The USA is in SERIOUS TROUBLE:
Lately, the EU really has begun to flex its economic muscle. This year it added 10 new members, and several more nations are eager to join the club
The US dollar has been persistently weak against currencies like the euro, the yen and the British pound. Just this week the dollar dropped to a new record low against the euro. When the euro first came out, it traded roughly even with the dollar; now one euro will buy 1.30 dollars.
The dollar's slide is good for US manufacturers because it makes their goods less expensive in foreign markets. Because we are a nation that imports more than we export, the fall in the dollar makes foreign products more expensive for us.
The greatest danger of the declining dollar is the risk of an economic meltdown. Because the US has had trade deficits for many years, large amounts of treasury notes are held by foreign banks and citizens. The tally is said to have built up to around $2 trillion. If the world was to suddenly lose faith in the dollar, the resulting wave of selling could cripple our economy.
Lately, the EU really has begun to flex its economic muscle. This year it added 10 new members, and several more nations are eager to join the club
The US dollar has been persistently weak against currencies like the euro, the yen and the British pound. Just this week the dollar dropped to a new record low against the euro. When the euro first came out, it traded roughly even with the dollar; now one euro will buy 1.30 dollars.
The dollar's slide is good for US manufacturers because it makes their goods less expensive in foreign markets. Because we are a nation that imports more than we export, the fall in the dollar makes foreign products more expensive for us.
The greatest danger of the declining dollar is the risk of an economic meltdown. Because the US has had trade deficits for many years, large amounts of treasury notes are held by foreign banks and citizens. The tally is said to have built up to around $2 trillion. If the world was to suddenly lose faith in the dollar, the resulting wave of selling could cripple our economy.
I already invested almost half my free cash in foreign denominated CDs. I think problems with the dollar will continue to get worse until Bush's team gets serious. They think they are above the world and can act unilaterally, but they have no chance of stopping world traders. All it would take is George to sober up and say "gee you know maybe if I stop pushing for tax cut number 30 I could save us some trouble". Make no mistake, deficits have consequences and the brewing storm is giving us all plenty of warning about that fact. Carry a 1 or even 2% of GDP deficit and the financial markets yawn. Carry an almost 5% deficit and say you don't care if it gets any bigger because someday it will go down, look out.
I hereby nominate John Snow for the Ass-croft peformance award in the next 4 years, if he makes it that long. Talk about a piece of work, this guy is supposedly a sharp mind, but all he does is cheerlead whatever idea the administration has come up with this time. Not an ounce of common sense or independent thought has come out of this guy's mouth since he started. Then again his predecessor engaged in behavior you would expect from a cabinet member and got canned for it.
I hereby nominate John Snow for the Ass-croft peformance award in the next 4 years, if he makes it that long. Talk about a piece of work, this guy is supposedly a sharp mind, but all he does is cheerlead whatever idea the administration has come up with this time. Not an ounce of common sense or independent thought has come out of this guy's mouth since he started. Then again his predecessor engaged in behavior you would expect from a cabinet member and got canned for it.
I see all these reactions to devest of $ and invest in eu. Hey, it's your money, but what's going to happen to the $ that's so terrible?
Over the short term this is good news for the US as the trade deficit will decrease as european products become more expensive on the world market, and as US products become cheaper.
Meanwhile, I'm sure that the Euro Banks are sweating blood as the strengthening of the eu vs the $ could require an interest hike to hinder any inflationary tendencies; and you might want to remember that Russia is a hair from economic collapse which doesn't help the eu - just the opposite.
In the US - many supply chains have already started looking toward the Pacific basin, strengthening a trend that has been slowly growing over the last decade.
Keep an eye on the auto market as that will be the first harbinger of real change, as opposed to moaning and groaning about indicators of change.
Over the short term this is good news for the US as the trade deficit will decrease as european products become more expensive on the world market, and as US products become cheaper.
Meanwhile, I'm sure that the Euro Banks are sweating blood as the strengthening of the eu vs the $ could require an interest hike to hinder any inflationary tendencies; and you might want to remember that Russia is a hair from economic collapse which doesn't help the eu - just the opposite.
In the US - many supply chains have already started looking toward the Pacific basin, strengthening a trend that has been slowly growing over the last decade.
Keep an eye on the auto market as that will be the first harbinger of real change, as opposed to moaning and groaning about indicators of change.
eek. said:I would be more inclined to keep an eye on the US interest rate.
If it follows the old UK righties pattern into the currency abyss, to counter its decreasing desireability on the open market, rates will go up sooner rather than later.
Party on dudes.
arty:
PBS's Frontline ran a bit last night on credit card debt. Apparently, in the US, credit card companies can change your interest rate (and apply it to past purchases, btw) based on your credit activity with creditors not remotely related to them. Miss a mortgage payment and watch your credit card rate double. Charming. So, given the ridiculous amount of debt being held by American consumers at the moment, along with the current volatility of the job market, this is alarming. I'm also reading that legislation is being re-written to make it much more difficult for consumers to declare bankruptcy.
