Pages: 1 2

 

2006-12-05 15:29:26
Bertster7
Confused Pothead
+1,101|6840|SE London

For quite some time the value of the dollar has been plumetting. This is due in part to rising house prices in the US, in part to many countries selling off their reserves of dollars and in part to rising national debt.

It's almost reached the point where £1 is worth $2 or double parity (at 1.9733 now). This hasn't ever happened before.

This will of course have an economic impact on the world, particularly the US where inflation looks set to increase especially as the budget deficit increases as the baby boomer generation retires.

I love it personally. It means I can get cheap goods imported from the US for a fraction of their value.

But will it have more serious consequences? I doubt it'll be disasterous, but it'll certainly be a hit for the US economy, but how bad will it be?
2006-12-05 15:32:31
Vilham
Say wat!?
+580|7025|UK
Tbh its about time they realise how costly things are in the rest of the world. The low prices in America are rediculus and are only thanks to low taxes, which to be fair isn't paying off too good for the citizens.

Not that i wish anyone to become poor, but things like your oil price is fucking so low, I remember seeing threads where ppl are like omg its $1 for a litre now, well in England it was like £1 until recently.
2006-12-05 15:33:51
Kmar
Truth is my Bitch
+5,695|6859|132 and Bush

At least the stock market is rallying again .
12,331.60
Xbone Stormsurgezz
2006-12-05 15:40:08
Bertster7
Confused Pothead
+1,101|6840|SE London

Kmarion wrote:

At least the stock market is rallying again .
12,331.60
Oh, yeah. The economy's doing pretty well. But that's all that's keeping the dollar going at the moment. If the economy stops performing so well the US could be headed for recession unless steps are taken to prevent it.
2006-12-05 15:41:48
Bertster7
Confused Pothead
+1,101|6840|SE London

Vilham wrote:

Tbh its about time they realise how costly things are in the rest of the world. The low prices in America are rediculus and are only thanks to low taxes, which to be fair isn't paying off too good for the citizens.

Not that i wish anyone to become poor, but things like your oil price is fucking so low, I remember seeing threads where ppl are like omg its $1 for a litre now, well in England it was like £1 until recently.
It's not all low taxes in the US. You have to pay tax for staying in a hotel! They don't tell about it till afterwards either, came as quite a shock to me.
2006-12-05 15:41:48
Kmar
Truth is my Bitch
+5,695|6859|132 and Bush

Bertster7 wrote:

Kmarion wrote:

At least the stock market is rallying again .
12,331.60
Oh, yeah. The economy's doing pretty well. But that's all that's keeping the dollar going at the moment. If the economy stops performing so well the US could be headed for recession unless steps are taken to prevent it.
Inflation comes to mind.
Xbone Stormsurgezz
2006-12-05 15:58:51
usmarine2007
Banned
+374|6626|Columbus, Ohio

Vilham wrote:

Tbh its about time they realise how costly things are in the rest of the world. The low prices in America are rediculus and are only thanks to low taxes, which to be fair isn't paying off too good for the citizens.

Not that i wish anyone to become poor, but things like your oil price is fucking so low, I remember seeing threads where ppl are like omg its $1 for a litre now, well in England it was like £1 until recently.
Yes, but I think we buy and use a bit more oil than anyone else.  Could be wrong, but that is just my gut feeling.
2006-12-05 16:00:10
The_Shipbuilder
Stay the corpse
+261|6759|Los Angeles

Bertster7 wrote:

But will it have more serious consequences? I doubt it'll be disasterous, but it'll certainly be a hit for the US economy, but how bad will it be?
A continually weakening dollar will for damn sure create some serious repercussions around the world. Note that the dollar is down 12% against the Euro in the past year. For Euro countries, that means everything your country sells just got 12% more expensive for Americans. So prices of imported goods (and raw materials) go up, but prices of US-produced goods remain the same. People will naturally shift their purchasing preferences toward cheaper domestic goods. Countries exporting to the US are forced to consider shrinking their profit margin by lowering wholesale prices so their American buyers can get the same amount for the same price.

