US Dollar has sunk to record lows against Euro

http://news.scotsman.com/latest.cfm?id=3759014 ^ | me

[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.

[fallujah-nuker]

Dec31,1999 asked "But wouldn't that have been much easier and lucrative if we had put a 10% tariff on Chinese goods four years ago? Other countries do it. Why do we have to be the world's _____?"

No no, of course it would avoided shipping our industrial base to China and allowing China to build a large hoard of dollars but it would have violated free trade theory. With the free trade gang it is theology.

[Axenolith]

Whether or not we are better off (we are) is irrelevant. Basically, you're saying that inflating the hell out of the currency is good because it, for some odd logic, is directly related to improvements in the availability of those product or our lifestyle in general.

I posit that under a stable currency system, many of those items would have fallen in price. The means of production of each one, scale of available transport and variety or types are cheaper and more efficient today. By any rights, they should be cheaper.

Also, each and every one of those items can be currently purchased for at or below the quantity of silver or gold that would purchase them in 1900, for the reasons I've outlined. Additionally, the price of the sugar, butter, and train ticket are directly and majorly subsidized by taxpayer money, FWIW.

[Moonman62]

Nonsense. Examine the hottest regions of economic growth, such as LA out in California. Notice that their real estate is not going down in price (the definition of deflation).

Price movements due to supply and demand in a market are neither inflation nor deflation. For instance, if the money supply is held constant and the prices for houses in California go up, then the prices for something else in the economy must go down to balance it out.

I'll repeat. Economic growth (more goods and services being produced) is deflationary.

[jpsb]

That does appear to match this rule, asumming the money supply does not go up too.

The supply of other goods goes up.

[Moonman62]

OTOH, were we really better off in 1900?

Inflation has nothing to do with us being better off today. It's a correlation not a cause. However, I do feel better that much more powerful computers are available today at just a fraction of the cost of what they were in the 1980's.

[Moonman62]

If you import more than you export, then your currency is overvalued. If you export more than you import, then your currency is undervalued.

That's it. That's the test. That's what the "free market" examines when valuing currencies.

That's your test, and there is no factual basis to it. I just got through reading a Federal Reserve study that looked at 25 countries that corrected account deficits. The link to it is here.

http://www.federalreserve.gov/pubs/ifdp/2000/692/default.htm

[endthematrix]

Try correlating prices from 1970 to current. Food prices are stagnant while others dropped significantly. The CPI doesn't reflect those changes. How many times do you buy durable good?

[Moonman62]

That's just so very, very wrong. GWB isn't *doing* anything.

Here's a little test: tell this forum *what* GWB is physically doing to the Dollar (you can't name it, by the way).

Actually, it's the Treasury that buys or sells dollars on the open market. The official name for it is intervention, and when it's done the Treasury issues a press realease. While it's true that the Treasury hasn't intervened, it hasn't had to. Our current weak dollar has come from low interest rates and jawboning, along with some cooperation from Japan and some stupidity from the EU. GWB's weak dollar policy is the worst kept secret in Washington. If you don't believe it you don't have to, but it puts you in the extreme minority.

[Commie Basher]

This type of article isn't even looked at by the 'true' FReeper Republicans because "The Man" can do "NO WRONG".

That's because "The Man" is BRILLIANT and WALKS ON WATER and the GREATEST and MOST CONSERVATIVE president in US history, and anyone who doesn't think so is a HATE-AMERICA-FIRST, TINFOIL-HAT TERRORIST-LOVER.

(Of course, I'm just a loserdopian who voted for Badnarik).

[Commie Basher]

Yeah. It sucks that Bush won reelection, doesn't it?

I think so.

[endthematrix]

"Is their an American banana industry overcome with joy at the prospects the weak dollar will make banana imports more expensive? "

I don't know about the banana industry, but there are 98 trade associations, representing the country's largest manufacturing and agricultural trade groups that say U.S. dollar "is not becoming too weak...In fact, the dollar is still too strong."

Welcome to the Coalition for a Sound Dollar

[endthematrix]

[Moonman62]

I don't know about the banana industry, but there are 98 trade associations, representing the country's largest manufacturing and agricultural trade groups that say U.S. dollar "is not becoming too weak...In fact, the dollar is still too strong."

Don't you think they have a bit of a conflict of interest?

[Moonman62]

I'd like to see that same chart going back to 1960 or so.

[tm22721]

Will Bush like Hoover get blamed for a crash and stick us we another 60 years of socialist Democratic rule? Keep your eye on the dollar.

The Fed will monetize our debt, ie drop dollars from helicopters to forestall a drop in our standard of living.

Get ready for hyperinflation, the 70s were a cakewalk compared to this mess and gold is headed to $3000+.

That's when we get Volcker back in, he's willing to apply the tourniquet and sacrifice the arms and legs to save the body (as he did in the 80s).

BUMP

[endthematrix]

Wouldn't it (dollar) have some weight going further back. Due to less manipulation from all the various mechanisms that fluctuate it today? My reply was to expats chart that went to the 70's. My point was to help focus the modern dilemma of a high dollar, not the historical.

[Moonman62]

But if you go back past the 1970's it's apparent that the dollar isn't overvalued. It was devalued significantly in the early 1970's. The dollar has been pretty much been manipulated throughout the industrial era, the government has just found different clever ways to do it. The most significant was probably the Bretton Woods agreement from the early 1940's to the early 1970's. It was just one of the many monstrosities that FDR left us.

[endthematrix]

No. The high dollar encourages US imports and discouraged US exports.

[Moonman62]

Get ready for hyperinflation, the 70s were a cakewalk compared to this mess and gold is headed to $3000+.

The 1970's inflation was triggered by massive government overspending and corruption that caused the collapse of the Bretton Woods foreign exchange system. There is no danger of that magnitude today.

That's when we get Volcker back in, he's willing to apply the tourniquet and sacrifice the arms and legs to save the body (as he did in the 80s).

Volcker isn't that smart. He raised interest rates the way he did with Reagan's approval in support of his strong currency policy. Don't let the Left fool you into thinking that Volcker was or is some kind of Genius. It was all Reagan.

[Moonman62]

That's true, but the majority of the corporations in our economy are not exporters. Those who are have a conflict of interest when they support policies that benefit them and no one else.