Economic Policy Institute
Posted on 10/25/2007 8:12:27 PM PDT by Philistone
To read the MSM headlines (which I try not to) the falling dollar is the end of the world. Maybe Wall Street should get a Noble Prize for their work in "Global Dollar Cooling". But seriously, what are the effects of a weak dollar?
1) Increased exports. Last month's exports were among the highest on record. Trade deficit? What trade deficit? Boeing, Caterpiller, Microsoft, Apple, etc. all with surges in foreign export sales.
2) Outsourcing? What outsourcing? All of the sudden it becomes cheaper to employ an American technician than one from Bangalore.
3) Cost of living? (I love this part!) Since China has pegged the Yuan to the Dollar, everything we get from China costs exactly the same! Maybe this will convince them to unlink the Yuan. Then we'll REALLY see who's the best producer.
4) Buhh... buhh... buhh... but foreigners will stop buying American Treasuries! What? In order to buy Russian ones? Chinese ones? Venezualian ones? Give me a break.
A weak Dollar equals: more exports, more jobs, more tourists (spending money) and the same or higher standard of living.
Bring it on!
I guess only if you care about what others think about what you have.
If someone from Zimbabwe came up and told me: “Hey! your daughter is ugly and stupid!” I really couldn’t care less. My daughter is smart and beautiful and nothing that Putin or Mugabe or Amandajihad will change that.
Nothing that bankers in Tehran or London or Beijing or Moscow might say will change the fact that the American economy is smarter and prettier than theirs.
No problem. 47.
Is that too old for us to have more in-depth conversations over a glass of (American) wine?
Money?
How do they provide us with “money”?
And please don’t say that they buy US Treasuries. If they didn’t buy them, someone else would.
Yeah, I know. Japan, isn’t it?
Cool. Thanks much.
xactly
Who?
Yeah, I know. Japan, isn’t it?
~~~
I was thinkin’ Asia but that’s close enough for me...
My point was just that whatever jobs leave this country
never come back...:0/
Nope. And what’s left is looking more and more like cold leftovers....
Oct. 22 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the dollar's decline may reflect a growing unwillingness among foreigners to buy U.S. securities.
``Obviously there is a limit to the extent that obligations to foreigners can reach,'' Greenspan said in a speech in Washington yesterday. The dollar's decline to its lowest since 1997 may be ``an indication America is approaching this limit.''
Greenspan's warning came after the U.S. Treasury reported last week that international investors sold a record amount of U.S. stocks, bonds and other financial assets in August. Central banks and private funds are turning to currencies including the euro as financial markets outside the U.S. expand.
Sold them to whom? Who bought them?
Total overseas holdings of U.S. equities, notes and bonds fell a net $69.3 billion in August after an increase of $19.2 billion in July.
Rodrigo de Rato, managing director of the International Monetary Fund, speaking in Washington today, warned of the threat of a disorderly fall in the dollar. ``There are risks that an abrupt fall in the dollar could be triggered by, or itself trigger, a loss of confidence in dollar assets,'' he said.
Well d'oh.
The Fed's trade-weighted broad dollar index, a measure of the dollar against the currencies of U.S. trading partners, dropped to 99.49 on Oct. 19, the lowest level since 1997. The U.S. currency today fell to a record against the euro, trading at $1.4327 per euro at 10:15 a.m. in Tokyo.
Greenspan first predicted that investors abroad would tire of financing the U.S. current-account deficit in a Nov. 19, 2004, speech in Frankfurt. ``A diminished appetite for adding to dollar balances must occur at some point,'' Greenspan said as Fed chairman at the European Banking Congress three years ago.
Greenspan returned to that theme in a London speech in December 2005. After leaving the Fed, he told a conference in Tel Aviv in December that the dollar will ``continue to drift downward'' because it's unlikely that international investors will continue to increase their allocations to the U.S. currency.
The dollar's share of world foreign-exchange reserves has slipped as central banks sought alternatives to the currency in recent years. The dollar's proportion fell to 64.8 percent in June, from 71.8 percent seven years before, International Monetary Fund figures show. The euro jumped almost 8 percentage points, to 25.6 percent.
65% of the world's total reserve currency is in dollars? Ooh. Sky falling!
