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A Dollar Warning
Wall Street Journal ^ | Sunday, November 28, 2004 | Wall Street Journal Editors

Posted on 11/27/2004 9:49:36 PM PST by Sarah

A Dollar Warning America can't devalue its way to prosperity. Sunday, November 28, 2004 12:01 a.m. EST President Bush has let everyone know he intends to pursue an ambitious second-term agenda. But if he wants to know what could spoil his plans even before his second Inaugural, he might consider the market reaction to his Administration's weak dollar complacency.

(Excerpt) Read more at opinionjournal.com ...


TOPICS: Business/Economy; Foreign Affairs; Government; News/Current Events
KEYWORDS: currency; devaluation; dollar
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1 posted on 11/27/2004 9:49:37 PM PST by Sarah
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To: FreedomCalls; Southack; B4Ranch; rdb3; jpsb; soccer_linux_mozilla; GOP_1900AD

heads up for those interested!


2 posted on 11/27/2004 9:52:43 PM PST by Sarah
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To: JoeV1

ditto


3 posted on 11/27/2004 9:53:41 PM PST by Sarah
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To: Sarah

Stocks and bonds both tanked the week before Thanksgiving, as the dollar fell again and oil and gold jumped, the latter to its highest level ($449 an ounce) since 1987. Investors may recall that was the last time we had a dollar crisis, as well as a little stock-market episode known as Black Monday. The markets rallied Monday, as the dollar firmed and oil dropped. But we hope the point has been driven home that investors don't bet on countries that debase their currencies.

All the more so when the nation's leading policy makers seem blasé, not to say clueless, about the matter. Treasury Secretary John Snow has been roaming the world saying that he favors a "strong dollar" policy even as he lobbies for a weaker dollar against Asian currencies. Investors who observe what Mr. Snow does tend to discount what he says.


4 posted on 11/27/2004 9:54:32 PM PST by Sarah
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To: Sarah

ping


5 posted on 11/27/2004 9:58:29 PM PST by investigateworld (( Willie Green for President!!! ...Now on my 5th day of not bashing Wal-mart))
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To: Sarah

And.


6 posted on 11/27/2004 10:03:14 PM PST by fatima (Pray for our troops.)
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To: Sarah

Where do you think the $ is going in the next month or two ?


7 posted on 11/27/2004 10:21:15 PM PST by Deetes
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To: Sarah

In my opinion, there is substantial inflation going on even though it is claimed otherwise. I'm in the process of building a new home and common material costs have increased dramatically over the last few years. Steel has increased something like 60% in just the last year. Lumber has more than doubled in the last four years I believe. Virtually everything else has been the same trend.


8 posted on 11/27/2004 10:22:14 PM PST by DB ()
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To: Sarah

Andrew Jackson is rolling over in his grave. And to add insult to injury, they threw his picture on a 20 dollar federal reserve note.


9 posted on 11/27/2004 10:25:01 PM PST by TheExperiment_Is_Over
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To: DB
"I'm in the process of building a new home and common material costs have increased dramatically over the last few years."

Larger quantities of our lumber, for one, are being shipped to other countries, especially China. The current and ongoing economic policy (along with high oil prices also due to much more consumption in China and other countries) should adjust that insanity and other problems. And BTW, while China consumes much of our lumber, China is conserving its own huge forest preverses in Communist (or more recently, fascist) fashion.

Thank goodness, policy and fortune that it is now becoming more expensive to ship such enormous percentages of one of our natural resources overseas. Maybe some of our brightest will also start new domestic small mills (as many of the older small mills were run out of business by their competition in partnership with radical environmentalists).

But yes, certain investors and corporates will complain loudly against it, just as they did against the fed's rate lowering not so long ago (which eventually brought the current trend). Good and secure policy is sometimes uncomfortable, at first. It's time for us to hire more inventive, productive workers (instead of socially oriented witch doctors) to earn our dollars the honest way--by producing more usable goods here and selling them here.
10 posted on 11/27/2004 10:38:26 PM PST by familyop (Essayons)
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To: TheExperiment_Is_Over

Nobody wants to hear it. They're too busy arguing over what Greenspan's latest fart smelled like.


11 posted on 11/27/2004 10:43:50 PM PST by agitator (...And that no man might buy or sell, save he that had the mark)
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To: Starwind

ping


12 posted on 11/27/2004 10:48:27 PM PST by OwenKellogg
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To: Sarah

The business of America is Business.


13 posted on 11/27/2004 10:50:56 PM PST by timestax
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To: TheExperiment_Is_Over

It took almost 200 years to build our great republic, THE REPUBLIC OF THE UNITED STATES OF AMERICA, and it took only 8 years to destroy the beacon of free world (8 years of Bill Clinton)


14 posted on 11/27/2004 10:55:33 PM PST by nanak (Tom Tancredo 2008:Last Hope to Save America)
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To: familyop
China consumes much of our lumber

Yes but how much of that lumber comes back to the US as furniture ?

