Economics, currency and geopolitics

[peskypup]

mmm

Phaedrus, if only that were so. If only the fact that market panics cost so many people lots of money meant that they never happen.

They do happen. In the case of currency they happen when the Government concerned takes its eye off the ball with regard to economic fundamentals like trade deficits, interest rates. Or gets distracted by war etc.

In the case of the UK, 1992 saw the pound blasted out of the ERM when our Gvt. lost the plot. I think the same thing is happening right now in the US and am short of $50,000 to attempt to profit from it.

Unless & until the administration tackles the issues causing the problem to the dollar, or has a positive outcome in Iraq, I can't see any reason to buy $.

For the time being, both of these are remote prospects IMO.

 

[peskypup]

the euro is popular

the euro is popular for 2 main reasons:

1. The most important one is that it is NOT the dollar.

2. The Euro countries are not bogged down in Iraq.

So the GBP is stronger than the dollar for reason 1, weaker than the euro because we are in Iraq.

 

[Phaedrus]

peskypup

The reason that I feel that a total collapse would be avoided is not based on something so simple and common as "market panic;" think in orders of magnitude greater; i.e.a global economic meltdown, which is what a true dramatic crash of the USD would cause. Hundreds of billions of dollars in US Treasuries are held by foreign governments, which would be worthless if the USD collapsed. Trillions of actual dollars are held by foreign governments and companies, because substantially all international trade is settled in dollars.

This makes no difference whether or not anyone thinks of the USD as "good" or "bad" (or if, like myself, a person thinks that all fiat currencies are worthless shît) ... it is simply the way it currently is. A gradual shift over to Euros would not be a bad thing, until/unless the Euro collapses. After all, the USD has not always been the primary trade currency -- barely a decade ago the deutschemark and yen were both prominent trade currencies, and of course the British pound was on and off from the early 18th century to just after WWII (in fact the British example serves as a good example of what will likely become of the dollar -- the costs of simply abandoning the pound were so great that it remained the interntional trade currency long after the sun had set on the British Empire.)

The net result of this is that countries all over the world, even countries that don't like the US, dirt-poor countries, filthy rich oil-exporting countries, the EU -- basically everybody everywhere -- are all holding huge, mind-boggling amounts of wealth that is denominated in US dollars. It's not a matter of a "market panic" such as what touched off the Asian currency crisis in the 90s; it's a total economic meltdown on a global scale unlike anything that has ever been previously seen, something that would make the Great Depression look tame. No government in the world wants something like this to happen for obvious reasons, so all governments will try to do their part to help stave it off, for better or worse. It's like the MAD principal of the Cold War, applied to currencies instead of nukes.
With regards to the Euro, what you're saying does make sense. Nearly everyone predicted that the Euro would take off like a shot and trump the US dollar as a trade currency, yet it in fact rapidly devalued after its introduction and more or less languished for over two years. Now, it has the distinctive feature of being not American, which adds somewhat to its appeal on the investment markets.


Phaedrus

 

[Faceless]

xpanda wrote:

Could it be that the Bush administration's real goals with the tax cuts for the über-rich, strange-but-true immigration practices (at least where Mexicans are concerned), and the (likely) intentional depreciation of the US dollar, are to bring back manufacturing to the US, making it all the more attractive by offering up an array of cheap labour and exports?

My salary is about €28 000 a year. At the time $/€ was 0.85 I made 23 000 in dollars and only in the "poorest" states of USA average payroll was that low. Now I would earn 36 000 in dollars and been moved to wealthiest states. So in the other words labour cost gone down a lot in USA, but still much more higher than eq. in China. If "über-rich peoples" have invested already into China, I don't think this drop is enough form them. No any affect to US economy at the moment.

Are US products at stores any cheaper here after Euro went from 0.85 to 1.29? No. Only if we order those products from USA by self, we'll get good discounts, but most of the people don't order stuff by self and plus affect to US economy is minimal at the moment.

I have heard that (old contracts) export/import prices are dealt once a year, January or February. So, if that's true, next time I expect dollar to get stronger is that time. If nothing happens, dollar is fücked.

 

[xpanda]

Too bad the Expos already left...that might have helped them out a bit. Isn't the dollar about where it was in the late 70's when compared to the Pound? The dollar has been pretty strong for a while now...if it weakens a little there isn't a problem. I don't understand why the Euro would be so high...Europe has far more economic problems than the US. Maybe George Soros is getting ready to crash the Euro.

