Posted on 12/02/2007 4:53:00 AM PST by Zakeet
The plunge in the dollar has turned normally calm voices strident and fearful. A weak currency, they say, spells catastrophe for the U.S. economy.
But like much conventional wisdom, this isn't true. Nor is it true that the dollar, to use one favorite recent word, has "collapsed."
You wouldn't know it, however, from recent headlines. This week's Economist magazine, known for its cool-headed discussion of economic events, has this on its cover: "The Panic About the Dollar."
Others see in the dollar's slump a metaphor for America's future — one of decline and waning influence in the world.
To be sure, the dollar is down almost 40% against the euro since 2001. Against the pound, it's off almost 44%. It's even down against the yen, by nearly 13%.
But put in perspective, these declines are neither dangerous nor even undesirable. Over the long-term, the dollar is well within normal bounds. After years of rallying due to massive flows of investment into the U.S., the dollar has simply come down to Earth.
To say it has "collapsed" or "plunged" is simply wrong — as the chart above shows.
Look at the dollar weighted against all its trading partners, not just a cherry-picked few, and you see the dollar hasn't plunged at all. It's about where it was 10 years ago — during the Internet boom.
It rose sharply in the late 1990s, thanks to the outsized returns offered in the U.S. markets compared with elsewhere. Today, after the Nasdaq meltdown in 1999 and 2000, a recession and 9/11, the flood of investment isn't as great.
True, the dollar has weakened against specific currencies — the euro and yen are recent standouts — but that weakness must also be put into context.
(Excerpt) Read more at ibdeditorials.com ...
The weak dollar, by making U.S. goods more competitive overseas,
will sow the seeds of future growth through booming exports, more
domestic jobs and a new surge in investment from overseas to snap
up bargains in the U.S.
That's not a cause for concern, but of celebration.
Well, it sure makes me feel better knowing that the dollar is still a better deal than the Vietnamese piaster.
Big Mac's?
Seriously.
What you'll really see is that those "partners" have been pegging their currencies to the dollar on a temporary basis, China for industrialization and Arab countries for political reasons. The result has been increasing inflation in those countries as they print more and more of their currency to keep up with the plunging dollar. Now that is coming to an end, not overnight, but inevitably.
ping
Don't you know? The new "U.S. Goods" are stock certificates. They are the future of America.
He has the cause and effect relationship backwards. We are seeing less investment because out currency is declining in value.
Ford and GM cars. Boeing Aircraft. Dell Computers. Apple Computers and devices. Caterpillar infrastructure equipment. Pharmaceutical drugs. To name a few.
The decline of the dollar is a positive thing and relatively speaking is not out of the ordinary just like our soaring defecit is not at a record amount when compared to a percentage of overall GDP.
I so much hate conventional wisdom, because well it is so conventional.
LoL
Foreign investment and spending is flowing into the US. Tons of people fly in from Europe to buy stuff in New York for cheap. Meanwhile Americans are avoiding buying stuff in Europe because it is ridiculously expensive.
HP is a better example. Dell is losing market share and has just started to ramp up its international sales. Dell sales are up significantly, but HP is kicking their butt.
I would agree to a point with this article and in the end believe our greatest fear should be not the dollar failing, but the tides of socialism sweeping across America. That is what investors will be looking for. Have any idea how many big corporations and individual investors invested the great USSR? We elect a democrat and implement any of there socialist ideas and then you’ll see “big” money flee from the US. Then we’re in real trouble. These fluxuations in the dollar don’t concern me too much, they’ve been there before. What does concern me is the devalued dollar coupled with socialist policies. When and if that occurs (i.e. Hillary, Edwards, Obama), then we’re in trouble.
It wouldn’t surprise me if some of our seasonal Canadian Snowbirds step into the local real estate market, and actually buy that condo or second home they’ve dreamed about for years.
You are not being serious. Impossible.
They come by the carloads and busloads to play the slots and shop at Wally World, Sam's Club, Target and Home Depot. I've never seen so many Canucks in ten years living here.
That's it folks, leave your dough and get out!
By the way, if you're driving behind one and they put on a turn signal, be careful. New Brunswick drivers have a bad habit of making a false move in the opposite direction, so they can make a nice w i d e turn...
What a load of crap. The best condition is a dollar that is fairly stable, not overly strong or weak, both domestically and on the foreign exchange market.
If they run that chart back to the 1960's, or even back to the 1930's one can see the dollar collapsed and never recovered, so anybody regardless of their position can make a case depending on the time period chosen.
Why people, especially politicians have such a fondness for exports, I don't know. Perhaps there is a genetic bias for mercantilism. Even countries that are known as big exporters like Japan, have an export market that is a little over 10%. Doing something that's good for exports only ignores the other 90% of the economy. When one subtracts out the negative effects on imports (higher prices), the economic impact is nil, or negative for a country like America.
Articles like this are making apologies for one of the worst economic presidents we've had, though one of the luckiest. If it weren't for congressman Bill Thomas saving his butt in 2003, he never would have won a second term.
Boeing and Caterpillar are benefiting. Even Airbus, a Euro jobs program, is looking to set up shop in Alabama.
The goal is to have China allow the Yuan to float a lot more than they have so far. If that happens, we may see a boon in manufacturing jobs in the US. Though the value of US manufacturing has been going up for years. It just doesn’t take as many workers to duplicate software and DVDs as it does to create cars that have lower margins.
If the low dollar also spurs imagination to come up with alternates to oil, all the better. Defund the terrorists!
I’m in the market for a (another) laptop . . . HP has some of the best deals out there, hands down. Even the units with Intel chips instead of AMD. (Not that I understand much of the difference between the two).
"Hey, hosers, more beers for us."
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