Posted on 11/17/2007 10:16:45 AM PST by shrinkermd
The euro's rise and dollar's slide are squeezing European exporters' profits or multiplying their losses, prompting layoffs and plant closings. Companies are not only curbing production of goods headed to U.S. buyers but also rethinking the way they do business.
The euro recently passed the record $1.47 mark, gaining 11.5% since the beginning of the year against the greenback. It closed Friday at $1.46; a dollar bought 0.68 euro.
Most emblematic of the problem has been the impact of the euro-dollar relationship on the aeronautics industry -- and particularly on France's Airbus, whose main rival is U.S.-based Boeing.
With a falling dollar making Boeing's products cheaper outside the U.S. and Airbus' more expensive, Louis Gallois, chief executive of Airbus' parent EADS, recently described the sinking U.S. currency as a "sword of Damocles" hanging over the company's future. He vowed to cut an additional 1 billion euros in operating costs by 2010 or 2011.
This would mean more layoffs at a company that is already purging 10,000 jobs, a decision made when one euro equaled $1.35.
Survival strategies
Less dramatic but no less crucial is the impact on other European companies that export sophisticated equipment, technology, cosmetics, cars and luxury goods. For firms that make a large portion of their sales in the United States or compete with firms that deal in dollars, survival depends on raising prices, cutting costs or hedging currencies.
The strong British pound, moribund Japanese yen and undervalued Chinese yuan also play roles in this tale of currency chaos, from a European exporter's perspective. Nearly every day, another company announces more lost earnings and job cuts and blames the currency commotion.
(Excerpt) Read more at latimes.com ...
So, relative to the total it really is miniscule.
It is not necessary for the federal reserve to engage in a bondburning exercise to monetize the debt. They need only ensure that the rate of inflation exceeds the “fair” return on the bond and then we all pay off the debt through inflation rather than through taxes and direct payments to the bondholders, who slowly watch the value of their investment diminish in comparison to assets.
I'm not sure I see the reasoning in #93. If the Fed and the US gov monetize the Treasury's debt it should be enough of a percentage of that debt to make a difference. As Toddster pointed out the amounts are relatively small.
The Bank Credit Analyst, one of the best Fed/bank watchers in the world is forecasting another flirt with deflation. The reason this could happen is because, again, the only tools the Fed has are targeting short term interest rates, discount borrowings and reserve requirements. This hasn't really changed much in many years.
There is also rampant speculation that the Fed has a stock futures desk. But that has been consistently denied or, at least, never acknowledged. Frankly, I hope they do.
Then the Fed should want a return to the 70's. 10% inflation would really be good. But, for some reason, they are constantly trying to fight inflation. What the hell are they doing that for?
That would be a more accurate definition of your use of the word monetization.
“The real problem with the US$ as a reserve currency is that whenever the US government has been running a bit short it just prints some more”?
You make it sound like a recent occurrence, the reason for the recent dollar decline. You make it sound like the Treasury can't sell debt in the open market and need the Fed to buy as a last resort. The current 10 year yield of 4.02% suggests that the Treasury has no problem selling debt.
What the Russians did in the early 90s, that was monetization. They didn't have enough revenues and cranked up the printing press. If the Fed handed money to the Treasury to cover current spending needs, without buying a bond, that would be monetization. If the Fed handed money to the Treasury to redeem a maturing bond, that would be monetization.
What the Fed does now, buying Treasury bonds to manage the money supply does not fit your use of the term. The Fed has done this forever and you can't blame those actions for the very recent actions in the dollar market.
Happy Thanksgiving everyone.
They say they are? Are they doing this successfully. I suppose it depends upon whether you believe the BLS numbers or those posted by others who claim that the hedonic corrections are fallacious.
I guess we are all just going to have to continue to disagree.
As far as 2003 deflation, we all know about that. That is how we got Sir Alan's 1.75% exploding ARMs.
It is my term and I get to define it not you. Again, we are just going to have to disagree on whether the Fed's management of the money supply is inflating away the national debt or paying it off in an honest fashion. That has been my point since about 800 posts and 3 threads ago.
So it's Greenspan's fault that the private sector keyed floating interest rates off of some internationally recognized benchmark and over lent to poor credits?
$800 billion in currency? Is that “all”? ;)
I remember reading somewhere that fully 70 per cent of the currency/cash in USD is outside the country, held by foreigners. Is that true?
At one time, the dollar was among the most favored currencies to hold, esp. by those who lived in countries where the leaders were graduates of the Mugabe School of Finance. Once, in Phnomh Penh, a nice street vendor wanted to refuse a $20 bill because a corner was folded over. Couldn’t believe it. They liked fresh, crisp currency.
You would define inflation as cost/push? What a wonderful world for anybody who would sell anything. If your costs go up just up the price of your goods. Hell, some damn fool will buy it.
No such thing as cost/push inflation. Inflation exists in a high demand high money stock environment. I will grant you that in an inflationary environment people will buy things like houses BECAUSE of inflation. (If they wait it will cost more, etc.).
No, silly.
Ask any Democrat. Money grows on trees and you fleece harvest it from taxpayers!
Cheers!
Oh, and Happy Thanksgiving.
None of those apply particularly to IT, which has been swamped by outsourcing.
Hint: Tree reading one of Micro$oft's EULAs ("End-user licensing agreements") sometime. It's a corporate lawyer's wet dream.
Cheers!
Back in the late 90's when I was still a smoker I worked in an office building with a bunch of IT smokers. They would stand outside MOST of the day and talk about where they were going to work next and how much MORE money they were going to make. They would also tell everyone who would listen what a huge problem Y2K was. I know my interactions were limited to a few people but I can't help but look back at those guys and hear the words: "whom the IT gods humble they first make proud".
But all the same, it was more or less supply and demand based, not union-wage based.
The business types simply went out and drummed up a lot more supply (albeit of admittedly inferior quality) to depress the price -- or at least to scatter the price paid out of the 'wages' column and into a number of different cost centers.
Cheers!
...hope you had a Happy Thanksgiving.
Exactly, the Treasury does not depend on the Fed purchases to fund their operations.
If that's what you think, I can't help you
Now, on the one hand I have Toddsterpatriot, who says the government doesn't print money to help fund itself.
You think the government couldn't fund itself if the Fed didn't buy Treasuries? What if the Fed bought GM bonds? Do you think the Treasury would still somehow be able to sell enough bonds to fund government spending?
That's your problem, you make up your own definitions and they're wrong.
Again, we are just going to have to disagree on whether the Fed's management of the money supply is inflating away the national debt or paying it off in an honest fashion.
The Fed doesn't pay off the national debt.
That has been my point since about 800 posts and 3 threads ago.
You've been wrong for a while now.
All because of the FOMC? Doing what is has always done?
That's what I'm finding ("--two thirds of Us currency circulates outside the US," or "majority of U.S. notes are actually held outside the United States"), but I haven't found any hard numbers yet. It seems like a lot.
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.