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Cacique's Recomended Reading List for week of November 12, 2007
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I am told that upwards of 40% of the earnings of the S&P 500 result from our exports of goods and services. It is possible that we are on the verge of becoming the next great export machine.
A devalued dollar is not all bad. Unless your a tourist.
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Cacique's Recomended Reading List for week of November 12, 2007
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I was in the store just yesterday to have a watch battery replaced in a Swiss Breitling.
Yesterday that watch was being sold for just about twice (two times) its year 2000 price tag.
As a sidenote, the Swiss watch brands (Omega, Rolex, Breitling, Tag) seem to have done a good job combating the Chinese ripoffs (one of which I’m now wearing). Looks like they cuffed all the dealers selling to the Internet grey market, and at the same they have a very heavy campaign saying in no uncertain terms that “Watches bearing our trademarks are not sold on the Internet and such merchandise should be assumed to fraudulent and illegal. We will not honor the warranty of any watch not sold by one of our authorized dealers.”
Absolutely. This will break the Euro and the EU. Asian currencies (HK Dollar, Chinese RMB, Japan’s Yen, South Korea’s Won, Taiwan’s Dollar) are all pegged, or kept very close to the US Dollar. Meaning that our primary import sources - Asia - aren’t any more expensive than they were in the last few years.
Unfortunately, the EU is getting crushed. Germany was the only real exporter of note, and they’re getting whacked by the US. Sales and production of the German companies inside China is dropping like a rock, in favor of the US sources, because of the pricing. Exports of Germany are drying up worldwide.
A broken Euro, and a dissolved EU will ensure that the US stays the pre-eminent economic power for the next 100 years. And the Asian companies have hitched their wagons to our fortune, not the EU...
So he backed off, and now those imports are 40% more expensive just due to the exchange rate.
Pretty smart for being such a dumb President — and there hasn’t been peep about this until now.
If we could only adopt a fair tax so tourists to America could help with the tax base by having sales taxes and maybe even VATS on luxury items.
It is the strong dollar which over many years put a constant pressure on manufacturers to move abroad, which made exports expensive and imports cheap. The strong dollar made US made goods sold abroad more expensive even outside the Dollar/DM/Franc/etc zones. A weaker dollar is for us “long term” a good thing.
Currencies for a long time were fixed. Many nations played currency devaluation games for many years and even today China pins its currency at a low rate in order to stimulate exports and growth. The fact of the matter is that the dollar was and largely remains the international currency for exchange in oil, gold, cesium, and near all strategic resources etc. This inflates the value of the dollar, since currency itself like any other commodity on a market has a supply and demand. As the Euro rises in importance as an alternative to the US dollar in international trade, it too will experience the upward pressure in value as it becomes an internationally recognized trade and reserve currency.
Years ago during the oil crush, OPEC offered the then reigning Schmidt in Germany to switch to the Deutsche Mark as the exchange currency for oil. Schmidt declined, and this was very smart, since it would have bankrupted the German economy within a decade. For years the foreign conspiracy theorists and especially those on the left were full of envy and arguing that the US intentionally is overvaluing the currency and manipulating this and that in some grand conspiracy of course. It is ironic, since as so often when looking at leftist dogma, exactly the opposite is true. The dollars' extreme high value was hurting us. At one point the dollar spiked over DM3.60:1US. You had privates in the Army buying brand new top of the line Audi's. What such a situation does long term is cause foreign made cars, washing machines, kitchen appliances, TVs etc. to be extremely cheap in comparison to their US manufactured goods. Despite the US having one of the highest per capita productivities, favorable labor laws, a skilled labor force, sound infrastructure, political stability, a judeo-Christian work ethic/culture, transparent laws and low corruption, permissive legal framework, cheap resources (water, power etc), and a broad range of geographic, climate, etc. that may be necessary for certain activities; firms in Europe and Asia were so much cheaper to produce in that US manufacturers shut down shop in the US and moved abroad. A US TV manufacturer such as Zenith simply could not compete in such a world.
The creation of the Euro no longer allows nations like Italy to play the currency game. Something they did all the way into the early 90s. At the same time the US is clamping down more and more on those who do play these games, such as China. Under the Clinton administration there was no concern nor talk about the currency pinning of the Chinese, yet it was a reality. A free floating exchange rate, and a fair valued dollar only works in our advantage. More value is not always better. Some in the EU are beginning to figure this out now. I wonder how they will twist the conspiracy theory now?
Long term, having free floating exchange rates, many of those who for years were banking their economy on exports will find the US a much more competitive marketplace for their goods and services. Already today this reality is beginning to hit home and many foreign firms are feeling the crunch. Many years ago simply chose a path where they accept lowered profits in order to maintain market share in the hopes that the exchange rates are simply fluctuating. At this point it is near evident that the US dollar has readjusted lower and will remain there long term. Firms such as BMW which years ago set up shop in South Carolina were smart. They saw the hand writing on the wall, and they will deal well with the new era of a weaker dollar with little impact.
Long term what you’ll see is a trend that reduces trade deficits and increases US exports. You’ll see more firms targeting the US market, basing their production, or at least a greater share thereof, in the US. But this is all long term, very long term. As the dollar declines and the Euro rises you won’t see immediate changes, but already today you’re seeing some take this trend.
The problem in not the loss of the American market for their products. The problem is loss of world markets for their products. American industry has loading docks overflowing with product to be containerized and shipped to Africa and Asia to customers with long relations to Euro vendors. Americans are being worked 7 days a week to keep up.
It is the main thing keeping the US out of recession right now. With our housing industry in a near stand still, companies that rely on exports are thriving and are reporting strong profits.
They’ll be cutting interest rates anyday now in Europe. They really have no choice with the dollar as weak as it is.
My company is having the best year in it’s 60 year history. A big chunk of that is due to FX.
It is possible that we are on the verge of becoming the next great export machine.
It’s already happening..and it’s going to get even better.
“There is a coming competition of currency devaluation that will result in another trade war. Europe and Asia have received a free ride since America has always been the consumer of last resort with a strong currency.”
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What the hell is China going to buy from us? THEYRE COMMUNIST SLAVES WITH NO MONEY To SPEND! If the Chinese economy busts, the government will just sweep in and take their money. THEYRE COMMUNISTS!
STUPID FREE-TRADERS! (not you)
It is possible that we are on the verge of becoming the next great export machine.
My husband travels to Sweden, on business, once a quarter. Usually this time of year he comes back with all sorts of goodies. Teas, candies, toys, cookies, clothes, crystal, etc. This year he just skipped it with the poor exchange rate.
bookmarked
