Is the puny dollar a sign of America’s decline?

The Times ^ | 7/12/2007 | Anatole Kaletsky

[BfloGuy]

What do we still make that we can sell?

Oh, let's see. Boeing jets, Caterpillar bulldozers and cranes, oil refining equipment, nuclear powerplants -- to name a few.

[Right Wing Assault]

They don’t have any of those in the stores I go to. ;-)

[ndt]

"Cheap USD ought to mean increased tourism from abroad and, what about the stock market?"

Well one problem there is that we have combined the attractions of a cheap dollar (to tourists) with increased visa bureaucracy. So much bureaucracy that business travel to the U.S. has dropped precipitously exactly when it should be increasing.

"I wonder how much of the bull market can be traced to (medium/ longterm) investment from overseas?"

Bull market I think little. If the stock market was being held up due to investor demand, the price earnings ratio would get our of whack as people would be paying more then a company was worth. In fact some sectors are historically affordable, not overpriced.

The ability to hold a stable dollar dollar while simultaneously maintaining a deficit in both trade and budget was subsidized by foreign purchase of our debt.

Thats fine as long as everyone wants your money. The world is changing and changing fast. The E.U. is a larger economy and has more money in circulation than the U.S. and is now accepted as being a competing standard to the U.S. dollar. At the same time, Latin America, China and India are all coming into their own.

Any intelligent investor, foreign governments included will choose to hold a diversified portfolio assuming one can be put together. We are seeing the U.S. lose it's position as the only game in town. That's not a bad thing, economic diversity is a good thing, you just don't want it to happen over night and our government needs to realize that business as usual is no longer a valid option. Never really was.

[ndt]

"the one leading currency even weaker in the past three years than the dollar has been the yen"

Japan actively works to keep the yen at lows so to prop up their export market. That's not an accident, that's by design.

[SAJ]

Nope. The gov't, couple-three years ago, stopped releasing money supply figures. Doesn't matter.

Inflation, as Friedman said, is everywhere and always a monetary phenomenon. Never mind the nonsense about the ''core rate'' of inflation, the fact that inflation is both present and nearly rampant in today's economy is demonstrable just by inspecting a list of comparative prives (or, ftm, looking at a series of commodity prices charts.)

This is very solid proof that the printing presses are running overtime. The level of monetised debt, too, is the highest in history.

[bruinbirdman]

"They can’t compete when their prices are ridiculously greater than the Americans."

Perhaps those prices don't necessarily reflect productive efficiency/worker but rather production/non-worker costs.

yitbos

[bert]

Other considerations aside, the price differences reflesct the strong Euro.

[bruinbirdman]

"the price differences reflesct the strong Euro. "

Boy, the puny American stock market, denominated in puny Americans dollars did OK for puny me today.

yitbos

[elli1]

Ah—that all makes sense after you explained it. And thanks for the reply.

[WesternCulture]

WHY IS THE DOLLAR LOSING GROUND TO THE EURO??

- The reasons to this are actually very simple:

It is more or less unavoidable for the currency of the world’s largest economy, The EU, to become a ‘global currency’, especially as The EU is a very open economy which both imports and exports a lot of goods and services.

Before the Euro, the only true ‘global currency’ was the dollar. Today, a lot of global trade is done in Euros, therefore THE DEMAND for dollars is not as big as it was before the introduction of the Euro. This is actually a matter of basic supply and demand economics.

Furthermore, the economic growth of continental Europe is presently better than it has been for over 15 years, 3.3% on an annual basis. This is very low compared to India and China (in fact even to some European countries, like Finland which recently enjoyed a GDP growth level of nearly 7%), but it is decent. Simultaneously as the Euro has established itself as a true ‘global currency’ and financial experts around the world have become more and more convinced the Euro project will NOT collapse in quarrels and internal strife among the Euro countries, the US has entered a period of more modest economic development than it has enjoyed for a long stretch of years recently.

But is the strength of the Euro a problem for the US (and/or for The EU) in the long run?

Hardly. For too long, The US has exported dollars and imported products of other countries. Indeed, the US have also managed to sell a lot of high quality products to the rest of the world, but The US is less dependent and less successful in terms of exports compared to several Asian and European countries.

Today, the dynamic US economy is facing a major opportunity; the conquest of the lucrative, growing export markets of Asia and Europe. Many American companies are already highly active in this area, but due to the comparatively cheap dollar, the ground is prepared for even greater success.

My advice to the Americans, who are admired around the globe for their spirit of competitiveness among people who know something about economy:

- Go for it!

[WesternCulture]

Related;

http://www.freerepublic.com/focus/f-news/1864646/posts