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chickentribs · 02-26-2005, 08:20 AM

flstf, that is a good question, and the answer is as much the "why" as the "how much". Over the last three years we have lost about 20 - 26% of our dollar value to assorted currencies around the world, the euro and yen obviously most important. If the losses were due to exceptional advances by Japan and Europe in equity markets or trade gains, that would be one thing because the value would get to us in the short to mid term. It would still be bad, because we are 25% poorer not only as a country, but as people and corps based on real dollar transactions today, but markets fluctuate and you deal with it.

The problem as I understand it is that monetary value did not shift, ie. the rest of the world is not richer from this shift. As we continue to spend money without raising taxes, other countries decide we may not be able to turn back money on our Bonds and T-Bills as readily as our financial obligations grow. This makes our gov't paper less attractive and it loses value in the world market. This now means my company has to sell 25% more product internationally just to cover budget - and most companies couldn't squeak out an extra 2-3%. We all lose money which means now the gov't not only has to raise taxes enough to make up for it's shortage, but needs to raise them further because income taxes are dropping as well.

This can then lead to a slowdown in economic growth which leads to inflation etc... I hope this helps convey if nothing else the chain reacton cause and effect a bit. Playing loosely with economic policy, and the belief that it doesn't matter because we just borrow whatever we need is dangerous and expensive.

02-26-2005, 08:20 AM	#9 (permalink)
chickentribs Addict Location: Mansion by day/Secret Lair by night	flstf, that is a good question, and the answer is as much the "why" as the "how much". Over the last three years we have lost about 20 - 26% of our dollar value to assorted currencies around the world, the euro and yen obviously most important. If the losses were due to exceptional advances by Japan and Europe in equity markets or trade gains, that would be one thing because the value would get to us in the short to mid term. It would still be bad, because we are 25% poorer not only as a country, but as people and corps based on real dollar transactions today, but markets fluctuate and you deal with it. The problem as I understand it is that monetary value did not shift, ie. the rest of the world is not richer from this shift. As we continue to spend money without raising taxes, other countries decide we may not be able to turn back money on our Bonds and T-Bills as readily as our financial obligations grow. This makes our gov't paper less attractive and it loses value in the world market. This now means my company has to sell 25% more product internationally just to cover budget - and most companies couldn't squeak out an extra 2-3%. We all lose money which means now the gov't not only has to raise taxes enough to make up for it's shortage, but needs to raise them further because income taxes are dropping as well. This can then lead to a slowdown in economic growth which leads to inflation etc... I hope this helps convey if nothing else the chain reacton cause and effect a bit. Playing loosely with economic policy, and the belief that it doesn't matter because we just borrow whatever we need is dangerous and expensive. __________________ Oft expectation fails... and most oft there Where most it promises - Shakespeare, W.