If the US is a top buyer of your country's exports, that's a big deal for your country's multinationals and exporters, and in turn for you because your country's economy is predicated on their performance (eg, less sales = less profits = need to cut costs = layoffs).

All countries and major multinational corporations use speculative hedging to protect themselves against fluctuations in foreign exchange. Hedging balances out the negative impact that FX movements have on their cash, bank deposits, and foreign-denominated loans/assets. Most FX advisers have had a negative view on the dollar for years now. Those who will get burned are those who were not negative enough.

At the end of the day, in this massively intertwined global economy, a plummeting dollar would spell absolute disaster for just about everyone. No one wants to see it happen, and countries would start buying up massive dollar reserves to help prop up FX rates. Do a bit of googling and I'll bet you'll find that your country has been amassing dollar reserves for the past few years.
2006-12-05 16:02:07
Vilham
Say wat!?
+580|7025|UK

usmarine2007 wrote:

Vilham wrote:

Tbh its about time they realise how costly things are in the rest of the world. The low prices in America are rediculus and are only thanks to low taxes, which to be fair isn't paying off too good for the citizens.

Not that i wish anyone to become poor, but things like your oil price is fucking so low, I remember seeing threads where ppl are like omg its $1 for a litre now, well in England it was like £1 until recently.
Yes, but I think we buy and use a bit more oil than anyone else.  Could be wrong, but that is just my gut feeling.
Do you mean per capita? If you do I recon it would be very similar to most countries, other than those pointless fuel drinking cars.
Do you mean overall? That would just be stating the obvious and wouldn't have much relavence to the price of petrol.
2006-12-05 16:03:57
usmarine2007
Banned
+374|6626|Columbus, Ohio

Vilham wrote:

usmarine2007 wrote:

Vilham wrote:

Tbh its about time they realise how costly things are in the rest of the world. The low prices in America are rediculus and are only thanks to low taxes, which to be fair isn't paying off too good for the citizens.

Not that i wish anyone to become poor, but things like your oil price is fucking so low, I remember seeing threads where ppl are like omg its $1 for a litre now, well in England it was like £1 until recently.
Yes, but I think we buy and use a bit more oil than anyone else.  Could be wrong, but that is just my gut feeling.
Do you mean per capita? If you do I recon it would be very similar to most countries, other than those pointless fuel drinking cars.
Do you mean overall? That would just be stating the obvious and wouldn't have much relavence to the price of petrol.
Well, isn't that the way things work?  The more you buy at any given time, the bigger the discount?
2006-12-05 16:12:55
Bertster7
Confused Pothead
+1,101|6840|SE London

The_Shipbuilder wrote:

Bertster7 wrote:

But will it have more serious consequences? I doubt it'll be disasterous, but it'll certainly be a hit for the US economy, but how bad will it be?
A continually weakening dollar will for damn sure create some serious repercussions around the world. Note that the dollar is down 12% against the Euro in the past year. For Euro countries, that means everything your country sells just got 12% more expensive for Americans. So prices of imported goods (and raw materials) go up, but prices of US-produced goods remain the same. People will naturally shift their purchasing preferences toward cheaper domestic goods. Countries exporting to the US are forced to consider shrinking their profit margin by lowering wholesale prices so their American buyers can get the same amount for the same price.

If the US is a top buyer of your country's exports, that's a big deal for your country's multinationals and exporters, and in turn for you because your country's economy is predicated on their performance (eg, less sales = less profits = need to cut costs = layoffs).

All countries and major multinational corporations use speculative hedging to protect themselves against fluctuations in foreign exchange. Hedging balances out the negative impact that FX movements have on their cash, bank deposits, and foreign-denominated loans/assets. Most FX advisers have had a negative view on the dollar for years now. Those who will get burned are those who were not negative enough.