15 posted on 11/27/2004 11:05:15 PM PST by staytrue
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To: familyop

Although China is consuming a greater share of the world's lumber, steel and cement, they are not directly receiving these mat'ls from us. Domestic lumber mills have closed recently, but not due to environmentalists. The mills that have closed have done so due to inefficiencies in production. Newer mills have a greater production capacity with fewer employees. New mills are slated to come on over the next few months. One mill closed for a short time due to its inability to log in an economical proximity to the mill. That was, arguably, caused by environmentalists. Lumber did almost double in price this year but it wasn't due to the Chinese. Believe it or not it was due to Iraq. The gov't shipped an incredible amount of lumber and plywood to Iraq in the summer of 2003, thus drying up the domestic supply and driving up the price. China gets most of it lumber as logs from South America. Their laws only allow for the importation of raw mat'ls. We compete with the Chinese for steel and cement on the int'l market since our domestic production cannot keep up with demand.


16 posted on 11/27/2004 11:05:42 PM PST by REDWOOD99
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To: Sarah
Investors may recall that was the last time we had a dollar crisis, as well as a little stock-market episode known as Black Monday.

I remember that. I also remember that if you had the guts to buy on Tues. or Weds., you would have been financially rewarded beyond your wildest dreams. I also remember that despite many financial experts predicting the crash would cause a depression, the real economy went booming right along.

Still a weak currency is not a good thing. If your currency is too strong, it is easy to weaken it. If your currency is too weak, it takes bitter medicine to strengthen it.

17 posted on 11/27/2004 11:09:34 PM PST by staytrue
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To: Deetes

On the previous article posted on this topic:
http://www.freerepublic.com/focus/f-news/1289411/posts
most think it hasn't hit bottom yet!


18 posted on 11/27/2004 11:58:37 PM PST by Sarah
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To: DB

Your steel and lumber examples are odd, they aren't blameable on the week dollar, as they're American industries, no?


19 posted on 11/27/2004 11:59:53 PM PST by Sarah
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To: nanak

I'm no fan of Clinton, but how exactly is it his fault that the dollar is weak?


20 posted on 11/28/2004 12:01:08 AM PST by Sarah
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To: staytrue
Yes but how much of that lumber comes back to the US as furniture ?

It comes back as handles on your hammers. I know that much for sure.

21 posted on 11/28/2004 12:04:03 AM PST by BJungNan (Stop Spam - Do NOT buy from junk email.)
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To: DB

When the Fed calculates inflation, they take out everything that is variable: fuel, oil, food, etc. The claim is that it is to unpredictable to calculate, thus there is the claim of only 1% inflation, hahahahaha.


22 posted on 11/28/2004 12:31:07 AM PST by jb6 (Truth = Christ)
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To: familyop

You want to save America? 2 things: 1. balanced budgets from our kleptomaniacs in Congress. 2. get rid of Roosovelt's Banking Reform laws that guarenteed to back the banks with Tax Payer funds. That should put a quick break on run away credit card issuing, which will cut down on debt spending.


23 posted on 11/28/2004 12:34:20 AM PST by jb6 (Truth = Christ)
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To: REDWOOD99

Iraq may be part of it, but the hurricaine season has had some effect on building materials prices, too.


24 posted on 11/28/2004 12:35:32 AM PST by Smokin' Joe (I'm from North Dakota and I'm all FOR Global Warming! Bring it ON!)
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To: nanak

Hah, in 1916 Woodrow Wilson said "My God, what have I done. I have doomed this republic by putting all the power in the hands of only a few men." This was in reference to the Bank Reform laws he signed in 1913.


25 posted on 11/28/2004 12:35:54 AM PST by jb6 (Truth = Christ)
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To: DB

We've been selling a lot of those raw mat'ls (it's been amazing to watch concrete prices!) to China, because China is on a frenzy of public works projects. I really don't know much about all this stuff, am no economist but like to read about it, but everything on your list is "raw" stuff.


26 posted on 11/28/2004 1:07:44 AM PST by Mamzelle (Nov 3--Psalm One...Blessed is the man...!)
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To: Mamzelle
When you have E.L.F. lobbyists (hidden under other names)raw material of any kind is hard come by. These scumbags are getting very active lately and don't believe they are not in high places with more power than just spray paint and firebombs. These homegrown terrorists need to be hunted down. Craig Rosebraugh, This means you!
27 posted on 11/28/2004 1:17:00 AM PST by Splatter
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To: Sarah

bttt for later read


28 posted on 11/28/2004 2:16:46 AM PST by RadioAstronomer
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To: Sarah
The article requires registration. As a matter of principle I cannot access it.

