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Thread: Anybody got a spare parachute for the dollar?

  1. #1
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    Anybody got a spare parachute for the dollar?

    Anybody who has been looking into international currencies lately must have noticed the freefall that the dollar is in right now (at the time of this writing the $/€ ratio is 1.32).

    While I have been waiting for this to happen for some time now, the speed at which the dollar is losing value is just frightening. I have never seen something like this before.

    Could this herald the (long overdue) devaluation of the dollar and the start of the next US recession/depression?
    Eh, what's this? A Republican from Texas that actually makes sense and can speak English?

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    We would have seen this a few years ago (and started down this road) had we not jumped into a trillion dollar Iraq spending spree which helped pump our domestic numbers. While we are certainly still in the center of that spending orgy, the debt we have accumulated during the course of that spending has finally reached the point where it is negating the short term economic benifits.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by gamehuis View Post
    Anybody who has been looking into international currencies lately must have noticed the freefall that the dollar is in right now (at the time of this writing the $/€ ratio is 1.32).

    While I have been waiting for this to happen for some time now, the speed at which the dollar is losing value is just frightening. I have never seen something like this before.

    Could this herald the (long overdue) devaluation of the dollar and the start of the next US recession/depression?
    Hardly. It will only increase American exports and a massive influx of shoppers into the U.S. to take advantage of our fantastic deals here in the U.S. And if it finally forces China to unpeg the Yuan to the dollar, so much the better. This should have happened a long time ago as we have been urging them. This is a "win-win" situation.
    "We sleep soundly in our beds because rough men stand ready in the night to visit violence on those who would do us harm." - Winston Churchill

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    Quote Originally Posted by daewoo View Post
    We would have seen this a few years ago (and started down this road) had we not jumped into a trillion dollar Iraq spending spree which helped pump our domestic numbers. While we are certainly still in the center of that spending orgy, the debt we have accumulated during the course of that spending has finally reached the point where it is negating the short term economic benifits.
    Let's not let the facts get in the way of ideology. The U.S. debt is about 65% which is even less than Germany's and Japan's. Their economy, especially Germany has been in the toilet. Japan for an entire decade Our economy is booming. Which one would we rather have? A booming economy of a recession? Seems like a no-brainer to me.
    "We sleep soundly in our beds because rough men stand ready in the night to visit violence on those who would do us harm." - Winston Churchill

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    Quote Originally Posted by Missouri Mule View Post
    Hardly. It will only increase American exports and a massive influx of shoppers into the U.S. to take advantage of our fantastic deals here in the U.S. And if it finally forces China to unpeg the Yuan to the dollar, so much the better. This should have happened a long time ago as we have been urging them. This is a "win-win" situation.
    Except that has not happened. You are essentially trying (once again) to use a dmbified version of a fairly complex theory which has led you to yet another unsupportable, idiotic conclusion.

    The dolalr has been slowly falling for several years, and contrary to the dumbed down version of economic theory that you are pushing here, it has not made our manufactured goods sell. It has not encouraged increased shopping by foreigners (people do not cross oceans just to shop). It has, in fact, driven prices UP and made us even less competitive. No opinion there, just fact.

    Prices have been driven UP by our falling dollar because we import over 80% of the manufactured raw materials we use in production. A falling dollar means a higher cost for those materials. The majority of industrial machinery used in the US today is also imported, meaning higher costs for that as well. The only thing that a lower dollar gets us is coceptually cheaper labor.

    First, if I was in your mental class, I would not cheer cheaper labor prices for XXXXXX. Second, the increased volume margin on the raw materials more than negates the effectof the cheaper labor.

    Again, no specualtion, just cold, hard facts. The dollar has been falling for long enough that we know damn well what the effect is. Those pushing the "lower dollar is good becuase it = cheaper exports" are just banking on the fact that most americans have only an extremely slight grasp of how the economy works, and many are stupid enough to actually buy the BS that the talking heads on their TV are selling.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by Missouri Mule View Post
    Let's not let the facts get in the way of ideology. The U.S. debt is about 65% which is even less than Germany's and Japan's. Their economy, especially Germany has been in the toilet. Japan for an entire decade Our economy is booming. Which one would we rather have? A booming economy of a recession? Seems like a no-brainer to me.
    Except for the fact that the 65% number that you keep tossing around has been completelly debunked more times than I can count, including within the last day right here on THIS forum, you MIGHT have a point here.

