is destroying us on purpose.
Oil is priced in dollars. When it's priced in euros, or a "basket" currency, your statement would be more relevant.
There is nothing to this article. I noticed under GWB that republicans said a weak dollar was good. Now with democrats in charge democrats claim a weak dollar is good, and republicans have changed positions.
If a weak dollar is good then why did Bernake raise interest rates in 2006 instead of growing the housing bubble indefinitely?? What about all the whining about oil and gasoline and food prices by everyone, republicans, democrats in 2005-2008?? Where was this guy telling us it was good?
Americans are intuitively correct.
One should equate the strength of a currency with that of the ECONOMY, not the NATION. Macro economists tell us that a strong open economy should have a strong currency, and a weak open economy a weak currency.
This answers the question: no, other countries would not necessarily cheer their currencies.
The entire world does not push for weak domestic currencies. They do, however, feel secure,stable and safe if the dollar is strong. Because after all is said and done, the free world still looks to America as it's guiding light.
Good post. Now how are going to get the politicians to act accordingly?
What do you think of the way W always said he supported a strong dollar, yet it declined significantly during most of his tenure?
When other countries want a strong dollar it's not because they like us. We just got done with years of fighting with China saying they manipulated our dollar to be too strong--
--and Europe's freaking out over the dollar's undercutting the Euro:
Are you aware that when the dollar exchanges for more foreign notes, that Americans buy more foreign goods instead of buying domestic products?
Yes, I am aware of that. Are you aware of the fact that your claim is true only ceteris paribus, that is, when all other things are the same?
We buy more foreign goods when our productivity is low (when we do not fully justify our keep), hence what we ourselves produce is expensive.
- "Now how are going to get the politicians to act accordingly?"
It is not the politicians that make our economy weak or strong. We have become not worth our keep in some of the segment (IT, for instance). The way out is, of course, a cultural change where people spend more on their education and growth, and decrease in wages. I could see politicians encouraging the former (tax breaks for continuing education or some such thing), but it's still a minor role.
Hardships, of course, lead to cultural change. We hardly saved as a nation for almost 20 years, as if some daddy is gonna take care of us in hard times. The average house built today is 1.4 times larger than 1950s. Couple that with the size of the family being halved, people are buying 3 times more footage than just 50 years ago (considered a prosperous decade). And all the while they whine that they "are just trying to make ends meet." The same goes for cars and LCD TV, updated every 18-20 months (until the crises). In the meantime, everybody is bit--g that jobs go abroad. How about taking a foreign language course in a nearby community college? Or a basic business course that would make a promotion more likely? Anything to improve productivity and competitiveness of our labor.
"What do you think of the way W always said he supported a strong dollar, yet it declined significantly during most of his tenure?"
I do not know specifics here. The only thing I could mention is that Bush, as any president, has nothing to do with the dollar, whatever he thinks of it. Isn't it the Fed that holds all the strings here?
For the Dems a weak dollar reflects a weak economy...which creates more dependency.
A strong dollar is evidence for Federal independence..and to the Dems..an absence of a piece of the action.
a good rule of thumb to use when trying to understand Democrat actions and intentions...is that Democrats only can find opportunity in their fellow Americans misery.
Here's a link to productivity, and here's a link to import levels. The fact is that for decades both imports and productivity have increased together. Falling productivity doesn't cause imports because goods are not allocated in accordance with need. They're allocated as demanded by an offered exchange of wealth, and increasing productivity spurs wealth creation.
---almost forgot, we're all doomed cuz the world's ending this afternoon. Maybe so, but just to be on the safe side I'm still going to thaw out the spaghetti sauce for supper tonight.
That’s not quite accurate. Gold is priced in American dollars and when the dollar goes down the price of gold in American dollars goes up. Same with oil.
I am sorry if I was imprecise. Falling productivity in a given sector results, ceteris paribus, in a smaller supply and higher prices. If the good is avilable elsewhere for a s smaller (old, before the fall in productivity), it will be purchased instead. If LCD TVs could be produced domestically as cheaply as in Taiwan, Wal Mart would be buying them here.
Hey guy, we both know that over the past couple years the price of oil's been twice what it is now, and it's been half what it is now --all this while the dollar's moved within a fraction of that range.
Let's use the BLS definition of productivity ---"ratio of the output of goods and services to the labor hours". American workers are the worlds most productive. We're more expensive than say, Taiwanese workers because we're worth it and we don't make LCD TV's because we do other things that pay better.
Using the standard definition, there has been no 'fall in productivity'. It's at an all time high (as usual).
Absolutely. This is an empirical fact. It does not imply the following, however: " We're more expensive than say, Taiwanese workers because we're worth it"
Here is a simple calculation. You make 10 widgets/hour and get $10/hour. A Taiwanese makes 1 widget/hour and makes $80c/hour. Are you more productive? Of course --- by a factor of ten. Are you worth your keep? Absolutely not. A widget you make costs $1 and the widget he makes costs 80c. That is exactly why we buy abroad.
Many people conclude, incorrectly, that for us to compete the salaries should fall to the Taiwanes levels. In the example above, we'd attain parity with the wage $8/hour. Only a 20% reduction is thus needed to be competitive.
The point is that, even while being much more productive (output per unit of time), we may run ahead of ourselves in terms of wages (output per dollar). In this case we see the corresponding implications for import. "and we don't make LCD TV's because we do other things that pay better."
That's a frequently repeated mantra but it is also false. Starring in a movie pays handsomely, but neither you nor I are doing that. Why? 'Case we can't act. We don't make LCD TVs because we cannot do that cheaply. Same with cars: Detroit workers were ENTITLED to retire after 30 years of service (age 48-50) with a pension equal 95% (!) of the last salary; the Detroit conveyor belts, infamously, are the slowest in the world (also union demand).
There are other areas where the opposite is true: it is the Indians, the Japanese, etc. are unable to do certain things (especially innovation), and then our labor is worth high salaries that we actually observe.
"Using the standard definition, there has been no 'fall in productivity'. It's at an all time high (as usual). "
Correct as far as I know. I hope you now see what I meant: competitiveness of labor and products depends on the interplay of (standard) productivity AND wage rates. What I did in my previous post is combine them in one measure: output per dollar paid or its inverse (dollar paid per one widget).
The American dollar isn’t the only factor regarding the price of oil. However, when the dollar drops in value other countries want more of them for their oil. Same with gold.
Yeah, grow up. The collapsing dollar is another one of those green shoots
I was pondering this while splitting wood today: if other societies are not “consumer-driven” (itself a dubious proposition, but let’s say it’s the equivalent of saying “their national governments have a strong export/manufacturing policy in order to generate tax revenue”), and said governments favor a weak currency when compared to the U.S. dollar in order to further that aim, then shouldn’t the U.S. weaken the dollar in order to create a strong export/manufacturing policy in order to generate tax revenue for itself?
Nicely done. Wrap-up all of your political misgivings and blame a poster you hardly know for them.
What the he!!, lets all just move to communist China or Cuba huh? What’s the diff, eh?
It's self correcting though, when the complainers shut down the markets they find out they also shut down jobs, food, and shelter. Then they like the free markets again.
Well, the yuan is pegged to the dollar, and Cuba runs on dollars . . . .
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