I hear tell that the US dollar hovered around $1.05CAD during the '70s, though I have no idea of the events that led to this. It seems to me that we have been most prosperous when the dollar hovers around $.75CAD. On Europe, no idea why, either. We're motoring along due to our trade surplus largely, despite the rise in currency.

Here's a fine website made just for you Xpanda. Unfortunately the overall quality of liberal males in the United States isn't very high; be prepared to set firm ground rules regarding bathing, employment, and clean underwear. They also will likely want to share your late-night toys...be ready to share.

http://www.marryanamerican.ca/

How sweet of you to watch out for me. You're not all bad after all.

 

[xpanda]

Phaedrus: nice to see some contributions from you again.

 

[bblight]

Specualting on the Euro for the short term could be the smart thing to do if there's a strong feeling that the terrorists could pull a coup on the US mainland.

The important financials and supply chain mags are giving the phenomenon in Europe some lip service - but no one is really giving it any kind of attention. Although no one will say it, I get the feeling that the Euro and its supporting economies are just to weak to challenge the $.

I just keep an eye on the conversion % because I do so much business with the UK, France and Germany.

For those of you who care, I'd keep an eye on China for financials and India for petro and pharmachems- the Chinese are taking to business like a dog to a bone - and the Indians don't understand the word No!

 

[DarrylParsons]

XP,

I expect to see the dollar-euro back to about 1.22 in about 2-3 months. Yes, the US economy will collapse IMO, but that will be mostly a function of the baby boomers retiring and the effects of that will only be felt starting about 5 years from now.

I agree that a 1.60 level would cause a lot of destabilization in the US (and world) economies and since the demographics show that the world is not ready for that yet, the various traders and other market players will not allow it to get up that high just yet.

This is of course only my theory which could be completely wrong, but if it's any consolation I am putting some $$$ behind it.

 

[Phaedrus]

posted by Phaedrus:

So, short version is -- watch what Snow announces at the start of the year with regards to his position as Treasury Secretary, and if he leaves what sort of history his successor has.

<!--StartFragment -->

Snow to Remain as Treasury Secretary
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[size=-1]by Caren Bohan[/size]
(Reuters)

WASHINGTON - [size=-1]President Bush asked Treasury Secretary John Snow to stay in his job on Wednesday and Snow agreed to do so, ending a frenzy of speculation that the 65-year former railroad executive was about to be replaced. [/size]

<!--StartFragment -->
[size=-1]White House spokesman Scott McClellan said Bush and Snow met for about 10 to 15 minutes in the Oval Office. [/size]

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[size=-1]"The president asked Secretary Snow to continue serving in his second term and the president is pleased Secretary Snow agreed to continue his service," McClellan said. [/size]

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[size=-1]Rumors swirled that Snow would soon be gone after an unnamed official was quoted in the Washington Post on Nov. 29 as saying Snow could remain in his post as long as he wanted "provided it is not very long." [/size]

[size=-1][/size]

[size=-1]Names began to circulate of people who might replace Snow, adding to a sense that the top U.S. economic job might soon be in play. [/size]

[size=-1][/size]

[size=-1]Bush, who won re-election on Nov. 2, has moved swiftly to overhaul his Cabinet for a second term. Eight of 15 Cabinet secretaries have announced their resignations. So far, only Snow and Defense Secretary Donald Rumsfeld have received public assurances that they will be staying. [/size]

<!--StartFragment -->
[size=-1]The White House had to decide on the economic team before pushing ahead with a legislative agenda that includes overhauling the tax code and reforming Social Security. [/size]

[size=-1][/size]

[size=-1]McClellan declined to say how long Snow would remain in the job. "I've never heard any discussion of time frames," he said. [/size]

<!--StartFragment -->
[size=-1]The White House helped feed the speculation about Snow's possible departure by failing to give the treasury secretary a clear vote of confidence. [/size]

[size=-1][/size]

[size=-1]Many administration officials and outside advisers to the White House were aghast by the comment that appeared in the Washington Post. To many, it seemed a gratuitous slap to a Cabinet secretary known for his loyalty to Bush. [/size]

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[size=-1]Snow has been a tireless advocate of Bush's policies and crisscrossed the country in the months before the election praising Bush's tax cuts and touting economic growth. [/size]

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[size=-1]"When some of the reports came out," McClellan said White House chief of staff Andrew Card called Snow "to say 'don't pay attention to the rumors."' [/size]

[size=-1][/size]

[size=-1]Asked why Snow's situation had not been announced sooner, McClellan said: "The president didn't have the opportunity to visit with him until today." [/size]

