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The inevitable collapse of the dollar

Isnt one of the reasons our trade deficit has been so high is because the dollar was as well? Meaning it is cheaper to purchase abroad than at home? And easier for and more profitable for foreign companies to import into our country?

A declining dollar should in theory increase our exports and reduce our deficit.
 
A declining dollar should in theory increase our exports and reduce our deficit.
Click to expand...

I've heard that the trade deficit is not shrinking like one might expect from the weak dollar right now, though. I suppose if something from China used to cost us $14 and now it costs $18 but is still cheaper than anywhere else, now we're out $18 instead of $14.
 
Originally posted by: Skoorb
A declining dollar should in theory increase our exports and reduce our deficit.
Click to expand...

I've heard that the trade deficit is not shrinking like one might expect from the weak dollar right now, though. I suppose if something from China used to cost us $14 and now it costs $18 but is still cheaper than anywhere else, now we're out $18 instead of $14.
Click to expand...
China pegs their currency to a basket of currencies which is dominated by the dollar. This is simply a form of currency manipulation of course like all pegs are. So, even though the dollar has fallen huge versus the euro, it has hardly moved versus the yuan.

http://www.x-rates.com/d/USD/CNY/hist2007.html

 
As soon as OPEC and other major oil producing countries start abandoning the USD as the currency by which their oil is valued (saudi arabia is considering this as I type) the worth of the dollar will plummet.

Rogo

 
I am watching this now. It seems to make sense but also seems to grossly oversimplify and is clearly one-sided. It's obvious that the US seems to take more than its fair share of the pie, but then it always has relative to poorer countries and it is not alone. Canada does, too, as does France, as do all the wealthy countries. In a sense, they are all masters to their slaves of China, India, etc. From an economic standpoint, there is no global equity, never has been and there's no reason to think there will be.

The US' debt is spiralling, but I recall somebody posting stats that compared to other nations its debt was really not that high as a comparison with GDP (?).
 
Originally posted by: Skoorb
A declining dollar should in theory increase our exports and reduce our deficit.
Click to expand...

I've heard that the trade deficit is not shrinking like one might expect from the weak dollar right now, though. I suppose if something from China used to cost us $14 and now it costs $18 but is still cheaper than anywhere else, now we're out $18 instead of $14.
Click to expand...

Some of those dollars might come back into the U.S.--but they won't be purchasing American labor. Instead, they'll get used to buy American capital and assets--land, real estate, businesses, stocks, etc.

In other words, Americans will have impoverished themselves by trading hard assets for ephemeral goods and services.
 
Originally posted by: Skoorb
I am watching this now. It seems to make sense but also seems to grossly oversimplify and is clearly one-sided. It's obvious that the US seems to take more than its fair share of the pie, but then it always has relative to poorer countries and it is not alone. Canada does, too, as does France, as do all the wealthy countries. In a sense, they are all masters to their slaves of China, India, etc. From an economic standpoint, there is no global equity, never has been and there's no reason to think there will be.

The US' debt is spiralling, but I recall somebody posting stats that compared to other nations its debt was really not that high as a comparison with GDP (?).
Click to expand...

Text

 
Originally posted by: K1052
Originally posted by: Skoorb
I am watching this now. It seems to make sense but also seems to grossly oversimplify and is clearly one-sided. It's obvious that the US seems to take more than its fair share of the pie, but then it always has relative to poorer countries and it is not alone. Canada does, too, as does France, as do all the wealthy countries. In a sense, they are all masters to their slaves of China, India, etc. From an economic standpoint, there is no global equity, never has been and there's no reason to think there will be.

The US' debt is spiralling, but I recall somebody posting stats that compared to other nations its debt was really not that high as a comparison with GDP (?).
Click to expand...

Text
Click to expand...
So the second and third strongest economies, Japan and Germany, have higher debt, though China when it surpasses Germany has a very low debt. Canada's is a hair higher than US, as a percentage of gdp.

 
Originally posted by: Genx87
Originally posted by: Pabster
Yeah, but China artificially devalues their currency.
Click to expand...

True, Bush failed to slap the Chinese for not playing by the rules.
Click to expand...

Nobody wants to be the President that causes a trade war with the largest producer of toys and other junk in the world. Imagine what would happen if he started one in the fall and Christmas rolled around with no toys?

We're too pussy to fight this war. People want to roll up to wally world and buy their cheap trash, without realizing it's destroying the country. They're all "me me me me" and short-term impulsive buyers.
---------------------

As far as the dollar "collapsing". It's hard to tell whether it will or not, there are a lot of variables in that calculation.

