[Southack]

"But the bad news is that if the dollar tanks the GOP will be blamed, and they deserve alot of the blame, and the GOP will be finished as a polical party."

The Dollar deserves to "crash," as it has been propped up above its Market value for decades by Europe, Asia, and India.

And the higher that the Dollar is propped up, the cheaper it is for Americans to purchase foreign goods instead of American products.

In a free Market, a nation's currency will adjust based upon its foreign trade surplus or deficit. A nation that exports more than it imports will see its curency rise. Notice however, that China's currency hasn't risen.

And a nation that imports more than it exports will see its currency decline until its trade deficit declines. Notice that the U.S. trade deficit hasn't declined.

So we *aren't* in a free market because the Chinese Yuan hasn't risen and because the U.S. trade deficit hasn't declined.

That means that governments are intervening in the currency market.

China, for instance, is hoarding $500 Billion in U.S. Dollars. India has another $88 Billion. Japan has even more. Europe, more Dollars still.

By hoarding all of those Dollars, they create an artificial shortage of something that is in reality present in abundance: the Dollar.

By creating that artificial shortage, they cause demand for the Dollar to be artificially high. That artificial demand makes the Dollar worth more than what a free market would value it.

That extra value of the Dollar enables Americans to purchase more foreign goods than a free market would normally allow.

Thus, the propped up Dollar serves as a stealth subsidy for all foreign imports.

Killing that foreign subsidy will hardly be a bad thing, as you errroneously claim above.

[Moonman62]

The Dollar deserves to "crash," as it has been propped up above its Market value for decades by Europe, Asia, and India.

What is the market value of the dollar?

[Ohioan]

You focus on the foreign export side of the picture. Yes, other Nations try to manipulate the market, to make their goods appear cheaper--to boost their sales to us. But that is not the ultimate engine driving the value of the Dollar.

If there were no other factor, but the question of where the existing supplies of Dollars--and Dollar denominated substitutes--were being held, there would indeed be a tendency over time, for things to level out, though not without some occasional convulsions, between over valuation to undervaluation, etc.. But the killing factor, now, is the reckless spending in Washington--and the immense factor hanging over all, is the advent of the madness known as Medicare Prescription Drug Coverage, which is going to cause the deficit to soar even further, with a great increase in the supply of money and money substitutes, triggered by the practice of monetizing the deficits.

What is coming is not going to be pretty.

For a commentary on Medicare, see Medicare--Panacea or Death Potion? For the delay in the actual effects of deficit spending, hitting the prices we pay at home, see Economics and Common Sense., which discusses the inertia factor in pricing, etc. But something very ugly is coming. The ugly situation at the end of the Carter Administration was not Jimmy's doing, it was the result of what LBJ did from 1965 to 1969; and Washington, today, is making LBJ look almost Conservative.

[B4Ranch]

>>In a free Market, a nation's currency will adjust based upon its foreign trade surplus or deficit. A nation that exports more than it imports will see its curency rise.<<

I'm not anxious to see our dollar at $0.25

>>Notice however, that China's currency hasn't risen.<<

The reason for the Yuan not rising is China has it locked in place. There has beed talk the past few months about letting it float.

>>China, for instance, is hoarding $500 Billion in U.S. Dollars. India has another $88 Billion. Japan has even more. Europe, more Dollars still.<<

These are the main buyers of the Treaury auctions. Holding the US the debt keeps us alive and their economy moving upwards. Beneficial to both of us.

>> That extra value of the Dollar enables Americans to purchase more foreign goods than a free market would normally allow.<<

That atificially promoted value of the Dollar enables Americans to purchase more foreign goods than a free market would normally allow.

[txrangerette]

Why do Snow & Bush say they are, and from what you say, actually follow a "high-dollar policy"? No matter their intent, it seems to do no good, does it? The $ just keeps falling, making them look helpless. Am I missing something?

[Luis Gonzalez]

A weaker dollar makes American-made goods more competitive in the world market.