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!
the countries we import from have weaker currencies. so it really hurts imports from europe
Tell that to the Germans who lived prior to Hitler gaining power.
It took a bushel of money to buy a loaf of bread. It got so they let workers out of work at noon each day to spend their money to get that money back in the system.
The result? Hitler took power and the rest is history.
I shudder at the thought.
Ping...lol.
btt
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.
Only 17% of US companies are exporters. Something like 94% of exports are from just 4% of US companies. A weak dollar does negatively affect large sectors of the economy, the increased exports positively affects a very small percentage of the economy.
b
Now, for the other 83% of US businesses in this country, the falling dollar directly affects their bottom lines by increasing costs of commodities. Commodities traded on world markets where all currencies are fungible. And the US Dollar has increasingly bought less in a commodities market where 100% of supply will be bought and consumed even if US purchase and consumption of the commodities drops by 10%.
We can suffer a relatively mild recession here, and have to fight tooth and nail just to be able to regain current levels of consumption on the economic rebound.
There is plenty of mid term and long term bad news involved here.
I have no particular desire to get into “Global Macro-Econ 101” with you here, but the US is by far the largest importer and largest exporter in the world (Yes, the EU’s economy is about the same size, but that mostly comes from EU internal sales).
Again: Chinese goods ARE THE SAME PRICE because they chose to link their currency to the Dollar.
European goods are more expensive to import.
American goods are cheaper to export.
Foreign labor costs are relatively higher than local labor costs (more American jobs).
As for oil, only America has an alternative fuels program available, waiting only for the sign that oil is going to STAY above $50.
How does that scenario play out in Canada these days?
On Sept. 20, the Canadian dollar, known as the "loonie" for the fowl that adorns it, became equal in value to the American dollar.
It was a moment of pride for our polite brethren to the north - the last time the loonie hit parity was 1976 but more important, it meant a 30% discount for anything bought in U.S. dollars compared with four years ago. In recent weeks, the U.S. has been looking like Canada's answer to Mexico: Citizens from the Great White North have been traveling south to gobble up everything from steak dinners to multibillion-dollar banks on the cheap.
Whose cool aid you been drinking to think the falling dollar value has nothing to do with the high price of oil??? Send me some will ya?
Please at least read the article you link to before posting it.
Yeah, right.
It means Clemenza’s vacation in Spain next month is more expensive than it should be.
Of course, one can read the story from the owner’s perspective or the kid’s (consumer). I hear ya.
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES
(in billions of dollars)
HOLDINGS 1/ AT END OF PERIOD
Aug Jul Jun May Apr Aug
Country 2007 2007 2007 2007 2007 2006
Japan 585.6 610.4 612.7 614.8 614.4 623.5
China 400.2 409.0 406.3 408.6 415.3 386.5 [MUCH MORE at link]
Non-sequiter. You assume that since X% of American businesses are exporters that the rest are importers.
The largest percentage of American businesses are neither exporters nor importers.
They either supply services or products that are produced here.
Hence the foreign price of the dollar doesn’t affect them.
Wrong. The price of crude has been stable for many currencies.
And? Those Treasuries had to go somewhere, no?
So someone else bought them.
Capitalism in action.
I said “Cheaper”, not “Cost Effective”... ;-)
Pure capitalism is nothing to be proud of....unless you’re a globalist, where people are nothing but commodities for sale.
And it’s obvious that’s your bent.
First, a weaker dollar translates into a cut in the real spending power of American consumers in effect, a reduction in real income.
Second, a weaker dollar weakens the role of the U.S. dollar as the world’s reserve currency. Why should investors and central banks around the world invest in US assets when their value is steadily declining?
Third, the chances of a weaker dollar leading to a sharp reduction in America’s trade deficit is highly unlikely since 40% of the current balance is due to oil imports that are denominated in U.S. dollars. An additional 20% is due to trade with China, which is, of course, controlling the value of its own currency.
Fourth, a weaker dollar is inflationary since it increases the cost of imports.
Fifth, business leaders know that discounting prices may bump near-term revenue and profits but at a real cost to long-term profitability, not to mention inflicting damage to the brand name. This is what we are doing to the brand of America by trying to increase exports by lowering their price in the global marketplace. Better to stand firm on price and sell into global markets on the basis of what is great about American products: superior quality, innovation and service.
Sixth, investors seem to like a weaker dollar since the profits of American multinationals get a boost from foreign earnings being translated into U.S. dollars. Again this is short-term thinking and vastly overstated since most multinationals have sophisticated treasury departments that hedge currency exposures.
What a weaker dollar really does is to encourage American and international investors to invest in non-American markets. The more the dollar drops, the more global equities rise. Many Asian currencies are hitting record highs against the U.S. dollar.
BTW, not my words.
http://sify.com/finance/fullstory.php?id=14547564
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.