I doubt that Saudi will switch, we're too important for them at this point. If you follow oil prices compared to the dollar, they are going up in equiv. increments, meaning that Saudi is pulling in the same amount of revenue in any other currency.

The biggest difference is that the avg. American is paying more and will continue to do so.
 
Originally posted by: LegendKiller
Originally posted by: Genx87
Originally posted by: Pabster
Yeah, but China artificially devalues their currency.
Click to expand...

True, Bush failed to slap the Chinese for not playing by the rules.
Click to expand...

Nobody wants to be the President that causes a trade war with the largest producer of toys and other junk in the world. Imagine what would happen if he started one in the fall and Christmas rolled around with no toys?

We're too pussy to fight this war. People want to roll up to wally world and buy their cheap trash, without realizing it's destroying the country. They're all "me me me me" and short-term impulsive buyers.
---------------------

As far as the dollar "collapsing". It's hard to tell whether it will or not, there are a lot of variables in that calculation.

I doubt that Saudi will switch, we're too important for them at this point. If you follow oil prices compared to the dollar, they are going up in equiv. increments, meaning that Saudi is pulling in the same amount of revenue in any other currency.

The biggest difference is that the avg. American is paying more and will continue to do so.
Click to expand...

Cant disagree with you there.
 
Originally posted by: LegendKiller
Originally posted by: Genx87
Originally posted by: Pabster
Yeah, but China artificially devalues their currency.
Click to expand...

True, Bush failed to slap the Chinese for not playing by the rules.
Click to expand...

Nobody wants to be the President that causes a trade war with the largest producer of toys and other junk in the world. Imagine what would happen if he started one in the fall and Christmas rolled around with no toys?

We're too pussy to fight this war. People want to roll up to wally world and buy their cheap trash, without realizing it's destroying the country. They're all "me me me me" and short-term impulsive buyers.
---------------------

As far as the dollar "collapsing". It's hard to tell whether it will or not, there are a lot of variables in that calculation.

I doubt that Saudi will switch, we're too important for them at this point. If you follow oil prices compared to the dollar, they are going up in equiv. increments, meaning that Saudi is pulling in the same amount of revenue in any other currency.

The biggest difference is that the avg. American is paying more and will continue to do so.
Click to expand...

Why pick on China only? The US and Japan both are manipulating their currencies like mad. Nobody can hold a candle to the Japanese when it comes to currency manipulation. The US looks like right big hypocrites for barking at China for currency manipulation while a. doing it itself b. embracing Japan's carry trade even it this is a major tool the Japanese use to keep the Yen as low as possible versus the US dollar (ie. manipulating their currency).


 
Originally posted by: LegendKiller
We're too pussy to fight this war. People want to roll up to wally world and buy their cheap trash, without realizing it's destroying the country. They're all "me me me me" and short-term impulsive buyers.
Click to expand...

QFT. :thumbsup:
 
Originally posted by: GrGr
Originally posted by: LegendKiller
Originally posted by: Genx87
Originally posted by: Pabster
Yeah, but China artificially devalues their currency.
Click to expand...

True, Bush failed to slap the Chinese for not playing by the rules.
Click to expand...

Nobody wants to be the President that causes a trade war with the largest producer of toys and other junk in the world. Imagine what would happen if he started one in the fall and Christmas rolled around with no toys?

We're too pussy to fight this war. People want to roll up to wally world and buy their cheap trash, without realizing it's destroying the country. They're all "me me me me" and short-term impulsive buyers.
---------------------

As far as the dollar "collapsing". It's hard to tell whether it will or not, there are a lot of variables in that calculation.

I doubt that Saudi will switch, we're too important for them at this point. If you follow oil prices compared to the dollar, they are going up in equiv. increments, meaning that Saudi is pulling in the same amount of revenue in any other currency.

The biggest difference is that the avg. American is paying more and will continue to do so.
Click to expand...

Why pick on China only? The US and Japan both are manipulating their currencies like mad. Nobody can hold a candle to the Japanese when it comes to currency manipulation. The US looks like right big hypocrites for barking at China for currency manipulation while a. doing it itself b. embracing Japan's carry trade even it this is a major tool the Japanese use to keep the Yen as low as possible versus the US dollar (ie. manipulating their currency).
Click to expand...


Every country does it to some extent. The largest difference is that China's doing it to mainain the odd trade balance and they are doing it to everybody. The scale and bredth of the effort is unprecidented in history.

The Yen Carry Trade is an interesting beast. It increases the demand for their financing, but decreases demand for their currency since people just dump it after borrowing in Yen. In any natural cycle, removing the carry trade, it'd have the same effect since their rates are so low. Foreign investment would be discouraged, decreasing demand for the Yen. Japan itself is still in an odd position, as their rates are low but their GDP is still not in line, nor is their inflation on a relative basis.