At the end of the day, in this massively intertwined global economy, a plummeting dollar would spell absolute disaster for just about everyone. No one wants to see it happen, and countries would start buying up massive dollar reserves to help prop up FX rates. Do a bit of googling and I'll bet you'll find that your country has been amassing dollar reserves for the past few years.
I think you'll find the opposite is true about countries buying up dollars. Italy sold all of theirs and bought £££s instead. China have been dumping all theirs, which is a BIG impact. Japan have been getting rid of loads of them too and Korea.

China certainly don't need to be buying any currencies. Their economy is doing staggeringly well and the US is virtually forced to buy Chinese exports because they are so much more expensive to produce in the US. US production costs are some of the highest in the world so there is no way the US is going to seemlessly become in any way self sufficient, the balance can't change by that much.

Did you know China has a trillion dollar surplus? That's growing by $18 billion a month. They are by far and away the richest country on Earth at the moment.
2006-12-05 16:19:24
Turquoise
O Canada
+1,596|6664|North Carolina

usmarine2007 wrote:

Vilham wrote:

usmarine2007 wrote:


Yes, but I think we buy and use a bit more oil than anyone else.  Could be wrong, but that is just my gut feeling.
Do you mean per capita? If you do I recon it would be very similar to most countries, other than those pointless fuel drinking cars.
Do you mean overall? That would just be stating the obvious and wouldn't have much relavence to the price of petrol.
Well, isn't that the way things work?  The more you buy at any given time, the bigger the discount?
Not quite...  there are two major reasons for why we pay far less for gas than most countries.

1. Less fuel taxes
2. A considerable amount of domestic oil production

We still use vastly more oil than we produce, but our own supplies offset the global cost of oil slightly.  The strongest factor is that we pay far less in fuel taxes than most of Europe (or any other 1st World areas of the world).
2006-12-05 16:24:54
Turquoise
O Canada
+1,596|6664|North Carolina

Bertster7 wrote:

The_Shipbuilder wrote:

Bertster7 wrote:

But will it have more serious consequences? I doubt it'll be disasterous, but it'll certainly be a hit for the US economy, but how bad will it be?
A continually weakening dollar will for damn sure create some serious repercussions around the world. Note that the dollar is down 12% against the Euro in the past year. For Euro countries, that means everything your country sells just got 12% more expensive for Americans. So prices of imported goods (and raw materials) go up, but prices of US-produced goods remain the same. People will naturally shift their purchasing preferences toward cheaper domestic goods. Countries exporting to the US are forced to consider shrinking their profit margin by lowering wholesale prices so their American buyers can get the same amount for the same price.

If the US is a top buyer of your country's exports, that's a big deal for your country's multinationals and exporters, and in turn for you because your country's economy is predicated on their performance (eg, less sales = less profits = need to cut costs = layoffs).

All countries and major multinational corporations use speculative hedging to protect themselves against fluctuations in foreign exchange. Hedging balances out the negative impact that FX movements have on their cash, bank deposits, and foreign-denominated loans/assets. Most FX advisers have had a negative view on the dollar for years now. Those who will get burned are those who were not negative enough.

At the end of the day, in this massively intertwined global economy, a plummeting dollar would spell absolute disaster for just about everyone. No one wants to see it happen, and countries would start buying up massive dollar reserves to help prop up FX rates. Do a bit of googling and I'll bet you'll find that your country has been amassing dollar reserves for the past few years.
I think you'll find the opposite is true about countries buying up dollars. Italy sold all of theirs and bought £££s instead. China have been dumping all theirs, which is a BIG impact. Japan have been getting rid of loads of them too and Korea.

China certainly don't need to be buying any currencies. Their economy is doing staggeringly well and the US is virtually forced to buy Chinese exports because they are so much more expensive to produce in the US. US production costs are some of the highest in the world so there is no way the US is going to seemlessly become in any way self sufficient, the balance can't change by that much.