As far as the value of dollars versus European and East Asian currencies, there are a number of political and economic situations at work here. The Democrats hope to develop the "devaluation" issue into a wedge issue, for instance. For another, the flood of dollars going to the Peoples Republic of China is being used for, amongst other things, attempts to dominate future oil production. Certainly those dollars are used to purchase oil in quantities directly leading to SOME of the recent oil price increases. There are many other reasons as well.

Perhaps you are interested in hard currencies, as in the old gold standard. Under the gold standard dollar devaluation would have progressed much farther by now. Attempts to maintain local currency values for domestic political reasons in the face of the foreign exchange markets have lead to bad ends generally in recent decades.

One hopes that current incremental devaluation policies may forestall a sudden drop in dollar values. Extreme and sudden unemployment is much in the Democrat Party's interest so long as George W. Bush can be blamed.

29 posted on 11/28/2004 4:16:33 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: jb6

Holy crap, we'd have a run on the banks (or ATMs, which ever)!


30 posted on 11/28/2004 4:19:51 AM PST by durasell (Friends are so alarming, My lover's never charming...)
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To: Sarah

Very simple, really. Examine the velocity of M3 calculated in reference to GDP at economagic.com. You have to be familiar with the M3 time series first, of course. Notice the inflection points in 1993.

What you are seeing is a flood of dollars, a huge increase in "liquidity". Massive increase in quantity supplied leads to lowered price. You are also seeing the cause of the market blowoff and crash of 2000. Lots of other things as well.


31 posted on 11/28/2004 4:23:57 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: Sarah
I think you're mistaken on the origins of steel and lumber.

Dimensional lumber mostly comes from Canada these days, although some (Yellow Pine) comes from the Southeastern U.S..

Kitchen cabinets are mostly made in Canada, I think...at least the doors are.

I'm not sure where most of our steel comes from, but:

Washington, D.C. –- Based on preliminary Census Bureau data, the American Iron and Steel Institute (AISI) reported today that the United States imported a total of 3,467,000 net tons (NT) of steel in September, including 2,714,000 NT of finished steel. Imports in both categories over the past two months have been the highest levels in four years and, year-to-date (YTD), are up 47 percent compared to the same period last year. The 47 percent gain in finished steel imports is nearly three times the 16.3 percent gain in steel consumption. As a result, steel import penetration in the United States in this period has jumped from 16 to 20 percent.

Almost 100% of electrical devices used in homes today are made elsewhere. Plumbing fixtures too. Even 500# Kohler cast-iron bathtubs are made in China and shipped over here.

32 posted on 11/28/2004 4:25:44 AM PST by snopercod (Bigger government means clinton won. Less freedom means Osama won. Get it?)
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To: Iris7

Are you saying that more dollars lowers prices? If so, I would tend to think you're wrong. More dollars chasing goods equals inflation.


33 posted on 11/28/2004 4:26:51 AM PST by durasell (Friends are so alarming, My lover's never charming...)
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To: Iris7

M3 time series (sorry to not leave links earlier):

http://www.economagic.com/em-cgi/charter.exe/fedstl/m3sl

M3 velocity time series:

http://www.economagic.com/em-cgi/charter.exe/var/vel-gdp-per-m3


34 posted on 11/28/2004 4:29:37 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: durasell
Since we are discussing the "devaluation" of the dollar, we are discussing the value of the dollar in foreign currencies. More dollars mean lower prices for dollars.

A lower price for dollars means a higher price for imported goods, and feed through prices for domestic goods. Inflation, that is, unless "liquidity" is curbed. A crash in the house market would have dire political repercussions, naturally.

I am sorry I did not make all this explicit earlier.

As far as inflation goes, it is probably not escapable.

There are good arguments that the Urban Consumer Price Index has been largely bogus since at least LBJ's time. The Producer Price Index is a more accurate inflation index, seems to me.

35 posted on 11/28/2004 4:44:38 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: Iris7

I agree. And also believe a bust in housing market is somewhat inevitable. This, along with its long term economic consequences will annoy many people.


36 posted on 11/28/2004 4:46:44 AM PST by durasell (Friends are so alarming, My lover's never charming...)
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To: agitator

"They're too busy arguing over what Greenspan's latest fart smelled like."

Why argue over something that Andrea Mitchell is an expert at or should I say "connoisseur"?


37 posted on 11/28/2004 4:54:25 AM PST by embedded_rebel
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To: durasell
Nice talking with you.

A housing market problem would not only put the owners underwater in so many cases but bust Fannie Mae, maybe. (Now there is a house of cards!) Followed by a massive "liquidity injection." High inflation and a terrible job market is the Democrat Party's dearest hope, so long as it happens on the Republican's watch. Nasty scenario, Ugh.