You can't compare Japan's situation to China's.

The big thing about China is that they cannot sustain the growth they have had. Their market is massively overheated and any government attempts at intervention have failed. It could end pretty badly.
 
Originally posted by: LegendKiller
Originally posted by: GrGr
Originally posted by: LegendKiller
Originally posted by: Genx87
Originally posted by: Pabster
Yeah, but China artificially devalues their currency.
Click to expand...

True, Bush failed to slap the Chinese for not playing by the rules.
Click to expand...

Nobody wants to be the President that causes a trade war with the largest producer of toys and other junk in the world. Imagine what would happen if he started one in the fall and Christmas rolled around with no toys?

We're too pussy to fight this war. People want to roll up to wally world and buy their cheap trash, without realizing it's destroying the country. They're all "me me me me" and short-term impulsive buyers.
---------------------

As far as the dollar "collapsing". It's hard to tell whether it will or not, there are a lot of variables in that calculation.

I doubt that Saudi will switch, we're too important for them at this point. If you follow oil prices compared to the dollar, they are going up in equiv. increments, meaning that Saudi is pulling in the same amount of revenue in any other currency.

The biggest difference is that the avg. American is paying more and will continue to do so.
Click to expand...

Why pick on China only? The US and Japan both are manipulating their currencies like mad. Nobody can hold a candle to the Japanese when it comes to currency manipulation. The US looks like right big hypocrites for barking at China for currency manipulation while a. doing it itself b. embracing Japan's carry trade even it this is a major tool the Japanese use to keep the Yen as low as possible versus the US dollar (ie. manipulating their currency).
Click to expand...


Every country does it to some extent. The largest difference is that China's doing it to mainain the odd trade balance and they are doing it to everybody. The scale and bredth of the effort is unprecidented in history.

The Yen Carry Trade is an interesting beast. It increases the demand for their financing, but decreases demand for their currency since people just dump it after borrowing in Yen. In any natural cycle, removing the carry trade, it'd have the same effect since their rates are so low. Foreign investment would be discouraged, decreasing demand for the Yen. Japan itself is still in an odd position, as their rates are low but their GDP is still not in line, nor is their inflation on a relative basis.

You can't compare Japan's situation to China's.

The big thing about China is that they cannot sustain the growth they have had. Their market is massively overheated and any government attempts at intervention have failed. It could end pretty badly.
Click to expand...

Japan is doing the same thing to everybody else too. They are the number two economy of the world yet their currency is a joke. The Japanese do not encourage foreign investment in Japan. They want to keep demand for the Yen as low as possible to keep the Yen way below the dollar so the big exporters can keep undercutting the competition for exports to the US.

It strikes me as hypocritical of the US to bark at China while embracing Japan while Japan has a far larger trade surplus with the US.

 
Originally posted by: GrGr
Originally posted by: LegendKiller
Originally posted by: GrGr
Originally posted by: LegendKiller
Originally posted by: Genx87
Originally posted by: Pabster
Yeah, but China artificially devalues their currency.
Click to expand...

True, Bush failed to slap the Chinese for not playing by the rules.
Click to expand...

Nobody wants to be the President that causes a trade war with the largest producer of toys and other junk in the world. Imagine what would happen if he started one in the fall and Christmas rolled around with no toys?

We're too pussy to fight this war. People want to roll up to wally world and buy their cheap trash, without realizing it's destroying the country. They're all "me me me me" and short-term impulsive buyers.
---------------------

As far as the dollar "collapsing". It's hard to tell whether it will or not, there are a lot of variables in that calculation.

I doubt that Saudi will switch, we're too important for them at this point. If you follow oil prices compared to the dollar, they are going up in equiv. increments, meaning that Saudi is pulling in the same amount of revenue in any other currency.

The biggest difference is that the avg. American is paying more and will continue to do so.
Click to expand...

Why pick on China only? The US and Japan both are manipulating their currencies like mad. Nobody can hold a candle to the Japanese when it comes to currency manipulation. The US looks like right big hypocrites for barking at China for currency manipulation while a. doing it itself b. embracing Japan's carry trade even it this is a major tool the Japanese use to keep the Yen as low as possible versus the US dollar (ie. manipulating their currency).
Click to expand...


Every country does it to some extent. The largest difference is that China's doing it to mainain the odd trade balance and they are doing it to everybody. The scale and bredth of the effort is unprecidented in history.

