more bad news for the dollar

[rcne]

I like the weak dollar, exports should go up, GDP goes up because US products are cheaper to buy, my dollar buys more investments so that when the dollar strengthens I'm worth more.

I know, I know - long term greed, but time is on my side.

[bishop]

rainbow, you seem to be learning this here for the first time, so i'll try to explain it better for you and give you a view of the present... despite our intervention in iraq, countries all over the world are beginning to convert their reserves to euros. i mentioned all of this in the previous posts, that i guess you couldn't digest.

it would seem that your solution is to go to war against every oil producing country that begins to price oil in euros, right? do you realize how stupid of a "solution" that is? you can engage in nation building and install friendly regimes, but nothing lasts forever in the big picture. and artificial creations through force are always more likely to fail than the opposite.

not to mention that fighting all these wars is bankrupting the country. well, we're already bankrupt, so this just deepens the hole. has a war in iraq done anything for the dollar? nope. plus, every hint of new intervention/war sends the dollar even further down. all of this weakens global demand for the dollar, as my link from bloomberg already stated. perhaps you should read the information that's already been provided and THINK.


the real answer imo, is to just balance the god damn budget and to stop acting like the global hegemon that we are.

[bishop]

who says that the dollar will go up rcne? sounds like you're taking its presumed strength for granted. if so, that's a big mistake on your part.

and this bit about how our exports should go up... that's such a weak argument in the big picture.. our exports go up, but manufacturing jobs keep shrinking. i guess that's great for the country too... this article sums things up nicely, in the land of milk and honey where nothing ever matters:

http://www.financialsense.com/editor...2005/0118.html


***

I like the weak dollar

do you like inflation too? cuz that's what the weak dollar's buying you.

[Samildanach]

Your exports go up but the problem is you have been a land of consumers so long you really don't have a hugely established manufacturing industry anymore, as you have said its been shrinking for years. Not to mention your companies have been shipping all their jobs offshore to china and india.
IMO your dollar is going to go down and stay down for a long time. Sorry to say but your nation is more or less theoretically bankrupt, the only thing keeping it afloat are countries like Japan.

[allen]

US dollar is the most powerful weapon in the world, far more powerful than US military forces. A weak dollar is an effective tool to steal the wealth of other countries.

Eastern Asia is the largest holder of US doallars. The countries there hold roughly 3 thousand billion dollars. In the last 2 years, they have found that although that number remained the same, the actual wealth lost about 40 percent. Where did it go? It was devoured by the astronomical budget deficit of US, without one bullet or shed of blood!

What a conquest!

[bishop]

even better about that is that japan's in a recession, again.

http://edition.cnn.com/2005/BUSINESS...n.gdp.weds.ap/

whatever benefits we see from a weaker dollar - they'll be completely overshadowed by the inflation consumers will experience. inflation which is rising faster than wage increases. doesn't matter if you look at core-cpi, or plain vanilla cpi, we have some sweet inflation on our hands. biggest jump in inflation in 6 years in fact:

http://money.cnn.com/2005/02/18/news...ex.htm?cnn=yes

this could be a repeat of what happened between 98-99. increasing inflation and interest rates.. a substantial slowdown in consumer spending, pull-out of foreign capital investment, the exposure of a financial bubble...

[Samildanach]

You are right it could get very nasty very shortly. Mind you if you were smart and had any investments they are all in Europe at the moment making you more money as the dollar drops.

[bishop]

i've placed a portion of my investments in u.s. funds invested in eastern europe. they've been my best performers.

i'm about to put more money directly into some foreign indices.. namely, split between the czech republic, poland and hungary. east europe is the fastest growing part of the EU right now. they're kicking ass and taking names.

you figure, people began talking about how our market was overinflated around '98. greenspan termed it as "irrational exuberance".. despite all the propaganda these past 4 years, the economy has never completely recovered, and big asset bubbles have formed in the bond and housing markets.

[Samildanach]

My money is in Latvia at the moment Its definitely worth a look if you havent already. I just bought a small flat there for £15000 its currently the best performing economy in Europe and predicted to remain so. Heres a link to the latest Full european economic outlook report. Its for this month. Check out the other accession countries. Some good info there.

http://www.pwcglobal.com/extweb/pwcp...0344eef#Latvia

[bishop]

thanks for the link.. in my master's program, i had a class in global economics last semester and we had this research project to do. basically, we had to do a country analysis, and at the end, we were to write a paper and give a presentation. my group did hungary. what was interesting was that there were others in the class who chose other eastern european countries, and at the end, it was generally agreed by everyone that they were excellent investment opportunities. hungary's BUX index doubled in value in about 2 years. all of this was the result of solid macro performance, rather than the illogical way investments in this country operate. all the countries in east europe are beating the hell out of the competition. the ONLY potential risk i can see would be if big protectionist surges form in those european states that are losing jobs to the east - namely france and germany. as it is, the EU as a whole is showing positive GDP, but germany is getting deeper in the red. not sure where france is, but my assumption is that they aren't fairing much better.