    I don't "prefer" recesson or growth. I prefer an economy that reflects the underlying fundamentals. When you have a boom economy when the fundamentals say "bust", you are settign yourself up for a serious fall.

    Also, you might look at private debt in those nations as well. It does make a difference.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by Missouri Mule View Post
    The U.S. debt is about 65% which is even less than Germany's and Japan's. Their economy, especially Germany has been in the toilet. Japan for an entire decade Our economy is booming. Which one would we rather have? A booming economy of a recession? Seems like a no-brainer to me.
    Do you even understand those countries? Japan's economy went into a recession for a number of reasons that has little or nothing to do with its national debt. A fundementally weak and corrupt financial sector with unsavory loan procedures backed by incredibly weak or non-existance gov't oversight was one of them. Germany's current problems stem not from its debt, but from its business practices that have made many parts of its economy very uncompetitive in the world market.

    The world is like a homogenous rubber ball to you when it is infact one of the biggest onions.

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    Quote Originally Posted by daewoo View Post
    Except for the fact that the 65% number that you keep tossing around has been completelly debunked more times than I can count, including within the last day right here on THIS forum, you MIGHT have a point here.

    I don't "prefer" recesson or growth. I prefer an economy that reflects the underlying fundamentals. When you have a boom economy when the fundamentals say "bust", you are settign yourself up for a serious fall.

    Also, you might look at private debt in those nations as well. It does make a difference.
    Then your problem is with the CIA; not me. You can contact that agency at Langley, Virginia. Take it up with them.

    Our "private" debt? We have money coming out of our ears. Americans have never had a higher standard of living. And it keeps going up. Having debt is not a problem if it can be serviced. I've already explained how this works in another thread. You might want to read that.
    "We sleep soundly in our beds because rough men stand ready in the night to visit violence on those who would do us harm." - Winston Churchill

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    Quote Originally Posted by obvious_child View Post
    Do you even understand those countries? Japan's economy went into a recession for a number of reasons that has little or nothing to do with its national debt. A fundementally weak and corrupt financial sector with unsavory loan procedures backed by incredibly weak or non-existance gov't oversight was one of them. Germany's current problems stem not from its debt, but from its business practices that have made many parts of its economy very uncompetitive in the world market.

    The world is like a homogenous rubber ball to you when it is infact one of the biggest onions.
    I never said it had anything to do with its national debt. You have raised a red herring. Japan had a problem in many other areas and that is why this argument that the United States has this "big problem" is so ridiculous. And Japan's problem became so serious that it came quite close to the precipice of disaster when deflation became a very real possibility. That's a far, far, far more serious problem than inflation is. Inflation can always be corrected by proper monetary policy. Deflation cannot. Once it gets going the whole economy can collapse. The "real" cost of borrowing becomes ever and ever greater because the interest rate can't go below 0% as it was in Japan for a long time. Only now has it started to correct itself. And we used to hear that this wonderful governmental/corporate alliance in Japan would sink the American economy. "Japan Incorporated" is what we heard. It turned out to be a lot of hooey such as we are hearing now. As I said, if a person doesn't let facts get in the way, ideology, in this case bashing the American economy, will win every time.
    "We sleep soundly in our beds because rough men stand ready in the night to visit violence on those who would do us harm." - Winston Churchill

  10. #10
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    Quote Originally Posted by Missouri Mule View Post
    I never said it had anything to do with its national debt.
    The U.S. debt is about 65% which is even less than Germany's and Japan's. Their economy, especially Germany has been in the toilet
    Do you enjoy lying? You clearly put the problems of the economy squarely within the issues of the debt as a percentage of GDP.

    Japan had a problem in many other areas and that is why this argument that the United States has this "big problem" is so ridiculous.
    Why did you contrast them then?

    And Japan's problem became so serious that it came quite close to the precipice of disaster when deflation became a very real possibility.
    Became? Deflation has been a part of Japan's economy for years. What are you talking about? Japan's problem became so serious because the Gov't didn't do squat to seriously fix the underlying problems with the financial sector. There are STILL zombie banks.