Did you know China has a trillion dollar surplus? That's growing by $18 billion a month. They are by far and away the richest country on Earth at the moment.
There are several hazards to China's growth, however.  Even though they are technically a capitalism now, their government is spending so much on their infrastructure at the moment that any slump in federal expenditures can dramatically impact their unemployment rate.  Essentially, so many people are employed in public works projects over there that their economy could very easily collapse if countries like America stopped consuming so much from them.  They face the exact opposite weaknesses of America.

Americans just need to learn how to save and stop borrowing so much.

Last edited by Turquoise (2006-12-05 16:25:58)

2006-12-05 16:27:24
The_Shipbuilder
Stay the corpse
+261|6759|Los Angeles

usmarine2007 wrote:

Vilham wrote:

usmarine2007 wrote:

Yes, but I think we buy and use a bit more oil than anyone else.  Could be wrong, but that is just my gut feeling.
Do you mean per capita? If you do I recon it would be very similar to most countries, other than those pointless fuel drinking cars.
Do you mean overall? That would just be stating the obvious and wouldn't have much relavence to the price of petrol.
Well, isn't that the way things work?  The more you buy at any given time, the bigger the discount?
No - the discrepancies amongst pump prices around the world has nothing to do with volume discount and everything to do with taxes

This is an old chart but shows that the huge variance amongst major countries is overwhelmingly attributable to government policy.

https://news.bbc.co.uk/furniture/in_depth/world/2000/cost_of_fuel/tax.gif

Note that Iran subsidizes fuel costs to keep prices low for consumers, so they pay roughly US$0.30 per gallon. One Latin American country does the same, I believe it is Venezuelans who pay about US$0.20 per gallon.
2006-12-05 16:49:32
Harmor
Error_Name_Not_Found
+605|6807|San Diego, CA, USA
I'm no economist, only have an associate degree in economics, but isn't a weakening dollar good for the U.S.?

We have a trade deficit with nearly every country...its about time our dollar is devalued so its more expensive for foreign companies to do business in the United States. 

Domestic products will be cheaper, helping local companies against the foreign companies that have such an advantage - either politically (less regulation) or economically (people work for less overseas).

The question is will inflation be a problem?  Right now inflation is pretty low in the United States, but with only 4.4% unemployment that is a pressure to have inflation increase.

The problem, like has been stated, is that with so many multi-national companies, just because they may do good in one country doesn't mean that they'll do well elsewere.  The question is whether it balances out to the positive.

Gas prices should be going up soon in the United States since our dollar is getting cheaper...that is a dampinging force on our economy.  However, we have relatively low taxes compared to the rest of the world...therefore entrepreneurs invest and do business in the United States. 

I believe the only reason why we haven't evened out our trade imbalance with China is because China has purposefully been devaluing its currency to keep their products cheaper in the United States.

Last edited by Harmor (2006-12-05 16:50:07)

2006-12-05 16:49:42
The_Shipbuilder
Stay the corpse
+261|6759|Los Angeles

Bertster7 wrote:

I think you'll find the opposite is true about countries buying up dollars. Italy sold all of theirs and bought £££s instead. China have been dumping all theirs, which is a BIG impact. Japan have been getting rid of loads of them too and Korea.
Huh?

https://goldseek.com/news/GoldSeek/images/2006/11-29gd/image003.png

I just don't know what you're talking about mate - Considering that over 70% of their trillion dollar foreign currency reserves are (US) dollar-denominated, and that their holdings in US treasury bonds have increased by over US$40bn in the past year, and that Chinese have been NET BUYERS of US treasury bills every month for the past year, how is it possible that China is, as you say, "dumping all theirs"?

Any evidence that Korea and Japan have been "getting rid of loads of them"?

Italy's move, although interesting news, hardly registers as a blip on the FX radar.
2006-12-05 16:52:41
Harmor
Error_Name_Not_Found
+605|6807|San Diego, CA, USA
I wonder if its within China's best interest for the United States to 'take care of' North Korea because they, as you point out, have such as large investment in our deficit.

