Thread: What’s so bad about a falling dollar?

I don't make a habit of long cut-and-pastes... I hope on this rare occasion that you'll indulge me.



From the current issue of The Week

What’s so bad about a falling dollar?



The value of the dollar has been down 15 percent against the euro in recent weeks, and last week it traded at its lowest point against the yen since December 2008.



Republicans have a new cudgel for bashing President Obama, said Edward Luce and Krishna Guha in the Financial Times. They’re blaming him for the plunge in the value of the dollar—which has been down 15 percent against the euro in recent weeks, and last week traded at its lowest point against the yen since December 2008. The greenback’s fall, Republicans say, is “evidence of waning U.S. power.� That’s the subtext of a Facebook posting by one of the Republican Party’s de facto leaders, former vice presidential candidate Sarah Palin, who linked the dollar’s sharp decline to “our out-of-control debt� and dependence on foreign oil. It’s not only Republicans who think so, said The Wall Street Journal in an editorial. The action in the currency markets “is a daily global vote on U.S. economic policy.� Quite plainly, currency traders around the world have no faith in U.S. policy, and for good reason. Under Obama, the U.S. budget deficit is exploding and our markets are “becoming less inviting to global capital.� So logically enough, traders are dumping dollars.



Politics has nothing to do with the dollar’s “recent feebleness,� said the Financial Times. The currency markets are simply returning to normal. During the darkest days of the financial crisis, investors around the world sought safety in the dollar and U.S. Treasury bonds; as a result, the dollar’s value rose 12.6 percent between August 2007 and spring of this year. Now that the storm has passed, investors are once again buying other currencies, and the greenback is “roughly where it was as the crisis was emerging.� We understand that politicians of all stripes tend to see currencies as “national virility symbols,� but the dollar’s decline is really a sign that the world’s other economies are recovering. It “should neither be feared nor obstructed.�



In fact, said Irwin Kellner in Marketwatch.com, “a weak dollar at this point in our business cycle is good for what ails us.� The U.S. economy got into trouble because we imported too many foreign goods and services while exporting too few. A falling dollar helps reverse that trend by making imports more expensive and making our exports more affordable to the rest of the world. A weak dollar also helps create jobs at home, by reducing the need for U.S. companies to outsource to cheaper labor markets. “Indeed, if the dollar gets weak enough, some jobs might be repatriated.� That’s hardly a cause for alarm.



A weak dollar is good news for the rest of the world’s economies, too, said Wolfgang Münchau in the Financial Times. Europe, especially, suffers from the reverse of America’s problem: It exports too much and imports too little. A weaker dollar and a stronger euro neatly solve that puzzle, with no need for heavy-handed government policies to correct the chronic imbalance. “The goal of a more balanced world economy is entirely consistent with a weaker dollar and a stronger euro.� The Obama-bashers should look elsewhere for ammunition.

[quote name='Djinn' date='21 October 2009 - 07:39 AM' timestamp='1256135973' post='42067']

I don't make a habit of long cut-and-pastes... I hope on this rare occasion that you'll indulge me.



From the current issue of The Week

[/quote]

So now a devalued currency is good with you??



If I had my way, the us would recall about 75% of the dollars and burn them, this is getting past ridicules. Have you any idea what inflation will look like in the very near future, I would predict 18% interest, with 20% inflation. That is as good as you can hope for. The dollar is garbage, and investing in them is insane.

[quote name='michaelr' date='21 October 2009 - 10:45 AM' timestamp='1256136348' post='42068']

So now a devalued currency is good with you??[/quote]

Actually, yes. If the price of gasoline suddenly dropped by $2.00/gallon, and then the next week, the prices went up by $2.00 a gallon, would you be ranting about the increase? Well, you might. But the rest of us would recognize that for that one week, gas prices were artificially low, and the $2.00 increase was the result of a return to normal prices.



As the article points out, the value of the U.S. dollar increased at the start of the financial collapse, since other countries thought the dollar was a safer bet than other currencies. Now that the worst has passed, they have once against started balancing out their portfolios, selling their disproportionate holdings of U.S. dollars in the process. It's a return to normalization.

[quote name='Djinn' date='21 October 2009 - 07:58 AM' timestamp='1256137124' post='42077']

Actually, yes. If the price of gasoline suddenly dropped by $2.00/gallon, and then the next week, the prices went up by $2.00 a gallon, would you be ranting about the increase? Well, you might. But the rest of us would recognize that for that one week, gas prices were artificially low, and the $2.00 increase was the result of a return to normal prices.



As the article points out, the value of the U.S. dollar increased at the start of the financial collapse, since other countries thought the dollar was a safer bet than other currencies. Now that the worst has passed, they have once against started balancing out their portfolios, selling their disproportionate holdings of U.S. dollars in the process. It's a return to normalization.

[/quote]

You better look at the dollar index before you say it increased. A weak dollar means countries will no longer invest in it, and what is worse, they will, and are dumping it. We have one thing in this country, our dollar and the use of it as a reserve currency, we lost that, and the bottom is falling out from under us.



There is a third monetary philosophy, it is the Zimbabwe doctrine, and were following it to a T, and the results will be the same, maybe not as catastrophic, but damn close.



Your buying into a lie, they are trying to convince you that a weak dollar will some how make it easier to pay the debt and improve exports. Both are fictitious.

The Dollar Is Finished And The Chinese Are Dumping It



Lets go celebrate, whoopee!!!

[quote name='PoliticalHotwire' date='21 October 2009 - 08:24 AM' timestamp='1256138653' post='42094']

article



This is a great article that I encourage every individual investor to read

[/quote]

I have read this, and it gets to the point. Anyone wanting a deflated dollar had better lay off the TV, because they do not see the simple ramifications.



Oil hit 78 bux the other day, and of course the liars said it was due to inventory, think about that for a second, production is down globally, so no it can't be because of inventory. It is because of the weak dollar, a simple thing called inflation, and it is just getting warmed up.



Like I said, 18% interest, and 20% inflation is my bet.

[quote name='michaelr' date='21 October 2009 - 11:53 AM' timestamp='1256140420' post='42104']

I have read this, and it gets to the point. Anyone wanting a deflated dollar had better lay off the TV, because they do not see the simple ramifications.



Oil hit 78 bux the other day, and of course the liars said it was due to inventory, think about that for a second, production is down globally, so no it can't be because of inventory. It is because of the weak dollar, a simple thing called inflation, and it is just getting warmed up.



Like I said, 18% interest, and 20% inflation is my bet.

[/quote]

Production is not the only thing that has an impact on reserves and inventory. Global consumption is down.

[quote name='Djinn' date='21 October 2009 - 09:01 AM' timestamp='1256140868' post='42108']

Production is not the only thing that has an impact on reserves and inventory. Global consumption is down.

[/quote]

I know it is, yet the liars said inventory is the reason for increased prices.



Manufacturing is a biggie however. Hell right now electricity should be almost free, manufacturing is a huge factor power consumption.