Posted on 11/27/2004 10:24:13 AM PST by soccer_linux_mozilla
The United States’ trade deficit is soaring and the once high-flying dollar has sunk to record lows against Europe’s common currency.
The dollar’s record low against the euro coincided with the government’s report that the United States was running a trade deficit through September at annual rate of 592 billion dollars. That compares with last year’s record 496 dollars billion. As a result, the country is having to borrow almost 600 billion dollars from overseas this year to pay for the imported cars, televisions and other items Americans are buying.
I agree with you for the most part, but I wouldn't say paying the bank back each month for a huge mortgage is exactly "owning" a home.
Maybe I just live in a poor area, but I see people hurting badly around here, no jobs, no money, no hope, lots of young people turn to gangs, durgs and prostitution, this is not the America I remember and it is not the America I grew up in. And I live in a sleepy little Texas town, not the inner city.
you make some good points. "sleepy towns", as you say, used to rely on basic industries and manufacturing to provide their jobs base. but with the shift of those offshore, service jobs are what's left. but its hard to have any kind of service economy in a location that has no jobs base to begin with, employing people who then have disposable income to spend on services, which provide employment for some of their fellow citizens.
We all have to compete with slave labor. There is no getting around it. What is slave labor but the opportunity for starving people to make a wage? And BTW, they are only slaves if they don't have a choice. Their other option may be to live off the jungle. If you think we can exist in isolation you have blinders on.
What????
Are you saying the Smith family was short the Euro? LOL! What has their mortgage to do with this?
No silly, a falling dollar will ingenite inflation and higher interest rates. If the banks start lossing to much money on fixed rate mortages they will call them in. Then lot's of folks will lose their homes.
You have to understand that there is nothing a president can do. I trade currency futures. The one thing that is a slam dunk is when a central bank enters the market to support a currency. (Central banks have all the money, remember.) That currency would rally briefly and if you take the short in that rally you will make money. The currency markets are bigger than all the central banks in the world and will flow with the trend better than any other commodity. You can't stop it.
The US stock market is billions, the US bond market is trillions, the currency markets are priceless and infinite. You cannot stop a currency trend with rhetoric or intervention or policy initiative. Bet on it!
The Moneterists and the Austrians (and probably the Supply-siders) would agree that money should serve 3 purposes:
1. a unit of account
2. a store of value
3. a medium of exchange
The Keynesians acknowledge that the store of value function is something that governments should be free to manipulate for various purposes.
What we have going here is a fundamental shift in the demand for dollars (weakening) and a continued increase in the supply of dollars. Unchecked, this could be a bumpy ride.
Excellent question. Remember we are the richest nation in the world. We have most of the world's money and most of the demand for the world's goods. At some point international products are supposed to be too expensive for us to buy. So how much money do we have? Are you going to NOT buy that Japanese gizmo for Christmas because it costs 30% more this year? Hell, you didn't know how much it cost last year. You'll buy it.
I was asking in a rhetorical way. I figured you already knew what happened in 1973. Basically the dollar was devalued, which is the primary reason we had all that inflation in the 1970's. Thanks for the chart. I like those long term charts and they can be hard to find.
I mentioned the CRB index because it seems particularly sensitive to changes in the value of the dollar, or rather it reflects inflationary or deflationary pressure in the short run and is a very good indicator of the value of the dollar in the long run. There is no way to get an exact value of a currency, just good rules of thumb and I think the CRB is the best, though the CPI is pretty good too. The Forex is awful because currencies are routinely manipulated by governments or packs of currency speculators. Here's a chart of the CRB.
There's no way in heck the dollar is overvalued when one goes back more than 30 years. Clinton's problem is he took the dollar too far, too fast. (Reagan had the same problem in the early 1980's, though it was due more to his excellent policies than manipulation.) Now GWB is taking the dollar too far, too fast in the other direction. It amounts to robbing Peter to pay Paul in a zero sum game. The only real economic growth comes from innovation and investment, not manipulating currencies. There are more important things to worry about than trade balances, like a Republican led government whose tentacles keep getting longer and more intrusive in our economy.
In case the chart doesn't display here is a link.
http://www.sharelynx.com/chartsfixed/rCRBFUTURES.gif
Okay, silly. The dollar has been falling for ten years. Interest rates have too. Explain.
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Don't make that mistake. It isn't about Americans and Chinese having the same standard of living. That sort of thinking died in 1929.
It's the foreign exchange value of the Dollar multiplied by average American *Productivity* that gives you your standard of living.
The only way that the Chinese could match our standard of living is by being as productive. Simply changing the values of our currencies won't accomplish that feat.
So try to be modern. Remember that it is Productivity as well as your currency value that counts, not merely your currency.
Say it again, come on, you can learn this too: Productivity.
When you are talking about standards of living, Productivity counts. If you can't remember to factor in Productivity, then you are out of your depth in this discussion.
What we have here is a hard headed, Ivy League educated president who believes the economy is a zero-sum game that should be dominated by the government. There is no question that he is manipulating the dollar downward.
I do admit that there are Supply-Siders who have gold fever, but I am not one of them. Commodity money just adds another layer of inefficiency to an economy. In the case of the Bretton Woods system, it provided the perfect playground for government corruption and manipulation.
You should consider a career in fiction writing because that's pure fantasyland thinking. Enjoy your delusions for yourself, but sharing that sort of nonsense must surely be embarassing.
A callable home mortgage? LOL. I wonder what the interest rate would be on one of those?
Nothing has skyrocketed globally more than productivity. Are you just antagonistic or ignorant? Do you think for one minute that the Chinese haven't copied our productivity standards? You should go to bed. There is nothing more exponential at this point in time than the growth of productivity. How this relates to "your currency" is beyond me.
Let's see were spending $80 billion a year to steal $30 billion of oil. Who the hell makes these decisions?
Making money is easy. Most people simply don't want to truly risk their own wealth on such pursuits (the majority prefers to consume rather than invest the majority of their income, for instance). And that's all fine and well, as even *investing* is a bad idea if you don't understand the basics of economics (especially as demonstrated in a fair part of this thread).
For instance, Chinese "slave" labor, after shipping, Import/Export red tape, various taxes, and other such costs, when factored in with Chinese Productivity amounts to a savings of less than half of the highest American wages. The existing devaluation of the Dollar by 30% in the last two years, once the Yuan finally follows, will reduce that labor cost benefit down to a mere 20%.
For that 20% savings, you get Chinese quality (ick, choke, gasp) and a time delay based upon the length of transit shipping/recieving/inspecting times.
Should the Dollar devalue even further, then even that meager 20% labor "savings" will disappear.
Consider this: would you pay *MORE* for a Chinese car today than for a Japanese, German, or American vehicle of the similar class? What do you think will happen to Chinese imports by Americans as the Yuan catches up to the change in the Dollar? Will Americans buy more or less of those newly increased-in-price goods?
The fed sets interest rates, and if you recall the feds set rates at near zero to help the economy set over the dot com bust. Also recall that the federal budget was in balance at the time so there was no need to borrow which allowed the feds to drop rates. Now the situtation is very diferent, the feds will have to raise interest rates to attract buyers to a falling dollar. Higher interest rates means higher inflation, a falling dollar also means higher inflation due to increased cost of imports.
The US ecomony is going to take a double hit, higher interest rates and higher cost of imports both due to a falling dollar.
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