What is our deficit now, $10 trillion now?
2006-12-05 17:00:24
jonsimon
Member
+224|6754

Bertster7 wrote:

Kmarion wrote:

At least the stock market is rallying again .
12,331.60
Oh, yeah. The economy's doing pretty well. But that's all that's keeping the dollar going at the moment. If the economy stops performing so well the US could be headed for recession unless steps are taken to prevent it.
How you come to the conclusion that the economy is strong in the US just because of a number the stock market throws around is unknown to me.

Edit: Fixed, proper post quoted.

Last edited by jonsimon (2006-12-05 18:42:45)

2006-12-05 17:02:13
Turquoise
O Canada
+1,596|6664|North Carolina

Harmor wrote:

I'm no economist, only have an associate degree in economics, but isn't a weakening dollar good for the U.S.?

We have a trade deficit with nearly every country...its about time our dollar is devalued so its more expensive for foreign companies to do business in the United States. 

Domestic products will be cheaper, helping local companies against the foreign companies that have such an advantage - either politically (less regulation) or economically (people work for less overseas).
In theory, this could work to our advantage.  The tricky part is that we have restructured our economy to focus on service industries.  We're so accustomed to buying imported things that a lower dollar just means a lower standard of living in the short run.  Transitioning back towards manufacturing has transaction costs and takes quite some time to adjust to.

The fact that it's happening to us while we're in Iraq is especially painful.  Unless we withdraw immediately, we'll be throwing a lot of government money at Iraq -- which equals major budget deficits.  When the government goes further into debt, it affects our currency very negatively.

Harmor wrote:

The question is will inflation be a problem?  Right now inflation is pretty low in the United States, but with only 4.4% unemployment that is a pressure to have inflation increase.

The problem, like has been stated, is that with so many multi-national companies, just because they may do good in one country doesn't mean that they'll do well elsewere.  The question is whether it balances out to the positive.

Gas prices should be going up soon in the United States since our dollar is getting cheaper...that is a dampinging force on our economy.  However, we have relatively low taxes compared to the rest of the world...therefore entrepreneurs invest and do business in the United States. 

I believe the only reason why we haven't evened out our trade imbalance with China is because China has purposefully been devaluing its currency to keep their products cheaper in the United States.
China's currency is currently pegged to our dollar.  No matter how low the dollar goes, the Chinese yuan will always be lower.  That is, unless they decide to remove the pegging.

The main thing that is hurting us with respect to manufacturing is that our labor is relatively low-skilled.  Most blue-collar workers in America do not have the skill level and education of many Western European laborers.  If we improve our vocational education systems, we will develop blue-collar labor that will better meet the demands of the manufacturing sector.
2006-12-05 17:05:06
Bertster7
Confused Pothead
+1,101|6840|SE London

The_Shipbuilder wrote:

Bertster7 wrote:

I think you'll find the opposite is true about countries buying up dollars. Italy sold all of theirs and bought £££s instead. China have been dumping all theirs, which is a BIG impact. Japan have been getting rid of loads of them too and Korea.
Huh?

http://goldseek.com/news/GoldSeek/image … age003.png

I just don't know what you're talking about mate - Considering that over 70% of their trillion dollar foreign currency reserves are (US) dollar-denominated, and that their holdings in US treasury bonds have increased by over US$40bn in the past year, and that Chinese have been NET BUYERS of US treasury bills every month for the past year, how is it possible that China is, as you say, "dumping all theirs"?

Any evidence that Korea and Japan have been "getting rid of loads of them"?

Italy's move, although interesting news, hardly registers as a blip on the FX radar.
Yup, you're right.

I hadn't checked all my facts properly there. It's the disparity between the dollar and yuan that is the problem as far as China is concerned. All to do with the fact the yuan is not on international currency markets. The US have been putting pressure on China to revalue the yuan, which I don't believe they have, because changing the value of the yuan discourages foreign investment.

There are similar scenarios in Japan and Korea. I had misinterpreted data from where the devaluation came from as being the countries selling off dollars.

Sorry.

