"America’s policies are putting at risk the dollar’s role as the world’s dominant international currency. Those bearish on the dollar are asking why investors will want to hold the assets of a country that has, by its own actions, jeopardised its reserve-currency position… if America continues to show such neglect of its own currency, then a fast-falling dollar and rising American interest rates would result. It will be how far and how fast the dollar falls that determines the future for America’s economy and the world’s. "
Just another Bush policy success. When will this clown show end ? More to the point, how much irreparable damage will have been done by letting the clowns run the circus ?
Tremendous damage has been done to the main stream press by the clowns that have been running it for the last 30 years. The damage will continue until everyone recognizes that the main difference between the National Enquirer and the main stream press is that the National Enquirer at least knows the truth about itself.
“Just another Bush policy success. When will this clown show end ? More to the point, how much irreparable damage will have been done by letting the clowns run the circus ?”
Replace “Bush” with “Greenspan” and you might have a point. You see, monetary policy is controlled by the Federal Reserve Board–not the President. Greenspan could easily stop the decline of the dollar if he chose to by raising interest rates. Low interest rates in the US are one of the reasons why people are not investing in dollars. But, raising interest rates will serve to choke off the recovery and make it harder to sell US goods overseas, meaning there will be more outsourcing.
I love you Doug, but you have really got to get a little more educated in Economics or stop getting all worked up on these issues.
It is not exactly like we have never been here before. I have seen all these headlines and gloom and doom scenarios about the US dollar before.
Our currency is weak because our interest rates are low. This was a Greenspan decision, and I think a good one, but it has consequences. Now our interest rates are rising and they will continue to rise over the next year or more. This will strengthen the dollar and the pendulum will swing as it always does.
I grant that our federal budget deficits now and projected into the future are a big problem, and the dollar is weakened by those issues. That just leads us back into the SS discussion in the other thread.
If you want weak dollar problems, just go back to the Carter era. You want those tax and economic policies back according to your earlier logic. Time to understand all the consequences, not just the income redistribution matrix that makes you happy.
Though at least in the Carter era, a lot more goods were still being made in-house (in America). Now, more of the stuff we’re buying comes from overseas, and even with China holding onto old exchange rates, the weak dollar’s going to nudge inflation a bit higher when it was already starting to be a concern in some areas.
Yeah, I know the weak dollar’s good for increasing exports and all, but the balance of payments is so out of whack in this country that you could up exports quite a bit and still have the typical American feeling burned by the weak dollar.
Long term, everything will be okay. Almost always is. But the short term will continue to be messy indeed.
The Economist is a UK publication, not affiliated with any US party. It’s generally highly respected by actual economists. I’m sure they would take umbrage at being called mono-buttocked…
This is part of what I mean by ‘reality-based’ - paying attention to what real experts are saying. It doesn’t matter what I think, or you think: what matters is what’s happening on the ground, in the financial markets and battlefields: which can be measured and analyzed. The numbers show disaster looming on many fronts. By and large, this did not and does not get discussed in the corporate media, because it’s not in their interests.
Unless you are able to quantify your statements you will find that most people view your post as politically motivated towards a politician and President who in fact does not control economics in America.
This isn’t the first time the dollar has been in decline. Instead of reading the Economist you should pick up a history book.
History book will tell him what? That dollar was in decline before? That Rome is the empire that rules the Earth? Or is that Ottoman Empire? That the strongest Navy is Royal? That pound used to be what USD is today?
If you didn’t read the article discussed, please don’t shit in the thread.
I don’t have to read the whole article. Everything that needs to be said is in the first paragraph. You can’t forecast exchange rates. In particular, the authors of this article can’t forecast exchange rates.
You can measure the expectations of those who put their money on the line. Just look at the futures markets. The Euro futures one plus year out show a market expectation of a nearly flat dollar to euro exchange rate.
Note that I am not saying the market will be exactly right. It won’t. I am saying that billions of dollars are being exchanged every day by those that, on balance, are expecting rates to stay nearly flat.
How much do you want to bet me that those authors never made a dime in foreign exchange speculation?
I don’t always agree with their politics, but I’ve found that The Economists’ financial analysis pieces are normally well written, and spot on. If they say “Hey keep an eye on this” that topic generally bears watching.
All fiat currencies are doomed to fail…eventually. This “dollar” just happens to be the most entrenched fiat currency in the history of the world.
Our four fathers guarded against such currencies, they learned their lesson from history well. On August 15, 1971, the last blow was dealt, and a complete fiat currency was born.
Its just a matter of time, doesn’t really matter who was elected…it will happen eventually.
I guess you want to go back to the gold standard. I really like the idea, but that dog don’t hunt in the modern world. There are now currency transactions totalling $2 trillion dollars a day. I don’t know how much gold or silver or whatever is out there, but not enough to go around in those volumes.
Gold standard would be best…but like you said, not in this modern world. I’m not sure what the solution is though. If I was in Greenspan’s, or Bush’s, or someother positions (say Finance Chairman in China or on the London Bank Board) I don’t know what I would do! I don’t envy them, in the least. But you right, there isn’t nearly enough gold and silver in the world for the daily transactions!
A history book will tell him that all of the gloom and doom scenarios have been forecast before and have been proven wrong every time. Sadly, I don’t need a history book, since I have been there and seen that. Does that make me a part of history?
If Doug actually believed this, he would be telling us about his positions shorting the dollar and going long the Euro. A year from now he would be very wealthy if he is correct. I am betting he hasn’t taken these financial positions. I am betting the authors haven’t either.
The authors aren’t interested in being right. They are interested in being provocative. In Doug’s case, they have succeeded.
Doug asks us to pay attention to the numbers and the facts on the ground. The numbers say the market expects a steady dollar over the near term. Time for him to step up, prove the market wrong and get wealthy.
I know at least one fellow who has done exactly that over the last few years, gotten rich (richer) off the downturn in the US dollar (mostly vs the Cdn dollar). I believe that he is still bearish on the US dollar. I, unfortunately, don’t have the stomach for the downside risk of short-selling, so I will play it safe and keep my money under the mattress.
You don’t actually have to move the gold arond, in fact that IS the reason for paper money after all. The paper means that you can turn it in and get gold for it, it is “as good as gold”.
You just need somewhere that comeone can turn the paper into gold at a set rate. The gold window that was closed in 1971 actually affected a very small sliver of transactions. But closing it set off a serious round of inflation that didn’t end until the 80’s.
Gold would work fine. Not the optimum mind you, the optimum currency backing would have an absolutely stable supply. Gold does not have that but is probably the closest thing we have to it.
Well, the dollar is really better than gold. Gold (and silver) prices have collapsed more often and more drastically than the dollar ever has. Linking the inflation of the early '80s to eliminated the gold standard is pretty simplistic. There were lots of other factors in play during that time. Government deficits that were much higher as a percentage of GDP than now, caused primarily by the funding of the Vietnam war and the creation of the Great Society programs at the same time, oil price increases caused by OPEC and the bone-headed Carter energy policies, etc.
If you want to turn your dollars into gold, go to a jewelry shop.