Should rates hike, and they'll have to in order to have foreign investors remain interested in t-bills, consumers are going to get their chains yanked. It's a nasty situation and I'm currently running about trying to figure out how those of us on the periphery can cover our asses. Doesn't look good for most of us.
The rising eu hurts the Euros more than the US - read on:
The strong euro puts pressure on manufacturers of products like German luxury cars or French wines, whose dollar prices either have to go up or the companies have to live with lower profit margins.
Germany's economic growth slowed sharply in the third quarter as exports slipped, with gross domestic product growing by 0.1 percent over the previous three months after two previous quarters of 0.4 percent growth.
The euro's current spike appears to be driven more by anti-dollar feeling in the markets than any one event, making it hard to say how long it will continue, said Dorothea Huttanus, an economist with DZ Bank in Frankfurt.
"There is nothing really fundamental, it's bad dollar sentiment," she said. "Nobody knows how long this can last until we get a sharp reversal."
Many analysts are predicting the euro will hit $1.40 by the middle of next year, if not higher. European Central Bank President Jean-Claude Trichet recently called the rapid increase "brutal."
Still, in the short term, Huttanus said she expected the increase to slow.
"I'm convinced that we will have a reversal, because trends as steep as these can't often continue," she said.
Introduced in 1999 as the common currency for 12 European countries, the euro initially dropped against the dollar but has risen some 60 percent since hitting an all-time low of 82 cents in October 2000.
Huttanus said, however, that she expected finance leaders would try more verbal warnings before intervening in the currency markets.
"We have to see a lot more verbal intervention _ Trichet talking about the euro rise being brutal _ and only if these verbal interventions have no impact will we have real market intervention," she said.
The strong euro puts pressure on manufacturers of products like German luxury cars or French wines, whose dollar prices either have to go up or the companies have to live with lower profit margins.
Germany's economic growth slowed sharply in the third quarter as exports slipped, with gross domestic product growing by 0.1 percent over the previous three months after two previous quarters of 0.4 percent growth.
The euro's current spike appears to be driven more by anti-dollar feeling in the markets than any one event, making it hard to say how long it will continue, said Dorothea Huttanus, an economist with DZ Bank in Frankfurt.
"There is nothing really fundamental, it's bad dollar sentiment," she said. "Nobody knows how long this can last until we get a sharp reversal."
Many analysts are predicting the euro will hit $1.40 by the middle of next year, if not higher. European Central Bank President Jean-Claude Trichet recently called the rapid increase "brutal."
Still, in the short term, Huttanus said she expected the increase to slow.
"I'm convinced that we will have a reversal, because trends as steep as these can't often continue," she said.
Introduced in 1999 as the common currency for 12 European countries, the euro initially dropped against the dollar but has risen some 60 percent since hitting an all-time low of 82 cents in October 2000.
Huttanus said, however, that she expected finance leaders would try more verbal warnings before intervening in the currency markets.
"We have to see a lot more verbal intervention _ Trichet talking about the euro rise being brutal _ and only if these verbal interventions have no impact will we have real market intervention," she said.
Interesting article on China.
Apparently the Yuan is pegged at 8.30 to the $.
So no matter how much the buck falls against the other currencies, the Chinese can keep producing and exporting stuff at breakneck speed to the USA with no currency effect.
According to some, the Yuan is currently undervalued by up to 40%.
Anyone know where I can get me a suitcase filled with Yuan at 8.30/$?
http://news.bbc.co.uk/1/hi/business/4034335.stm
Apparently the Yuan is pegged at 8.30 to the $.
So no matter how much the buck falls against the other currencies, the Chinese can keep producing and exporting stuff at breakneck speed to the USA with no currency effect.
According to some, the Yuan is currently undervalued by up to 40%.
Anyone know where I can get me a suitcase filled with Yuan at 8.30/$?
http://news.bbc.co.uk/1/hi/business/4034335.stm
Buffet likes China.
Instead of a suitcase of Yuan, a portfolio of Chinese companies riding the favourable currency exchange wave?
http://news.bbc.co.uk/1/hi/business/2999697.stm
Instead of a suitcase of Yuan, a portfolio of Chinese companies riding the favourable currency exchange wave?
http://news.bbc.co.uk/1/hi/business/2999697.stm
This is some funny sh!t.. Stay long on the US dollar. You travel to Siberia and give them a dollar and they smile. You travel to Ohio and hand over a ruble and they call the cops and have you arrested for passing worthless cash. You travel to mexico and give them a dollar and they smile for weeks. You travel to Germany and give them a US dollar and they can't get a enough. You travel to Florida and pay with a mark or a franc they boot you out of the store. There's always ups and downs, remember the US dollar is the backbone of the world. The American economy is the engine of the world so relax.