Of course the Chinese hold a lot of mortgage collateralized securities, maybe they will take the loss!! (Fat chance.)
38 posted on 11/28/2004 5:14:10 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: DB

Your lumber and steel is due to giant sucking sound of Big Red China gulping up all the raw commodities...



39 posted on 11/28/2004 5:15:51 AM PST by Flavius ("... we should reconnoitre assiduosly... " Vegetius)
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To: Iris7

Good talking to you. Here's another scenario, though. The banks, unwilling to repo the homes, would go into massive "work-out" mode similar to what they did with South American debt. People get to stay in their homes and the banks keep the loans on the books as "performing." Of course, there will be a certain percentage of people who object to paying $500,000 for a piece of property and building only worth $150,000, but I believe that percentage will be relatively small.


40 posted on 11/28/2004 5:17:50 AM PST by durasell (Friends are so alarming, My lover's never charming...)
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To: REDWOOD99
I thought we were getting a lot of lumber from Canada.

I live in an area that for decades depended on the timber industries and it has dried up, plants have closed.

41 posted on 11/28/2004 5:24:43 AM PST by lonestar (Me, too!--Weinie)
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To: durasell
Hmmm.

Could be. Just have to talk the home owners into believing that the price of their houses will go back up right soon. That would be pretty easy, wishful thinking working like it does!

Sort of how the Japanese have done it? Argentina, too, I think? You may be on to something here.
42 posted on 11/28/2004 5:30:13 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: Iris7

Where are they going to go? They're already up to their neck in debt. They have a garage filled with useless plastic stuff from Wal-Mart. Little Suzie is a cheerleader who can't leave her friends at the "good school." Can you honestly picture some Gap-wearing, house-proud family moving into an (gasp!)apartment?


43 posted on 11/28/2004 5:33:27 AM PST by durasell (Friends are so alarming, My lover's never charming...)
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To: agitator
Crude! But your description exactly described the scent in the air relating to our stinky economic logic. Which came first, the chicken (economic illiterate citizens)or the egg (incompetent educators who train them)?
44 posted on 11/28/2004 5:56:57 AM PST by ghostrider
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To: REDWOOD99

A lot of lumber is being shipped to Florida as rebuilding from the very active storm season gets into full swing. It's only a drop in the bucket compared to how much we produce, but I would think that with worldwide supplies already under pressure that sending as much as they are right now to one area would affect the price across the country.


45 posted on 11/28/2004 6:25:44 AM PST by jwpjr
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To: durasell

Chuckled several minutes over your last post. Dang, that was funny. Not funny - ridiculous, but funny - true to human nature, natch.

"What fools these mortals be!" - Shakespeare.

Very much including me, of course!!!


46 posted on 11/28/2004 6:26:47 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: ghostrider
You aren't talking bad about our (gasp) RETARD SCHOOLS?

Those oases of learning were the teachers are even more retarded than the students? Of totally cynical administrations? Of Jukes and Kallikaks?

Where all involved, every one, complain about poor salaries, about getting no respect, and who vote Democrat to the last man, woman, or other?

47 posted on 11/28/2004 6:33:35 AM PST by Iris7 (.....to protect the Constitution from all enemies, both foreign and domestic. Same bunch, anyway.)
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To: nanak

The "Experiment" was over along time ago. Read up on what was happening back in Jacksons day and things will become clear. Clinton, as much as I despise the parasite had nothing to do with it. It is much deeper than anything we can see at the Executive level.


48 posted on 11/28/2004 7:08:32 AM PST by TheExperiment_Is_Over
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To: staytrue
I also remember that if you had the guts to buy on Tues. or Weds.

My broker doesn't take guts. He wants cash, although he is more than willing to open a margin account for the asking. That is, later on you can ask where your money went.

49 posted on 11/28/2004 7:13:16 AM PST by RightWhale (Destroy the dark; restore the light)
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To: jb6
[ Hah, in 1916 Woodrow Wilson said "My God, what have I done. I have doomed this republic by putting all the power in the hands of only a few men." This was in reference to the Bank Reform laws he signed in 1913. ]

And the creation of the Federal Reserve system(1913), act, laws (all while congress was out for Christmas vacation). The creation of a central banking system in the United States. Something Andy Jackson and Abe Lincoln was assinated for being AGAINST.. Jackson survived though.. Lincoln vetoed a bill to create a central bank just a few weeks before the "HIT"..

"Someone" evidently did'nt like that... I know, I know you thought it was about slavery.. Hint: Its always about "the money".. And few americans even KNOW that greenbacks are NOT MONEY..Most don't even what MONEY IS..

50 posted on 11/28/2004 7:23:43 AM PST by hosepipe (This propaganda has been edited to included some fully orbed hyperbole....)
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