The Yen Carry Trade is an interesting beast. It increases the demand for their financing, but decreases demand for their currency since people just dump it after borrowing in Yen. In any natural cycle, removing the carry trade, it'd have the same effect since their rates are so low. Foreign investment would be discouraged, decreasing demand for the Yen. Japan itself is still in an odd position, as their rates are low but their GDP is still not in line, nor is their inflation on a relative basis.

You can't compare Japan's situation to China's.

The big thing about China is that they cannot sustain the growth they have had. Their market is massively overheated and any government attempts at intervention have failed. It could end pretty badly.
Click to expand...

Japan is doing the same thing to everybody else too. They are the number two economy of the world yet their currency is a joke. The Japanese do not encourage foreign investment in Japan. They want to keep demand for the Yen as low as possible to keep the Yen way below the dollar so the big exporters can keep undercutting the competition for exports to the US.

It strikes me as hypocritical of the US to bark at China while embracing Japan while Japan has a far larger trade surplus with the US.
Click to expand...


I don't disagree, I just said there are a lot of factors in there. Their economy may be #2, but it's still recovering somewhat.
 
Originally posted by: Genx87
Originally posted by: Pabster
Yeah, but China artificially devalues their currency.
Click to expand...

True, Bush failed to slap the Chinese for not playing by the rules.
Click to expand...

Not playing by the rules? You know that one of the effects of a weak dollar policy, is that US debt that is owned by other countries gets devalued. All those US bonds that countries like Japan and France have to cover the US's debt? They just lost their monetary value by over half relatively since Bush has come into office. You can bet that the Euro countries are extremely pissed at the US. Now a country like China has purchases large amounts of US debt over the years.

Here's the other problem. The US can only continue to increase its debt IF other countries are willing to purchase it. If the dollar keeps falling as it is, why would anyone invest into declining US assets? US bonds are considered one of the safest forms of investments as it is garanteed by the government, but what good are they, if the US dollar drops 20% a year like it has? China or Japan refusing to buy any more US debt would cause a total dollar collapse within the US, and the Bush administration is playing a dangerous game. Interestingly this dollar decline is great for US investors, IF they purchase foreign funds. An almost garanteed 20% increase per year? Great, except this translates into investing money coming out of the US, and into other markets.

http://www.forbes.com/personal...17etfbriefing_inl.html

What a weaker dollar really does is to encourage American and international investors to invest in non-American markets. The more the dollar drops, the more global equities rise. Many Asian currencies are hitting record highs against the U.S. dollar.

The Australian dollar has climbed to a 25-year highs, while the Singapore dollar has touched 10-year highs. The Brazilian real, which has jumped 18% in value against the U.S. dollar this year, and the Indian rupee's sharp appreciation against the U.S. dollar during the past year, have supercharged U.S. dollar investors' returns in those markets.

According to EPFR Global, investors are pouring money into global funds--with net inflows of $96.94 billion into world equity funds so far in 2007, while taking out $9.6 billion out of U.S. equity funds. Brazil's local stock exchange, the Bovespa, reported that investors have injected $1.2 billion into the market in September alone.

Foreign investors slashed their holdings of U.S. securities by a record amount as the credit squeeze intensified, according to the U.S. Treasury Department. The Treasury said net sales of U.S. market assets--including bonds, notes and equities--were $69.3 billion in August after a revised inflow of $19.5 billion during July. The August outflow exceeded the previous record decline of $21.2 billion in March 1990.
Click to expand...

There are benefits to a weak dollar, but the US is a country that benefits much more from a strong dollar as a superpower.

http://www.globalpolicy.org/so...007/0116weakdollar.htm

The People's Bank of China is holding some $1.01 trillion in reserves, the vast majority in dollars, which it has amassed as part of its strategy to keep the yuan from appreciating against the American currency to ensure Chinese products remain competitive in the United States market.

The Chinese and other Asian central banks are beginning to diversify more into euros, which has helped fuel its recent appreciation. "That's really the main reason," said Ben Simpfendorfer, a currency strategist in the Hong Kong office of the Royal Bank of Scotland.

Such diversification, however, will have limited effect unless Asian countries buy a lot fewer Treasury bonds, slowing the flood of credit that has kept interest American interest rates low and supported consumer spending. And that would harm the Chinese as much, if not more, than it would Americans. "With China," said Waldman, the manufacturing economist, "the capacity for trade imbalances to adjust is minimal."
Click to expand...

The net result, is that the one main benefit of a weak dollar is nullified. As such, keeping a weak dollar policy is the most asanine policy ever devised.
 
I think I posted an article a year or so ago that Dick Cheney and leading PNACers were putting their money in the euro. Some people always come out on top eh?
 
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