The US government does not print more money when it wants to spend more; we have the Iranians doing that for us- lol. Monetary policy is not set by a bunch of third graders as you seem to think. As an economy grows, and ours has been for many years, the need for currency expands. There are also other factors to consider, such as the velocity of the currency. There are many variables, but your little cliché world of how it works is superficial and inaccurate.
Like a trade deficit, a topic chosen by the media because of its perceived negativism (Bad news and the out of the ordinary sells stories), the dollars exchange rate is misconstrued to mean all sorts of things except what it is; a natural and positive development for us that more or less is a correction and puts the dollar at its natural state as defined by supply and demand, vs. the inflated value of past. People like you think a bigger number must be better. Higher blood pressure is obviously better. Really high cholesterol is better than low cholesterol as well, right? We can run a trade deficit indefinitely, and it will not hurt us. In fact we have been doing in for long over a decade and despite the self proclaimed experts purporting doomsday prophecies of what this will bring, as Friedman predicted, all is fine and the sky is not falling. Likewise, a lower valued dollar is no negative thing and as it stands it is indeed to our advantage. Of course those being crushed by the dollar will complain, and ironically it’s a devalued dollar that does the crushing, ask EADS, the topic of this thread. Did you read the article?
“and Germans have had one of the highest standards of living in the world for many years now.”
• The Germans have double digit unemployment.
• They have had near no economic growth in the last years and today are happy with a meager 2% adjusted.
• They have a per-capita income ¼ less than in the US.
• Their standard of living and per capita purchasing power has dropped over the last decade.
For further reading and a quick fact check: http://www.destatis.de/jetspeed/portal/cms
“Surely Buffett and I are not the only one’s who think that borrowing abroad, mortgaging our real estate abroad to finance consumption from abroad is a sign of underlying economic weakness, you know, like the Congo or Sierra Leone or Brazil in the bad old days. That our currency is in decline is a reflection of that underlying weakness. “
Sure, and the economy of Great Britain with their high valued pound was so great off years past, right? Besides, what sort of reasoning are you applying? Your reasoning is like that of a lemming. “Well, others are jumping off the cliff so I guess I too should go!”
A powerful currency does not equate to an economy that is doing well, it is not an indicator of economic prosperity, long term economic stability or the wealth of the people within that society, or its distribution among the people within that society. Like any commodity on a market, it has a supply and a demand, and as the demand decreases, so does its value. The devaluing of the dollar is not a function of more currency as much as it is demand in our case. If we wanted to, we could take actions to stop the devaluing of the USD. We have not done so for a reason. In fact when the US pushes China to stop pining their currency we are de facto doing the opposite, since China likes the status quo and does not want to see a devaluing of the USD for all the reasons I listed.
“And as for all of your claimed experience in Germany, it must have been a long long long time ago, because in the past 20 years being stationed in Germany for married service members has been to be cast into financial hell.”
Actually I left Germany in 2005 again, this time as a service member, 1AD, 1BDE. I grew up there and spent my first 24 years in that socialist nightmare you so admire. I actually do remember (While I was there) them phasing in 1 Euro jobs so that they can pay people their unemployment plus 1 Euro a day but no longer count them on their unemployment statistics, or created retraining programs, which when enrolled in the people also don’t count in the official statistics……….
While it is beneficial for 86,000 US service members stationed abroad when the dollar is highly valued, it hurts us as a nation because the US as a point of production becomes more expensive. I made that point in my first post I do believe and this is probably the third time or so that I make it. What you seem to forget is that the US is a little bigger than 86,000 service members in Germany, there’s another 299,914,000 living here who like to have jobs and prefer a playing field that at least gives us a chance to compete. When you have situations as in the mid 80s when 1 USD = DM 3.60 no matter how productive, no matter how low the taxes, how good the labor laws, how educated and skilled a work force, etc. the US is in such a situation at a huge disadvantage.
My last attempt with a hypothetical example: Let’s assume you have a guy named Schmidt. He works at a plant for MAN trucks. He costs his employer an average of Euro 51,000 per year, of course that’s not what the employee sees but this is the cost that is built into the product from the human capital invested in transformation. On a truck, well say 36% of the cost is labor in some way or fashion. The cost of assembly line worker Bob in the US is about $65,000 per year. Now let’s do some real simple math. Let’s assume its $1.46 = Euro 1. The average worker in the US plant hypothetically now costs Euro 44,520. All other variables held constant, this is a difference of Euro 6,480, or 13% less in labor; better yet, this amounts to 4.7% less in total end item cost.
“Surely Buffett and I are not the only one’s who think that borrowing abroad, mortgaging our real estate abroad to finance consumption from abroad is a sign of underlying economic weakness,”
Actually it’s a sign of globalization. What’s the meaning of old retires from Europe retiring in Florida? Like Lord of the Flies you can read into it as much as you wish, or simply see it as a reality of a global economy.
” And people buy BMW’s and Audi’s not because they are cheap because of their reputation for quality (reliability, design, performance, total cost of ownership over the real life of the car, etc.) Surely even you are not that much of a dolt despite your fancy perfumed finery flapping in the wind with the little MBA monogram on it.”
Wow- Never have I seen a consumer so enthusiastically scream “I’m a sucker” so loud. I have two cars, both with over 170,000 miles. I tow, I go light off roading when hunting etc. I have no interest in an overpriced car that gives me no functional advantage. I don’t Fu%! my car. I like my vehicle white and bare bones. I don’t care for conceptual advertising trying to push a feeling of status or quality. The only extra I have a need for is A/C, everything else is frivolous B.S. that people think they need. As to your super duper BMWs and Mercedes, between my father and I we have owned a 528i, 520i, 380SE and it is not without reason why he today drives Volvo and I Jeep. They are overpriced and besides some illusion of being special, that vehicle is still just a pile of plastic, rubber, steel, and glass; stamped out of sheet metal, spot welded, bolted, and glued together, these machines are mostly assembled from third party components often even the same suppliers between various brands. You are a great example of how various techniques in product differentiation and branding work to allow a higher price point to be set.
The US government does not print more money when it wants to spend more; ... As an economy grows, and ours has been for many years, the need for currency expands. There are also other factors to consider, such as the velocity of the currency. There are many variables, but your little cliché world of how it works is superficial and inaccurate. And when the need for currency expands where does it come from - who prints it? The government or some backstreet print shop? What happens if they print too much? If they only print what the economy "needs" explain this chart to me:
How do they know how much more currency the economy "needs."
Until you explained it to me I really had not guessed that our economy has been growing at 14 and 16 nay 18% per year. If that is how it all works, shouldn't we just print some more and it will grow even faster.
All those exploding mortgage CDO's with the exploding interest rate, currency and default swaps hidden in the package, the high flying real estate valuations, now collapsing, the collapsing dollar and rising price of gold and oil couldn't possibly be explained by the fact that maybe a pit too much of this really valuable currency was printed, making it kind of a glut in the vaults of central banks around the world. Naah. Couldn't be.
Monetary policy is not set by a bunch of third graders as you seem to think.
I am glad that when Greenspan was running around telling everyone how all the smart people were taking out 1.75% exploding ARMS that would destroy their equity, credit, lives and the real estate industry to boot, he was being an adult with full knowledge of forethought.