The liquidity and size of euro-denominated financial markets are approaching those of dollar markets, Bank of International Settlements economists Gabriele Galati and Philip Wooldridge wrote in a paper a year ago.
Ben S. Bernanke, Greenspan's successor, and Treasury Secretary Henry Paulson have repeatedly dismissed concern about international investors selling off their holdings of U.S. Treasury securities. Paulson noted in June that China's investments, the largest after Japan's, amount to about a day's worth of trading in the Treasury market.
One day's worth. Ooh! The sky is falling!
Nope. And what’s left is looking more and more like cold leftovers....
~~~
That’s just what we wind up with,,,
Some folks are makin’ money from this krap now but no way will it last...
No, it’ll be a bust for the greedy, too.
Unfortunately, most Americans, by that time, will probably be scraping along that they won’t have enough energy to cheer that it finally caught up with the greedy globalists.
I honestly don’t see a bright future for America....unless drastic changes are made right quick. (I pray that that’s exactly what happens, though.)
I’ve got to call it a night; see you later!
True Dat and Niters...
“I mean a lot of people would want to protect their accumulated wealth and to see their savings only be able to buy half of what it used to....”
This is a really good question. Shows your thinking and your humility.
My answer is now. In the markets there are what are called “safe havens” in times of tumult and trouble economocally. Utilities (because they pay a high percentage wise dividend and the risk/reward ratio is very low because as their costs go up they are passed onto the consumer). Gold and silver are considered safe havens also. I’m not astute enough to tell you all of what is considered safe havens but some people now are starting to go the safe haven route with their investments. Safe havens protect your investments from inflation as they should go up in price to protect your capital. As the US Dollar continues to fall you will hear more and more about them. IMO, it would be wise to start looking now to buy them as soon as you feel confident in what you’ve learned. As more people go to safe havens the more expensive they will become.
Plastics like PVC (and a zillion others) are all made of oil. Those increasing costs are making their way through to just about every product we produce and consume ourselves or export.
Copper, iron and most other metals costs around triple what it did just a few years ago. The things we export and consume ourselves are made of these things.
Why do you suppose meat, milk, and virtually every other food has gone up in price very substantially over the last few years? Bought a good steak lately?
It is simple. The dollar is worth less than it was not long ago. We aren’t some isolated economic island that can arbitrarily set values for everything. Supply and demand is without borders and will ultimately set the price.
As the dollar continues to be worth less the prices of everything we consume that defines our standard of living will slowly work its way through the supply lines and end in higher prices. If our pay doesn’t increase by the amount the dollar declines our standard of living declines. It is as simple as that.
I strongly believe inflation has been much higher than reported. I believe the numbers are artificially driven down due to cheap imports from China while virtually everything else of value has gone up.
By the way, my business produces high tech communications equipment that we sell all over the world. Virtually all the companies that produce the kind of equipment we do are already in the US. Lower affective prices don’t make a big difference in our exports because the users of this type of equipment already bought from the US. So there’s no one from outside the country to take the business from. I’d guess that is true in many high tech areas including software.
The last time you wrote that you put your foot in your mouth and then tried to quibble your way out of the basket.
So, I'm yawning. Only because I'm too sleepy to laugh at you any more or any less.
Sold them to whom? Who bought them?
Well d'oh.
65% of the world's total reserve currency is in dollars? Ooh. Sky falling!
One day's worth. Ooh! The sky is falling!
I don't know whether the sky is falling, but the dollar is and investors are increasingly less willing to finance our debt. Whether or not you may understand why, that spells trouble for us.
You asked what China provided and I told you one of many things. You squirmed and tried to shake it off. You can't.
I thought the text accompanying the graphic to which you referrred jedward was excellent.
The vast majority of China's U.S. reserves are held in low-yielding debt securities, primarily Treasury bills and notes and agency securities. This is money that China could have used to invest in environmental clean-up, improved public health provisions, a more secure pension system, or other currently unmet social needs in China. The value of these securities in yuan, and the interest income they generate, will drop sharply when the dollar is finally allowed to fall to a sustainable exchange rate, as it must. China's exposure to currency losses is escalating rapidly due to its massive purchases of foreign exchange reserves.
China isn't the only country moving away from financing our debt.
I am still worried about the Spotted Owl.
Who owns the federal reserve?
And its not the US government either.
Answer that question and you’ll find out why our dollar is doing what it is doing.
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