currency crash? - Tilted Forum Project Discussion Community

boatin · 02-25-2005, 10:03 AM

Lord knows I'm no expert, but this makes sense in a "my own personal finances" sort of way. If I continue to borrow forever, eventually I dig myself a fiscal hole that I can't get out of without catastrophe. It wouldn't surprise me that national finances work the same way.

My questions for the peanut gallery:
*Why wouldn't national finances work that way?
*Why isn't limiting the deficit seen as a higher priority?
*Why isn't reducing oil needs a higher priority, with an actual plan?

In other news, actions/inactions have consequences. And yes, the link came from fark.

http://service.spiegel.de/cache/inte...343449,00.html

Quote:

OPINION

Honey, I shrunk the dollar

When a country lives on borrowed time, borrowed money and borrowed energy, it is just begging the markets to discipline it in their own way at their own time. By THOMAS L. FRIEDMAN

I have just one question about President Bush's trip to Europe: Did he and Laura go shopping?

If they did, I would love to have been a fly on the wall when Laura must have said to George: "George, do you remember how much these Belgian chocolates cost when we were here four years ago? This box of mints was $10. Now it's $15? What happened to the dollar, George? Why is the euro worth so much more now, honey? Didn't Rummy say Europe was old? If we didn't have Air Force One, we never could have afforded this trip on your salary!"

Cooperative agreement between SPIEGEL ONLINE and the "New York Times"

SPIEGEL ONLINE and the online version of the "New York Times" offer their readers a special service. Approximately twice a week, you can read selected analyses and commentary from the "New York Times" on SPIEGEL ONLINE. In return, our colleagues in New York will publish selected and translated articles from DER SPIEGEL on their website each week.
The dollar is falling! The dollar is falling! But the Bush team has basically told the world that unless the markets make the falling dollar into a full-blown New York Stock Exchange crisis and trade war, it is not going to raise taxes, cut spending or reduce oil consumption in ways that could really shrink our budget and trade deficits and reverse the dollar's slide.

This administration is content to let the dollar fall and bet that the global markets will glide the greenback lower in an "orderly" manner.

Right. Ever talk to someone who trades currencies? "Orderly" is not always in the playbook. I make no predictions, but this could start to get very "disorderly." As a former Clinton Commerce Department official, David Rothkopf, notes, despite all the talk about Social Security, many Americans are not really depending on it alone for their retirement. What many Americans are counting on is having their homes retain and increase their value. And what's been fueling the home-building boom and bubble has been low interest rates for a long time. If you see a continuing slide of the dollar - some analysts believe it needs to fall another 20 percent before it stabilizes - you could see a substantial, and painful, rise in interest rates.

"Given the number of people who have refinanced their homes with floating-rate mortgages, the falling dollar is a kind of sword of Damocles, getting closer and closer to their heads," Mr. Rothkopf said. "And with any kind of sudden market disruption - caused by anything from a terror attack to signs that a big country has gotten queasy about buying dollars - the bubble could burst in a very unpleasant way."

Why is that sword getting closer? Because global markets are realizing that we have two major vulnerabilities that this administration doesn't want to address: We are importing too much oil, so the dollar's strength is being sapped as oil prices continue to rise. And we are importing too much capital, because we are saving too little and spending too much, as both a society and a government.

"When people ask what we are doing about these twin vulnerabilities, they have a hard time coming up with an answer," noted Robert Hormats, the vice chairman of Goldman Sachs International. "There is no energy policy and no real effort to reduce our voracious demand of foreign capital. The U.S. pulled in 80 percent of total world savings last year [largely to finance our consumption]." That's a big reason why some "43 percent of all U.S. Treasury bills, notes and bonds are now held by foreigners," Mr. Hormats said.

And the foreign holders of all those bonds are listening to our debate. They are listening to a country that is refusing to raise taxes, and an administration talking about borrowing an additional $2 trillion so Americans can invest some of their Social Security money in stocks. If that happened, it would almost certainly weaken the dollar, further depreciating the U.S. Treasury bonds held by all those foreigners.