    That's a far, far, far more serious problem than inflation is. Inflation can always be corrected by proper monetary policy. Deflation cannot. Once it gets going the whole economy can collapse.
    Funny you say that given that deflation has been a serious part of Japan's economy for years yet it the economy is one of the largest in the world. Again, what are you talking about?

    The "real" cost of borrowing becomes ever and ever greater because the interest rate can't go below 0% as it was in Japan for a long time.
    Huh? The cost of borrowing is shown through the lack of investment as payments on refinanced debt are far more attractive then new positive NPV projects.

    I seriously doubt you even understand US economics much less other nation's.

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    Quote Originally Posted by Missouri Mule View Post
    Hardly. It will only increase American exports and a massive influx of shoppers into the U.S. to take advantage of our fantastic deals here in the U.S. And if it finally forces China to unpeg the Yuan to the dollar, so much the better. This should have happened a long time ago as we have been urging them. This is a "win-win" situation.
    If this were really the case, then please explain to me why since the introduction of the Euro in 2002, the Euro has increased in value versus the Dollar by over 50%, but at the same time the trade deficit that the US has with the EU has grown by almost 30%.
    Eh, what's this? A Republican from Texas that actually makes sense and can speak English?

    http://www.ronpaul2008.com/html/Issues_fx.html

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    Quote Originally Posted by Missouri Mule View Post
    Then your problem is with the CIA; not me. You can contact that agency at Langley, Virginia. Take it up with them.

    Our "private" debt? We have money coming out of our ears. Americans have never had a higher standard of living. And it keeps going up. Having debt is not a problem if it can be serviced. I've already explained how this works in another thread. You might want to read that.

    Yea....money coming out our ears and a negative saavings rate.

    I have no issue with the CIA. They repoet the official numbers. I have an issue with the reagan, clinton, and second bush administration for changing calculation of GDP and inflation to artificially pump the GDP numbers and inflation numbers. I also have a problem with dishonest scumbags who use that artificially inflated number after it has been proven conclusively that it IS an artificial number. The CIA did not create that number, they simply copied it from one sheet to another.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by gamehuis View Post
    If this were really the case, then please explain to me why since the introduction of the Euro in 2002, the Euro has increased in value versus the Dollar by over 50%, but at the same time the trade deficit that the US has with the EU has grown by almost 30%.
    Not being an American, you may not be aware that the theory being put forth here by Mule, as illogical and completely at odds with the facts as it may be, is the official party line for American economic apologists.

    In truth the dollar has been sliding long enough that we know EXACTLY what the consequences are...higher energy and materials prices, which drive the cost of our finished goods up so we are even less competitive, coupled with a decreased standard of living for our people offset by a higher private debt level as people struggle to maintain the lifestyle they feel they deserve.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  14. #14
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    The 1.3275 resistance didn't hold, and we are above 1.33 now.

    An a mildly interesting side note, I was speaking with my former partner in an online currency trading service (sold my interest to him) and there is apparently a problem with the charting software they give out with accounts. They are going to have to upgrade it for every customer, because it does not have the ability to display the GBP/USD cross with a "2" as the first number, and analysts expect that they will need that capability in the not too distant future.

    Thats OK, though. Everybody knows that a weak dollar is better than a strong one. Hell, when it is trading 1:1 with the peso, life will be SWEET. A weak dollar is good, hemmoraging money in the form of trade deficits is a sign of strength, as is debt.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    If anyone watches current account deficit, they've probably noticed we're now looking at $250B/quarter to finance FDI outflows. $250B was the total FDI outflow for 2004. The new 12-year USD low and FDI outflows will require some serious increase in government printing capacity to continue servicing just that inflation and debt with debt. No need to reference increases required in consumer debt to maintain standard of living with those changes.

    According to MM, this is excellent prosperity for the US economy. Anyone have a wheelbarrow recommendation for hauling all that prosperity to fertilize decorative landscaping? Or should I just go for the front-end loader now?
    These are my principles. If you don't like them I have others. ~Groucho Marx~

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