The Incredible Shrinking Dollar

[Guest StuCotts]

The dollar is now trading at 1.56+ per euro, and is also sinking compared to other currencies, the yen included. This article asks how low it can go. The answer is that no economist knows exactly, but all agree it will get worse before it gets better. With the dollar goes our influence in the world. I understand Bush is coming to NY today to deliver an "upbeat" speech about the nation's economy. I bet that will allay lots of fears.

http://www.nytimes.com/2008/03/14/business...amp;oref=slogin

[Guest JamesWilson]

... I understand Bush is coming to NY today to deliver an "upbeat" speech about the nation's economy. I bet that will allay lots of fears.

http://www.nytimes.com/2008/03/14/business...amp;oref=slogin

I'm afraid that it didn't go very well for George, at least according to this pundit...

George Speaks, Badly (New York Times)

Fortunately (or not), not too many people seem to be paying him much attention, anyway.

[TownsendPLocke]

I am heading to Europe next month.

Hotel and flight are paid for via points/miles.I am still planning on $300 USD a day for expenses-and will still have to make frugal choices

The Sauna Thermas in BCN will now only get 2 visits instad of 5.

[TotallyOz]

I have never really understood the way the dollar moves up and down. I do feel the strain. When in Thailand on this trip, I am now getting about 29-30 baht per dollar. A few years back it was over 42.

When in Brazil it is now about 1.7 and use to be 3.5.

I had even considered moving to Montreal at one point when they loved the dollar now it is of less value that the Canadian money.

On a recent visa run to Burma, they have always given the option to pay in USD or Thai Baht. Now, the signs still say USD but they refuse to take it as they say it is no good and prefer the Baht. I tried in 2 different places to pay with the USD which the signs posted said was fine but the agents were smarter and knew the value of that was less than the required baht so they found issues with each bill I presented.

What will it take for us to get out of this mess? I really don't ask this just to talk. I really don't understand and would love to know where we are headed and if we are going to recover in the near future.

[Guest Anton]

I understand Bush is coming to NY today to deliver an "upbeat" speech about the nation's economy.

I always found those speeches a little concerning. When an economy goes well, there's no need for a president to have a speech with some "positive talk". LOL, so when there's a speech with poz talk, I find that a sign that things are NOT going well.

And Oz, I think it's mainly a matter of offer and demand on the international money market, and speculation upon what offer and deman will be in the next future (i.e. if the interest of a currency goes up, the currency itself goes up instantly). If more dollars are offered on the international money market than needed, the value of the dollar goes down (something that is offered too much and too often, simply goes down).

So why is the dollar being offered too much? It's a fact that the US are importing more than they are exporting. That means that US $ is offered more to buy things from elsewhere (= abroad), instead of US $ being needed abroad to buy US goods and services.

A side-effect is that national banks all over the world are less confident with a currency that turns out to be so weak. Slowly but gradually a number of them are converting their dollar reserves into other currencies or other devices, such as gold. As a side-effect the value of gold goes up. Unfortunately this means that even more (!) dollars are being offered on the international money market.

President Bush once said that if the value of the dollar went down, US products would become cheaper, and export would grow automatically. LOL, so far the main thing which is happening is that the oil price goes up because of a weakening dollar. It's simple, the weaker the dollar gets, the more dollars per barrel the oil-producing countries will want. A simple consequence is that taking fuel simply becomes more expensive the same amount.

So what is the initial cause of the US importing more than they are exporting? LOL I can't tell, I'm studying to become a fiscalist (tax lawyer), not an economist.

Sincerely, Anton/Amsterdam.

website : http://www.antonamsterdam.com/

reviews : http://www.antonamsterdam.com/reviews.html

[JKane]

Friday we made history! For the first time in god knows how long the US economy was no longer #1 in the world. Good job Bush!!

http://www.reuters.com/article/idUSL1491971920080314

We're not yet behind a single country, but the way things are going...

I'm no economist either but I figure near the heart of the problem is our economy now being service-based. We don't export anything (except maybe grain and other agriculture), and we are loosing our lock on inventing intellectual property worth anything.

Instead we sit here inside a bubble drifting downward, selling crap to each other and needing to import a fair amount of stuff. When the bubble hits the floor... pop.

[TampaYankee]

I did my bitching about the dollar and the economy several months ago. To my utter astonishment it has failed to have any impact on the course of events.

Now even the domestic goods are becoming less affordable! Checked your grocery store lately? It will get much worse before it gets better. It probably won't get any better. Foodstuff prices seldom come down unless there is a glut.

Whoever the fucking fool was that sold all of us other fools on ethanol leads in the Idiot of the Century Award Contest. Even I could see back then that this would have a terribly adverse affect on the price of corn that would ripple through the entire food commodity base. Corn is a primary feed for beef, pork, and chicken. Producers are already cutting back on their beef herds in anticipation of the the diminshed comsumption that will come with higher prices next year.

Ethanol was and remains a handout to big farming interests and worse, it does nothing substantial for the energy supply since is takes more energy to create it than it yields.

