The Dollar Sucks

[TotallyOz]

The USD sucks in Thailand and the exchange rate on my last trip was really disappointing. My recent trip to Brazil was no better. The USD sucks just about everywhere or so I thought. CNN did a nice survey of some places where the dollar is still strong. 2 places I want to visit this year are on the list. Vietnam and Argentina

 

http://money.cnn.com/galleries/2008/pf/080...neymag/?cnn=yes

 

[Guest tdperhs]

The USD sucks just about everywhere or so I thought.

 

Take heart, GT. Events are occuring in China as I type that are going to turn the dollar somewhat. Give it about a week. I will be returning to LOS in about 8 weeks so I have ordered up a much improved dollar. I hope to see you at the beach at that time. I do enjoy your company, but I enjoy your entourage even more.

 

[Gaybutton]

Events are occuring in China as I type that are going to turn the dollar somewhat.

 

Would you mind letting those of us who are clueless, especially me, what's going on in China? Whatever is happening, it hasn't done anything for the US dollar yet. Today (Tuesday, April 22) the dollar closed at 31.31 against the baht.

[Bob]

My guess is he's referring to what a lot of investment people are suggesting - that China's economy is about to head downhill shortly (which makes sense as it's overheated to a great degree). A lot of these soothsayers suggest it'll happen right after the Olympics but lately there is more talk that it'll happen sooner than that.

 

Regardless of if/when it happens, I'm doubtful that a downturn in the Chinese economy will affect the US dollar much or at all. The Chinese peg the yuan to the dollar (there is no free market float of the yuan) and, as long as they continue that practice, the dollar isn't rising or falling to the yuan at all (other than the amount the Chinese allow to occur - which seems to be about 6-7% per year as of late).

 

The US downturn is somewhat spreading around the world (with some notable exceptions - perhaps South America being one of those exceptions) and, if that continues, then the US dollar ought to strengthen a bit. But I'd bet it'll never be valued anywhere near where it was for the rest of our lifetimes as the time of US position in the world economy will only continue to slide (at least relatively) to the emerging markets such as India, China, and South America.

 

 

[Guest tdperhs]

My information pretty well parallels Bob's except for the investment part. According to our Cuban economics professor at school who tracks this sort of thing, the Chinese are preparing to pull themselves loose from the dollar. In anticipation of the influx of foreign currency from tourism and the program to manufacture and export a line of low priced automobiles, tracking with the dollar would send it lower and their own currency with it.

An independent Yuan would raise the cost of goods imported from China reducing the negative balance of trade and the number of dollars shipped outside the country. Fewer dollars leaving this country increases their value.

Funny thing is that the Chinese will be effectively tracking with us because both currencies will independently increase in value.

Does this make sense to you? It took me a while to figure it out and I don't know if I explained it clearly, but Jose has been right most of the time.

[Guest shockdevil]

The USD sucks in Thailand and the exchange rate on my last trip was really disappointing.

 

http://money.cnn.com/galleries/2008/pf/080...neymag/?cnn=yes

 

GT:

 

I just returned from my three (3) month stay in the Land of Smiles. Although I loved every minute of my long getaway, I was a little disheartened by the weak dollar. It seemed like each day the dollar kept sinking. I remembered my previous trip where the dollar was equal to about 40 baht or so. I really felt like I lost quite a bit of spending power this year. Thank God I had a robust budget this year or else I may not have enjoyed myself as much as did.

 

However, even with the weak dollar, Thailand is still one of my least expensive vacations. Hopefully, when I return later this year the dollar will be a bit stronger.

 

[Bob]

Tdperhs, I'm wondering what your professor friend means by the "Chinese are preparing to pull themselves loose from the dollar."

 

If he means the Chinese are going to unpeg the yuan to the US dollar and let it float in the free market, you could expect the dollar to devalue (to the yuan) by at least 40-50% (the US government has complained for years about the undervaluation). But this simply isn't going to happen (my opinion) as that would mean that every Chinese product would cost 40-50% more in the US, exports from China to the US would die a quick death, and the Chinese economy would take a major hit.

 

I'm thinking he means that the Chinese are going to start dumping their dollars....and I've read some accounts of the Chinese officials suggesting that they were going to balance their foreign reserves by using a basket of currencies rather than primarily sitting on billions of US dollars. Many other countries are doing the same and, of course, that's one of the main reasons the US dollar has fallen like a rock (nobody wants the damn things).

 

Foreign governments (Japan and China being two of the largest) supposedly finance almost 70% of the US debt (they take the billions of dollars they get for selling their products and then buy US Treasury Bills). I've always wondered why this system wouldn't collapse when the foreign currencies are appreciating so much against the US dollar (i.e., why earn 3% on a T-Bill for a year when the principal is worth 8-10% less to you for that same year - a definite losing proposition). Some economists have suggested that the US currency could totally collapse if Japan and China simply dumped (exchanged them for other foreign currencies regardless of the price) 20% of their US dollar reserves. Maybe we're seeing the beginning of that process now.

[KhorTose]

Bob's assessment is 100% right on. I suggest you read this great article on why the dollar will be crashing.

 

http://www.marketoracle.net/Article4248.html

[Gaybutton]

I've often stated that I know and understand virtually nothing about economics. I also know little or nothing about wine. All I know is what I like. When it comes to economics the only thing I know is that I have yet to ever see a prediction about what will happen with the exchange rate turn out to be right. Some economists say the exchange rate will crash. Some say it will remain relatively stable. Some say it will improve.

 

A wise old friend of mine gave me a piece of advice many years ago: Don't worry until you have something to worry about.

 

I'm not going to worry about the exchange rate either improving or going to hell until it happens.

 

[payless]

I've often stated that I know and understand virtually nothing about economics.

 

A wise old friend of mine gave me a piece of advice many years ago: Don't worry until you have something to worry about.

 

I'm not going to worry about the exchange rate either improving or going to hell until it happens.

 

There have been no observations of Ostriches putting their heads in the sand. A common counterargument is that a species that displayed this behaviour would not survive very long.

[Gaybutton]

There have been no observations of Ostriches putting their heads in the sand. A common counterargument is that a species that displayed this behaviour would not survive very long.

 

My counterargument would be that the ostriches don't put their heads in the sand until something actually occurs to frighten them.

[fedssocr]

Bob's assessment is 100% right on. I suggest you read this great article on why the dollar will be crashing.

 

http://www.marketoracle.net/Article4248.html

 

wow, I was already pretty depressed and after reading this I may go over the edge altogether! The world has an awful lot of problems right now. They say the "misery index" is rising fast due to the food crisis. I guess it's going to get a whole lot more miserable for a lot of people who have no idea what is coming. Or they are willfully ignoring the problems because they are just so daunting.

 

One of my friends had a BF from Germany who wrote for a German economics magazine. Four or five years ago he was predicting a collapse of the US economy based largely on the housing bubble and the fact that we owe so much money to so many other countries. I guess those predictions are finally coming true. People who think this is just going to be a little recessive blip are in for a rude awakening I fear.

 

I am glad I have been traveling the last several years while I am still young. Depending on how bad things end up getting I may not have the option to do that in the future. I wonder if this year's trip may be my last to LoS.