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[size=-1]Months before the Post article appeared, Snow had been telling associates that he wanted to stay on for six months to a year to get the ball rolling on the tax reform effort. [/size]

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[size=-1]Several Republicans said there may have been divisions within the White House as to whether to keep Snow and those that wanted him to go may have overplayed their hand with the anonymous quote in the press. [/size]

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[size=-1]"I think it's fair to say that the last 10 days have put Secretary Snow in a difficult position and that may have helped extend his tenure," said Republican strategist Scott Reed. [/size]

 

[Phaedrus]

:thumbsup:

 

[xpanda]

Stumbled on this article the other day:

http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=3235

So, I guess a soft dollar policy is the approach for the next four years? How low will they let the dollar get, do you suppose?

 

[Phaedrus]

I dunno X. I still believe that it would be a fairly long shot to say that the number of governments currently holding massive amounts of US dollars and US Treasury debt would not do everything in their power to prevent it from going too low, but of course all state intervention seems to have the tendency to generally go awry, so whose to say that massive propping up of the USD wouldn't actually contribute to it (e.g. by causing enough "little fish" governments to lose confidence and move away from using the dollar as a settlement currency that it would have the same or worse effect as one "big fish" government like China or Japan doing so.)
All the more reason for people to just get out of the state money game entirely imho.


Phaedrus

 

[xpanda]

If they're doing this to de facto lower the real value of the debt for repayment purposes, there's certainly only so far China and Japan would let it slide before they dumped them. I read today, also, that Japan experienced only .1% growth in the last month (I think that was the term length) and are expected to enter a recessionary period immediately.

 

[Phaedrus]

Yes, but Japan has been in such an economic doldrums for much of the last fifteen years that even good news is usually just really "less bad than normal" sort of news. They had sudden and suprising growth spurts this year -- the largest since 1990 -- but even a dead cat will bounce once or twice if you drop it from a high enough point.


Phaedrus

 

[WildBill]

Japan has been growing for most periods since the 90s, just not fast enough. They have mastered the muddle through policy.

Look the currency situation is a matter of symptoms, not really an issue. What the currency settles at won't really be what leads the economy down as much as the psychology that surrounds it. A falling dollar will lead to less productivity in the US as less foreign money comes in to fund needed investment. In this case worthy investments that could lead to economic growth don't get funded. Interest rates will go up, but I doubt they have much effect unless they really spike, which is something I just don't see happening. As has been well pointed out a stumbling US economy or currency will cripple much of the world as well so this concept of foreigners deciding not to put money in the US economy really doesn't make sense. They have money and they have to put it somewhere; if everyone is going down they might just stay put.

The reason why the deficit has to be reduced and why reduction in trade deficits would be helpful are quite simple. It isn't about manufacturing because those jobs are gone, no currency valuations will bring them back. It could delay the loss of jobs, but no company is going to pencil out numbers that show it makes more sense to bring back lost jobs unless the decision to ship the jobs off in the first place was a wrong one. The reason why we need more equilibrium is that at some point the rest of the world will come to the stage the US lives at now. They will realize consumerism really is the final stage, the point where you can be a self-sustaining economy just off internal consumption. If we don't balance things out within the time it takes for others to give up their dreams of being export based economies or they give up their rationale for saving at rates that are just too high, then we will be in trouble. Once consumerism sets in for more countries, the US will be faced with a number of other challenges that we aren't even preparing ourselves for. Outsourcing white-collar jobs is just the first stage, at some point our superiority in all sorts of "creative" and "thinking" jobs will be lost and the investment into those fields, where we really need the money to maintain a high standard of living, will be lost to other countries as well. The rest of the world can have the manufacturing jobs; I want to keep the jobs that truly drive prosperity here.

 

[Glaken]

Hello Brother of Sherlock, I saw your name and wanted to say hello, I mentioned your screen name the other day under a thread about cool screen names.....Dreary old weather around the Cherry Tree; but not this week...unless your jogging.

 

[roadreeler57]

​

Russia and China Creating New Global Reserve Currency Expected Severe Negative Impact on the USD​ ​

 

[Willie99]

Some good old timers in this thread

And proof predictions about the demise of our currency have been ongoing for a long long long time now

As long as we maintain our economic might, we should be fine. Although that economic might thing is in question if we continue to destroy our own economy

I'm not worried about China and Russia, they've always been our adversaries. I'm more worried about the policies of Biden, Pelosi, democrats and the likes of an AOC


PS: China has so much invested in US, I doubt they want us to fail. That would be an international disaster