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Dollar stands on a precipice
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| January 2 2003
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Posted on 01/04/2003 4:25:25 AM PST by Fzob
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Any Feeper put this in layman terms?
1
posted on
01/04/2003 4:25:26 AM PST
by
Fzob
To: Fzob
The dollar is being artificially propped up by foreign govs to keep their products affordable here. If the dollar drops, foreign products increase in price here and in other countries where their currency is strong.
If it does drop, then our products will be more affordable in other countries, but some countries will be hurt badly, like Japan who depends on exports to survive. Prices for all imports, including oil, will increase here and generally, the world's economy will slow, hurting everyone, since we are the engine of the world's economy. If the US has economic sniffles, the world has a cold.
2
posted on
01/04/2003 4:41:45 AM PST
by
KeyWest
To: KeyWest
Thanks. That make sense
Prices for all imports, including oil, will increase here and generally, the world's economy will slow, hurting everyone,...
Adjusted for inflation the price of oil is very low. Which prompt this question in my mind. If oil prices were to increase enough to spur capital investments in the petro-chem business is that really a bad thing? Or is my assumption that capital investment in that area would grow is false.
3
posted on
01/04/2003 4:48:51 AM PST
by
Fzob
To: Fzob
Adjusted for inflation the price of oil is very low. That's one way of looking at it.
The price of oil is relative to the price of oil. It is its own benchmark -- like gold. Adjusting it for inflation is a politician's trick.
I'm getting concerned with the lack of correlated spending cuts to go along with tax cuts. I think Bush is headed for some trouble here. We are bleeding red, interest rates are in the toilet (where is the incentive for saving yet?), American consumers are on the hook for a trillion and a half in credit card debt (which, interestingly enough, doesn't track with interest rates), and yet the government still grows. We're going to become a nation of gimmicks and tricks. That's not a good thing.
4
posted on
01/04/2003 4:58:55 AM PST
by
Glenn
To: Glenn
Thanks and bump
5
posted on
01/04/2003 6:07:54 AM PST
by
Fzob
To: Glenn
Agree with spending cuts. The foundation for the economic problems we had from Johnson to Reagan (who moved us out of them) were from the Vietnam War, where Johnson decided to have guns and butter.
6
posted on
01/04/2003 6:08:51 AM PST
by
KeyWest
To: Glenn
We're going to become a nation of gimmicks and tricks. That's not a good thing.
We've had that problem since 1913,imo.
7
posted on
01/04/2003 6:22:43 AM PST
by
steve50
To: Fzob
The bottom line is this: our current system depends on essentially a circular flow of dollars. We purchase huge amounts of goods from abroad, and the dollars return to the US via investment in our economy by these same foreigners. But if the investment dollars cease to flow, the dollar will go into a freefall.
This is the real problem with the recent corporate accounting scandals. We sold the USA as a great investment destination based on wildly profitable numbers during the 90's. Many foreign investors were astounded by just how great the numbers were...and now they know why...those numbers were phoney. This is one of the big reasons why FDI (foreign direct investment) in the US economy is dropping (China recently passed us up as the #1 destination for FDI): foreign investors don't trust our numbers anymore.
History shows that when a trade deficit passes 5% of GDP, that country's currency takes a big nosedive. I believe that our current deficit is around 6%. We have been living way beyond our means for a long time....but its been a comfy ride because its one heck of a sweet deal....we consume at a steep discount. But it won't go on forever.
8
posted on
01/04/2003 6:23:58 AM PST
by
quebecois
Comment #9 Removed by Moderator
To: Fzob
A dollar is a claim on US production. A dollar only has value if it can be used to buy "stuff" -- otherwise it is just a piece of paper. A deficit cannot be sustained forever, any more than you would keep accepting $1,000 IOU's from me indefinitely
Eventually real prices for imports will rise, and prices for US exports will fall, to the point where the dollar value of exports equals the dollar value of imports. What that will do to living standards in the US is another story -- it won't be good in the short term
What has been happening over the past few years is that the US has been exporting dollars in exchanged for high priced oil, and low-priced Chinese stuff. Since the Fed does not want to crank up the printing presses and creating large-scale inflation, that means there are fewer dollars in the US to buy US-made goods, which results in unemployment, as US companies are unable to sell enough of their product.
Money is to a country like blood is to the body: as long as it circulates, the body is healthy. But if you bleed out too much past a threshold, you die.