On Monday, the Bank of Korea said it planned to diversify more of its reserves into nondollar assets, after years of holding too many low-yielding and depreciating U.S. government securities. The fear that this could become a trend sparked a major sell-off in U.S. equity markets on Tuesday. To calm the markets, the Koreans said the next day that they had no intention of selling their dollars.

Oh, good. Now I'm relieved.

"These countries don't have to dump dollars - they just have to reduce their purchases of them for the dollar to be severely affected," Mr. Hormats noted. "Korea is the fourth-largest holder of dollar reserves. ... You don't want others to see them diversifying and say, 'We'd better do that, too, so that we're not the last ones out.' Remember, the October 1987 stock market crash began with a currency crisis."

When a country lives on borrowed time, borrowed money and borrowed energy, it is just begging the markets to discipline it in their own way at their own time. As I said, usually the markets do it in an orderly way - except when they don't.

Zeld2.0 · 02-25-2005, 08:01 PM

With international trade built on the dollar, as it decreases in value, the more likely a big problem will occur in the future, especially at how we are spending money this fast without ever trying to pay it back.

A few years ago, the U.S. was a bit above the Euro. At that time I should've invested my money into the Euro because right now, 1 Eu = $1.32. 1 GBP is now $1.92.

As our dollar goes down in value, we will be hurt.

alansmithee · 02-25-2005, 08:35 PM

Actually, the lowering of the dollar isn't as big a problem for the US as it is for the rest of the world, at least as far as trade is concerned. It makes US products cheaper in comparison to the rest of the world's, which other countries have problems with. This can also be seen in China, which has been accused of artificially lowering their currency's value to stimulate trade.

And the rising price of oil has hurt the EU's economy more than it has America's, because oil prices are based on the dollar. OPEC needed to raise prices to compensate for the devaluing of the dollar.

The reason I believe that reducing reliance on oil isn't higher priority is because there's no need yet. There are still vast oil reserves, many untapped. From a business perspective it's more expensive trying to develop new energy technologies than relying on oil.

National finances are quite separate from personal finances. In personal finance, borrowing can be seen as a sign of weakness, whereas that's not the case for national finance. Also, there is really no way to collect on national debt, because it's allocated throughout many places. It's on a totally different level.

As for debt reduction not being a higher priority, again I don't think it's seen as a large problem. And even if it was, it's hard to explain macroeconomic theory to the masses in a way that it could be traded on for political capital.

Zeld2.0 · 02-25-2005, 10:26 PM

The oil issue is important though, imo.

Keep in mind its not simply build more nuclear/fusion power plants whenver. It takes energy to create energy - the energy needed to power the machines. Not to mention the research. The power needed to start the powering of a fusion plant for instance is a lot. Reserves or not in oil doesn't matter - its going to come sooner or later and I'd rather be prepared for sooner than reach it and realize there is no later.

Of course, thats a different issue from this at hand. I'd go into more about the money problem but thats for another day right now im afraid.

host · 02-25-2005, 11:10 PM

Quote:

Originally Posted by alansmithee

Actually, the lowering of the dollar isn't as big a problem for the US as it is for the rest of the world, at least as far as trade is concerned. It makes US products cheaper in comparison to the rest of the world's, which other countries have problems with. This can also be seen in China, which has been accused of artificially lowering their currency's value to stimulate trade.

And the rising price of oil has hurt the EU's economy more than it has America's, because oil prices are based on the dollar. OPEC needed to raise prices to compensate for the devaluing of the dollar.

The reason I believe that reducing reliance on oil isn't higher priority is because there's no need yet. There are still vast oil reserves, many untapped. From a business perspective it's more expensive trying to develop new energy technologies than relying on oil.

National finances are quite separate from personal finances. In personal finance, borrowing can be seen as a sign of weakness, whereas that's not the case for national finance. Also, there is really no way to collect on national debt, because it's allocated throughout many places. It's on a totally different level.

As for debt reduction not being a higher priority, again I don't think it's seen as a large problem. And even if it was, it's hard to explain macroeconomic theory to the masses in a way that it could be traded on for political capital.

Opinions, alansmithee, or do you have sources to post to substantiate your assertions in your last post ? I disagree with much of what you posted.

I submit that compared to the U.S., countries that use the Euro as their
currency have experienced only a small fraction of the increased expense of
oil imports, when compared to oil prices and currency values four years ago.