You guys are all marching down the wrong alley. The value of the Euro means little, we hardly compete with European products. After all if someone wants a BMW, how much would the Euro have to rise before the person considers a Cadillac instead?
Asia is where the issue is. The dollar is steady there, but falsely so thanks to currency supports. That also happens to be where the majority of our trade goes. Don't forget our main partner either, Canada. The looney is down at levels I can't even remember when I saw the last time. Great stuff for manufacturers sure, but our economy barely depends on competitive manufactured prices anymore. Not to mention just how much would the dollar have to drop to make a plant with $1/hour labor too expensive to still hold most of our manufacturing jobs?
But lets not get away from reality here. The problem is driven because no one trusts W and his GOP cronies to stop spending and tax cutting us into oblivion. That is where this problem begins and ends. If they actually got off the pipe and lived up to all their empty promises we wouldn't even have to worry about this. If our budget deficit was under 2% of GDP no one would even care. Bush has made claims that his policies will eventually get us to that point, but no one in the financial markets believes him.
Asia is where the issue is. The dollar is steady there, but falsely so thanks to currency supports. That also happens to be where the majority of our trade goes. Don't forget our main partner either, Canada. The looney is down at levels I can't even remember when I saw the last time. Great stuff for manufacturers sure, but our economy barely depends on competitive manufactured prices anymore. Not to mention just how much would the dollar have to drop to make a plant with $1/hour labor too expensive to still hold most of our manufacturing jobs?
But lets not get away from reality here. The problem is driven because no one trusts W and his GOP cronies to stop spending and tax cutting us into oblivion. That is where this problem begins and ends. If they actually got off the pipe and lived up to all their empty promises we wouldn't even have to worry about this. If our budget deficit was under 2% of GDP no one would even care. Bush has made claims that his policies will eventually get us to that point, but no one in the financial markets believes him.
WildBill said:
I have two American clients, both of whom I obtained largely due to price competitiveness. If the trend of a rising CAD/falling USD continues, I will probably lose them. Our dollar hasn't been this strong since the late eighties.
Certainly adding 800 billion to the national credit card limit didn't help matters, either.
The cad is up to $0.85 - an 11% increase.
If I were the Canadian Government, I'd worry about a big time trade deficit. All of those Canadians crossing the border to vacation and to buy all of those low tax American goods!
How long will it take before some Governor on the Mexican border gets the grand idea to bus a lot of those Mexicans up to Canada.
Hey xpanda - how many Mexicans do you think Canda can absorb before the welfare and healthcare sytems go broke!
Doc is gloating like a moron while the sky falls on all of the things he loves and as the American economy benefits from the grief of those same nations who hate us the most!
Ya gotta love it!
If I were the Canadian Government, I'd worry about a big time trade deficit. All of those Canadians crossing the border to vacation and to buy all of those low tax American goods!
How long will it take before some Governor on the Mexican border gets the grand idea to bus a lot of those Mexicans up to Canada.
Hey xpanda - how many Mexicans do you think Canda can absorb before the welfare and healthcare sytems go broke!
Doc is gloating like a moron while the sky falls on all of the things he loves and as the American economy benefits from the grief of those same nations who hate us the most!
Ya gotta love it!
bblight said:
The taxes have nothing to do with it. You get stuck paying duty on the way back, anyway. In the early 90s, after the FTA kicked in and kicked our asses, we got hammered with cross-border shopping. At the time, though, prices of goods in the US were much lower. This isn't the case now as much of our pricing is in line with yours. But, it's still bothersome. I'm a big chapters.ca shopper and I've been comparing the CAD prices to the USD prices at amazon.com and I know I would save money by switching. Chances are good that we will begin to see consumers buy more American.
As for the trade deficit, this is where I'm really puzzled. We should already be seeing a decline in trade and yet we're not. We continue to post record numbers in exports and have again posted our highest trade surplus on record. If the USD trend continues, of course this won't continue.
You see now why I'm so worried about your dollar? I feel best about the Canadian economy when we're sitting at about $0.78USD. We're a far cry from that right now.
What does this have to do with the USD?
I'm quite surprised at how many of you don't take the issue of a tanking USD very seriously. I don't know if it's party loyalty or what, but you should be more concerned about the markets. Why do you think your economy is utterly invincible? Nobody's is ....
The US $ is very strong at the moment - It's typical of the doomers and gloomers to turn to the economy when all of their other dire warnings don't come about.
I'll start worrying when the European economy starts to collapse - and I don't see that happening for another 10 or 15 years.
Meanwhile the $ will continue to chug along, doing it's thing!
I'll start worrying when the European economy starts to collapse - and I don't see that happening for another 10 or 15 years.
Meanwhile the $ will continue to chug along, doing it's thing!
Looks like the big boys are taking cover in gold.
gold prices surge to sixteen-year highs
http://news.bbc.co.uk/1/hi/business/4042451.stm
gold prices surge to sixteen-year highs
http://news.bbc.co.uk/1/hi/business/4042451.stm