To: Sgt. Fury
The debt of the US Govt. will be paid by devalueing the dollar,Bingo!
and the people who will really pay will be the poor and middle class.
Don't they always?
The poor by having less buying power for whatever dollars they do have. The middle class will just have to pay more taxes.
I mean the government can't do with a real budget cut, can they?
11
posted on
01/04/2003 6:36:27 AM PST
by
JZoback
To: steve50
We've had that problem since 1913,imo.Say more about that, please.
12
posted on
01/04/2003 6:39:06 AM PST
by
Glenn
To: KeyWest
>>Agree with spending cuts.
Also, couldn't agree more...it seems the difference between republicans and democrats has become democrats want to spend your money like there is no tommorrow and raise your taxes to pay for it...and the republicans want to spend your money like there is no tommorrow and tell you nobody has to pay for it.
I am all for low taxes...I am even more for getting rid of about 1/2 of all government workers and all waste first...and then cut my taxes since they won't need the money anymore. Until the spending portion of the equation comes into line with reality, than anything the republicans or democrats to is nothing more than tricks and postponing the inevitable crash.
Comment #14 Removed by Moderator
To: Sgt. Fury
Does anyone believe the government's phony inflation numbers?I don't. The Consumer Price Index since 1972 is up about 180%. The price of a barrel of oil in that same time is up 1500%!
15
posted on
01/04/2003 6:41:50 AM PST
by
PGalt
To: sc-rms
For 2003, I plan on staying totally debt free.Good choice. I refuse to pay interest on anything and owe no one a cent on credit. The amazing result is I find myself with more spending power than ever.
16
posted on
01/04/2003 6:44:30 AM PST
by
Glenn
To: quebecois
The bottom line is this: our current system depends on essentially a circular flow of dollars. We purchase huge amounts of goods from abroad, and the dollars return to the US via investment in our economy by these same foreigners. But if the investment dollars cease to flow, the dollar will go into a freefall. Investment money will only flow into the US, if the companies to be invested in will be producing products that can be sold. The bottom line is that eventually the investments have to (directly or indirectly) result in exportable products that can be sold abroad to redeem those dollars. If that prospect is not on the horizon, the inflow will cease
China has been holding off problems with its own economy by exporting unemployment to the US (exporting products made with low wages in China, but not allowing US companies free access to the China market). If the US market suddenly goes sour, China will have to deal with tens of millions of its people who wll not have the funds to buy food -- a recipe for insurrection.
To: Glenn
I'm not a big fan of the Federal Reserve, fiat money is the shysters most powerful tool. Their main money making skills are coin clipping, in modern form.
18
posted on
01/04/2003 6:46:36 AM PST
by
steve50
To: Fzob
"Net foreign direct investment has collapsed, from $308bn in 2000 to an annualised $14bn in 2002." The Europeans, Japanese, and the Middle East are waging economic hard ball.
They apparently are doing this in concert and relishing the fall of the U.S. dollar (and look forward to the U.S. living standard being brought down as well).
Within the next twenty years, we face the threat of becoming a third-world economic power:
* The rise of the Euro dollars buying power will overshadow the U.S. dollar.
* America will increasingly shift from being an industrial power to an economy fueled largely by the less advanced and much more unstable "Services" industry.
* America will continue to export it's heavy and light industries overseas where cheaper labor is abundant.
In short, there won't be any more "Miss American Pie."
To: sc-rms
>>This may sound strange, but I am intensionally not going to earn at the same level I have been, to avoid paying taxes and therefore stop funding a hopelessly socialistic system.
I could have wrote that statement myself. Last few years I made really good money (I paid over 6 figures in income taxes those years).
And then end of 2001 I finally got sick of having the govt confiscate more than 50% of everthing I made...I was working 80 hours per week (running my own business) and 40 hours per week all I was doing was working to pay my taxes...I finally said enough.
Paid off all my debts, have a modest savings account, and I am gonna be flying under the radar for the forseeable future. I don't expect to earn more than about 20-25K per year, and besides taxes on my house, will pay NO state or federal income taxes (with a family of 6 you get a lot of exemptions). Can't tell you how good that feels.
By no means am I living a lavish lifestyle, but finally realize that I can live on a fraction of what I was living on before, work a lot less, with less stress and spend more time with my 4 kids.
On their deathbed, no one ever wishes they had spent more time at the office
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