Just another example that government exists for the benefit of big business and special interests. The only importance of grassroots Americans in the process is to pay the freight for delivering government largesse.

[Guest Conway]

The dollar has made a nice comeback against the real this week as investors have fled the commodities, fx, and precious metals markets and are starting to look at US equities whose P/E ratios are starting to reflect the bargain prices of some US companies (Goldman Sachs and Lehman Brothers are two that come to my mind right now.).I suspect that the Veep's visit to the Saudi Royalty is likely going to result in increased gasoline production by the Saudis in the relatively near future. As the price of oil works its way back down more investment dollars will be driven back into the US since the dollar is still such a good value against most foreign currencies.

[Guest JamesWilson]

I suspect that the Veep's visit to the Saudi Royalty is likely going to result in increased gasoline production by the Saudis in the relatively near future. As the price of oil works its way back down more investment dollars will be driven back into the US since the dollar is still such a good value against most foreign currencies.

If you think that Cheney is in the pocket of the Military-Industrial Complex and Big Oil lobbies (as I do), why would he want the price of oil to come down?

A lower oil price would result in lower profits for BO (not to mention the Saudi govt), and make it less important to continue the destabilization and occupation of the Middle East, resulting in lower profits for the MIC. It also would have the horrible effect of allowing the American people to focus more on domestic issues like universal health care, reform of the financial markets, and social security reform.

Personally, I think Cheney and the rest of the conservatives are happy with the way things are right now, and are only putting on a show for the American people to help out McCain. They aren't serious about getting the Saudis to open the taps, and the Saudis know it. Cheney is probably only there to help clear brush on the King's ranch, since he has so much practice helping out Shrub!

[Guest Conway]

If you think that Cheney is in the pocket of the Military-Industrial Complex and Big Oil lobbies (as I do), why would he want the price of oil to come down?

A lower oil price would result in lower profits for BO (not to mention the Saudi govt), and make it less important to continue the destabilization and occupation of the Middle East, resulting in lower profits for the MIC. It also would have the horrible effect of allowing the American people to focus more on domestic issues like universal health care, reform of the financial markets, and social security reform.

Personally, I think Cheney and the rest of the conservatives are happy with the way things are right now, and are only putting on a show for the American people to help out McCain. They aren't serious about getting the Saudis to open the taps, and the Saudis know it. Cheney is probably only there to help clear brush on the King's ranch, since he has so much practice helping out Shrub!

Well, if politics and economics could be discussed on a purely rhetorical basis. I think that you would have some good points.

The Saudis aren't blind to the fact that many of the critical voters in the next election will vote depending upon the condition of their own pocketbooks. High oil prices and the resulting inflation on items like food and clothing could result in the next President being Barack Obama.

I think that an Obama presidency makes the Saudi Royal Family pretty uneasy. Why? Because an unconditional pullout of US troops in Iraq would embolden the fundamentalist extremists in Saudi Arabia as well as other oil producing middle eastern nations that are friendly to the US and potentially weaken the stronghold that the Saudi Royal Family has over the stability of that country's as well as the region's long term control of it's oil. I'm sure that the Saudis, as well as other oil producing nations have a much more macro, long term view of the future of their commodity that your argument suggests.

Crude prices have been driven largely by the demand created by the exploding Chinese manufacturing economy. That doesn't mitigate the fact that Oil companies who own the lease rights to many of the wells producing that oil, have made nothing short of a shitload of profit off of the increased demand for crude.

I do want to note that federal law requires that the assets of the President and Vice President (no matter which party they're affiliated with) are controlled by blind trusts. Each year, both the President and the Vice President file a disclosure which indicates in what and how their investments are managed. Cheney, obviously by virtue of the fact that he is its former CEO, owns a large number of options in Halliburton. Otherwise, he is mostly invested in bond funds (or at least he was at the time of disclosure). What is clearly indicated in Cheney's disclosure is that there is no substantial oil company holdings through whixch he is personally enriching himself at the expense of the electorate.

Let's be honest. Unlike the Clintons, who had no money upon entering the White House or the Gores, who inherited that which they had, both Bush and Cheney made enough money to support themselves for life before ever being elected to public office.

The US equities markets, which have blossomed for the past 25 years, have allowed many middle income citizens to build long term wealth. These folks aren't fat cats. They're working people, who saved and invested their own money in well run American companies.

[Guest BewareofNick]

Ladies and Gentlemen, welcome to the Bush recession!

[Guest Conway]

That welcome message is about six month late, BON.

Right now, there are some pretty encouraging economic signs. Granted, they have only started to show themselves in the past week. But, there is solid evidence that value investors are moving pretty quickly back into US equities as are foreign investors who still recognize what a great value US companies are when bought with Euros, Yen and Real. Strong foreign currencies are providing foreign investors with great opportunities in both equities and real estate in the US.

As a financial guy, I'm delighted to be moving much of my personal holdings out of cash and money market funds and back into equities with very attractive P/E ratios for the first time in over a year.