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 ...
Excellent chart. The dollar was at it highest against the Euro during the last economic recession.
Yes, the real collapse is yet to come, as all this “keeping us afloat” ends.
Wal-Mart draws huge crowd - of applicants
Some say 6,000 job hunters a reflection on economy
Monday, November 26, 2007
Zachary Lewis
Plain Dealer Reporter
As the world’s largest private employer, Wal-Mart is used to being greeted by large numbers of applicants almost every time it opens a new store.
But the 6,000-plus people who applied for jobs at the new Supercenter in Cleveland’s Steelyard Commons took everyone, even Wal-Mart, by surprise.
“We had to recount [the applications] three times,” said Mia Masten, Wal-Mart’s director of corporate affairs, Midwest division.
When thousands of people compete for a few hundred ordinary jobs, trend watchers say it’s an indication not only of a less-than-stellar economy...........
[snip]
It already started just look at short term Treasury rates collapsing due to the flight to safety.
For instance, just try to put some money into a Schwab money market fund that is backed by US Treasuries. That option has been blocked by Schwab since August when it first 'hit the fan'.
There is a distrust of all commercial paper banks won't even lend to each other the Libor is at unprecedented levels.
A $27 billion Florida money market fund suspected to have exposure to subprime had a $10 billion 'bank run' and had to freeze further withdrawls last week.
You are right, everybody wants dollars now (except for the gold bugs).
6000 people for 300 low-to-average jobs. Yep, I guess we need more unskilled immigrants.
</sarc>
Those people are more interested in the return *of* their money, rather than the return on their money. It’s not that they have any choice but to get dollars, if they are lucky.
A very interesting GDP breakdown is Bureau of Economic Analysis Report - GDP and the Economy Feb 2007
One learns that of GDP 58% is services, 31% goods and 11% structures. Of net imports/exports, 8% of GDP is goods exported, 3% is services, and the total is offset by 13.8% goods and 2.3% services.
So, of the total value of goods in the economy of 31% 8% is imported and we actually manafucture goods in the US in the amount of 23% of our economy.
So, what goods is a very very good question.
Overall inflation is not even close to 10% and anyone who thinks so is a baffoon. If it was, sales everywhere would be up YoY of at least that amount. Right now very few retailers are over even 3-4% gain.
Cleveland, Ohio is your example for the rest of the country? Ohio is about the only state my retail company doesn’t have a hard time finding labor for.
As is “Apple Computers.” Made in China!
That's like a balloon, maybe?
Freudian or what?
This compares with $3.8 T in service producing industries, $1T in business profits distributed to proprietors, $1.7T interest and dividends on assets, $1.6 T in transfer payments.
IOW, wages in manufacturing is 1/10 th of total personal income, less important in the economy individually than profits to business owners, income of rentiers, or those living on transfer payments.
Because I would probably be your typical "baffoon" if you chose to use the old definition of inflation, which is simply an increase in the money supply.
Here is another chart from the site that raybbr kindly called to my attention in post #68 above:
Nope, we don't have any inflation. Just a shortage of helicopters.
An increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices
Prices are not going up 10% YoY overall as a normal American budget.
M3 also needs to be adjusted by productivity increases and a growing economy or you run the risk of deflation. If you increase money supply by 10% but your countries productivity increases by 5% and economy grows 3%, your inflation rate should be around 2%, yes?
Well, here is what the Fed tracks
Recent data includes:
2007-01-01 7255.0
2007-11-19 8065.5
So, there has been a 10% increase in the money supply in 2007 alone. Since M1 has remained flat, this is all short term credit dollars as opposed to dollars in demand deposits.
No. By putting in both productivity increase and economic growth, you are double counting.
If productivity increases by a 5% assuming the same quantity of goods are produced then prices should decrease by 5%.
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