[bishop]

not to nitpick, but these surplusses/deficits were intangible - they were cbo projections.

it's likely that the recession would've hurt the 5.5 trillion projection. although i should add that we didn't have a budget deficit until bush began enacting policies/laws. i think bush's medicare and tax cut policies are the biggest contributors to the 12.4 trillion number - and gore wanted an even bigger medicare expansion.. we'd most likely have a deficit with either man, but bush's behavior of tax cut and spent is infinately worse than tax and spend.

[rcne]

Well it seems to me interest rates are and have been low for sometime. The market is still moving.

All at a gradual sustained pace. The growth will continue. Some EU markets are in a boom cycle. Which one were they again - oh yeah the capitalistic ones.

Germany has some serious problems, socially and economically, with France following not that far behind.

Wait, France and Germany are supposed to be the leaders of the EU, I guess the 'new' members aren't listening to them.

Economics, what a wonderfully abstract science.

[bishop]

another reason why a weak dollar is bad for the country...

some 2/3 of our economy is driven by consumption. inflation, caused by a weak dollar, hurts consumption.

countries that have weak currencies tend to consume less, and consequentially have lower standards of living. that's not my idea of what's good for america.

[bishop]

Quote by: rcne Well it seems to me interest rates are and have been low for sometime. The market is still moving.

higher interest rates have dampened market returns, they usually do. in the past, interest rate increases have tended to push the market down, or dampen it at best. what's the primary reason why the market moves up? irrationality and speculation. if you look at the fundamentals alone, our market is ridiculously overvalued.

All at a gradual sustained pace. The growth will continue. Some EU markets are in a boom cycle. Which one were they again - oh yeah the capitalistic ones. Germany has some serious problems, socially and economically, with France following not that far behind.

it's poor logic to assume that because they do bad, that we'll do better. in fact, if you look at the historical returns of france's leading index (CAC 40) or germany's (DAX), and compare them to the S&P 500, you'll easily see that there is little to no difference in any of them. so this assertion that the "capitalistic" ones are better is completely wrong. of course, france and germany ARE capitalist economist - not pure capitalist of course, but neither are we by any stretch of the imagination.

not to mention that growth will not continue if consumers stop spending money because of inflation - which is caused by a weak dollar.

Wait, France and Germany are supposed to be the leaders of the EU, I guess the 'new' members aren't listening to them.

another statement that doesn't make any sense.. what are these new members doing where you suggest that they aren't listening to france and germany??? there've been some big increases in what you would characterize as socialist policy in all of those countries. things like public housing, wages for public employees, etc...

[Nono]

When rcne speaks of flourishing economies in the EU, he may be thinking of Britain, which is following the US along the path of debt-driven boom.

[bishop]

from what i've read, you guys have an insane bubble in your housing market. (there seems to be a global bubble in real estate in general) i haven't learned too much about the situation, but it's interesting that that's going on, since your interest rates are around 4.25% or so... care to explain the deal in britain?

[Nono]

Ain't British and don't have that sort of detailed knowledge. One of the Brits here might be able to tell you though.

[G. Adams]

Lack of housing in the South East, all the decent paying jobs are down there, people are prepared to pay ever increasing amounts in order to get those jobs. if I was in a position to do so I'd sell up my house and rent until the bubble burst then try and buy up property with my savings. Cause this boom is not gonna last for ever. Mind you, so many people do believe it will continue, so they are driving up the prices on their own accord.

Oh, and the mortgage lenders are into some dodgy dealings, allowing the customer to set what they're own income is, thereby increasing the amount they can borrow, even though the dealers know they won't be able to pay it back unless the value of the property rises before they sell up.

[Pooeypants]

Quote by: bishop from what i've read, you guys have an insane bubble in your housing market. (there seems to be a global bubble in real estate in general) i haven't learned too much about the situation, but it's interesting that that's going on, since your interest rates are around 4.25% or so... care to explain the deal in britain?

Our interest rates had to be pumped up to that % inorder to slow down this insane price increase, not sure if it's actually working though.

[bishop]

hmmm... well at least it's based, seemingly entirely, on consumer demand. the prices would only drop then if the job market began to drop. but even then, it'll probably stay relatively high. here in boston, we were hit very hard this past recession, and housing prices weren't really affected. rental prices fell, but only for about a year. there's a steady demand for housing in this area, seems similar to britain.

but, i should stop there. i know nothing about the housing market or mortgages and don't want to make a fool of myself.