If China did sell off their US bonds the dollar would be in real trouble.
2006-12-05 17:15:39
Bertster7
Confused Pothead
+1,101|6840|SE London

Harmor wrote:

I'm no economist, only have an associate degree in economics, but isn't a weakening dollar good for the U.S.?
Not very. Borrowing in the US is at massive levels, due in part to huge increases in house prices. The only way to stabilise the dollar is to raise interest rates. Raising interest rates means everyone has less money to spend. People having less money to spend damages the economy.

There are benefits, but the disadvantages outweigh them.

Another nasty disadvantage is the plummeting value of US federal reserves.

Harmor wrote:

We have a trade deficit with nearly every country...its about time our dollar is devalued so its more expensive for foreign companies to do business in the United States. 

Domestic products will be cheaper, helping local companies against the foreign companies that have such an advantage - either politically (less regulation) or economically (people work for less overseas).

The question is will inflation be a problem?  Right now inflation is pretty low in the United States, but with only 4.4% unemployment that is a pressure to have inflation increase.

The problem, like has been stated, is that with so many multi-national companies, just because they may do good in one country doesn't mean that they'll do well elsewere.  The question is whether it balances out to the positive.

Gas prices should be going up soon in the United States since our dollar is getting cheaper...that is a dampinging force on our economy.  However, we have relatively low taxes compared to the rest of the world...therefore entrepreneurs invest and do business in the United States. 

I believe the only reason why we haven't evened out our trade imbalance with China is because China has purposefully been devaluing its currency to keep their products cheaper in the United States.
It is not a good thing overall. Don't you remember last time it happened? The US had to ask the rest of the world to bail them out. Remember the Plaza accord?

With the huge twin deficits the US has at the moment there is little doubt that the dollar will continue to fall and  will in time reduce the strength of the US economy.

China has been devaluing it's currency to keep exports cheap in the US. I remember they famously did it in '99 when their trade surplus dropped by 64%.

Last edited by Bertster7 (2006-12-05 17:19:05)

2006-12-05 17:42:11
The_Shipbuilder
Stay the corpse
+261|6759|Los Angeles

jonsimon wrote:

How you come to the conclusion that the economy is strong in the US just because of a number the stock market throws around is unknown to me.
+1.

I advise against using market-derived indices as indicators to back up ANY opinion that isn't directly related to equity markets themselves. It's always weak, indirect, or reflexive evidence.
2006-12-05 17:44:40
Bertster7
Confused Pothead
+1,101|6840|SE London

jonsimon wrote:

Bertster7 wrote:

Vilham wrote:

Tbh its about time they realise how costly things are in the rest of the world. The low prices in America are rediculus and are only thanks to low taxes, which to be fair isn't paying off too good for the citizens.

Not that i wish anyone to become poor, but things like your oil price is fucking so low, I remember seeing threads where ppl are like omg its $1 for a litre now, well in England it was like £1 until recently.
It's not all low taxes in the US. You have to pay tax for staying in a hotel! They don't tell about it till afterwards either, came as quite a shock to me.
How you come to the conclusion that the economy is strong in the US just because of a number the stock market throws around is unknown to me.
When did I say anything about the stock market?

The economy in the US is strong though. That's the only thing keeping the US going through all these other fiscal difficulties.

Your point, while perfectly valid, seems totally unconnected to what you have quoted.

Last edited by Bertster7 (2006-12-05 17:45:56)

2006-12-05 17:51:28
The_Shipbuilder
Stay the corpse
+261|6759|Los Angeles
I'm sure he meant to quote someone else.
2006-12-05 17:54:16
Bertster7
Confused Pothead
+1,101|6840|SE London

The_Shipbuilder wrote:

I'm sure he meant to quote someone else.
Ah, looking at post #4 it becomes a bit clearer.

I'd like to make it clear that I'm not basing my opinion about the US economy doing well solely on the performance of stock markets. It's about a whole load more than that.

But looking back I can see where some confusion could have arisen.

Last edited by Bertster7 (2006-12-05 17:56:21)

 

Pages: 1 2

Board footer

Privacy Policy - © 2025 Jeff Minard