Skip to comments.A Dollar Warning
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 ...
heads up for those interested!
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.
Where do you think the $ is going in the next month or two ?
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.
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.
Nobody wants to hear it. They're too busy arguing over what Greenspan's latest fart smelled like.
The business of America is Business.
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)
Yes but how much of that lumber comes back to the US as furniture ?
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.
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.
On the previous article posted on this topic:
most think it hasn't hit bottom yet!
Your steel and lumber examples are odd, they aren't blameable on the week dollar, as they're American industries, no?
I'm no fan of Clinton, but how exactly is it his fault that the dollar is weak?
It comes back as handles on your hammers. I know that much for sure.
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.
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.
Iraq may be part of it, but the hurricaine season has had some effect on building materials prices, too.
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.
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.
bttt for later read
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.
Holy crap, we'd have a run on the banks (or ATMs, which ever)!
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.
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.
Are you saying that more dollars lowers prices? If so, I would tend to think you're wrong. More dollars chasing goods equals inflation.
M3 time series (sorry to not leave links earlier):
M3 velocity time series:
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.
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.
"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"?
Your lumber and steel is due to giant sucking sound of Big Red China gulping up all the raw commodities...
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.
I live in an area that for decades depended on the timber industries and it has dried up, plants have closed.
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?
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.
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!!!
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?
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.
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.
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..