As you can see, if the numbers below are accurate, U.S. currency has already collapsed. It can be argued that U.S. equity market indexes (Dow 30, Nasdaq 2000, S&P 500) only appear to be "up" when observed by people who live in the U.S........ Equity indexes, just like barrels of crude oil , have been "re-priced" to reflect the collapse of the U.S. dollar value. When viewed in Euros, the values of U.S. equity indexes have dropped in half since the 2000 presidential election.

Quote:

<a href="http://www.td.com/economics/global/gm1204.pdf">http://www.td.com/economics/global/gm1204.pdf</a>

pg. 9

The euro continued its ascent versus the U.S. dollar in
November abd early December, rising by another 4.4 percent
to nearly 1.345 USD/EUR at one point- a move thattook the
currency mmore than 60 per cent above its October 2000
all-time low of 82.7 U.S. cents.

Quote:

<a href="http://www.google.com/search?hl=en&q=Oil+valued+in+dollars+is+up+20%25+versus+its+peak+in+2000%2C+but+when+valued+in+euros%2C+the+price+of+oil+has+fallen+by+20%25.&btnG=Google+Search
">Oil valued in dollars is up 20% versus its peak in 2000, but when valued in euros, the price of oil has fallen by 20%</a>

Quote:

<a href="http://www.technologyreview.com/articles/05/02/issue/review_oil.asp?p=0
">http://www.technologyreview.com/arti...ew_oil.asp?p=0
</a>
The End of Oil?
By Mark Williams Febuary 2005

If the actions—rather than the words—of the oil business’s major players provide the best gauge of how they see the future, then ponder the following. Crude oil prices have doubled since 2001, but oil companies have increased their budgets for exploring new oil fields by only a small fraction. Likewise, U.S. refineries are working close to capacity, yet no new refinery has been constructed since 1976. And oil tankers are fully booked, but outdated ships are being decommissioned faster than new ones are being built.

If those clues weren’t enough, here’s a news item that came out of Saudi Arabia on March 6, 2003. Though it went largely unremarked, the kingdom’s announcement that it could not produce more oil in response to the Iraq War was of historic importance. As Kenneth Deffeyes notes in Beyond Oil: The View from Hubbert’s Peak, it meant that as of 2003, there was no major underutilized oil source left on the planet. Even as established oil fields have reached their maximum production capacity, there has been disappointing production from new fields. Globally, according to some geologists’ estimates, we have discovered 94 percent of all available oil........

.........................The prognosis? Deffeyes has no doubt that by 2019, the year in which Hubbert’s theories indicate global oil production will drop to 90 percent of current rates, human ingenuity will have found replacement energy sources (see “What Energy Crisis?”, p. 19). But Deffeyes is optimistic about the long term only because he believes that by 2010, pressures will grow so intense that they’ll create the resolve necessary to develop a new energy *economy. In the short term, he foresees continually rising oil prices that force industry after industry closer to the wall. He fears not just escalating resource wars around the world but also mass starvation in some countries, since the 6.4 billion people living on the earth today are fed thanks largely to the successes of the 20th century’s “green revolution,” which, among other innovations, brought petrochemical-based fertilizers into wide use.

Because 15 years ago we failed to begin developing the new energy sources and technologies we need now, Deffeyes argues, in the immediate future we’ll have to rely on what we’ve got. In Beyond Oil, he examines how we might optimize the use of our geologically derived energy sources..................

Quote:

<a href="http://www.gravmag.com/oil.html">http://www.gravmag.com/oil.html</a>
US OIL DEMAND, 2004: Over 20 million barrels per day, up from January 2002, when demand was about 18.5 million barrels per day, = 777 million gallons.... .....55-60% of US consumption is imported at a cost of $50 billion+ per year, amounting to the largest single element of our trade deficit. In summer 2004, thanks to higher prices, increased demand, and lower production, record trade deficits of more than $50 billion per month were recorded, with approximately 30% of that attributable to imported energy costs. In September 2004, the US reported its lowest montly oil production in 55 years, at an average of 4.85 million barrels per day.

In March 2004, the total trade deficit was about $46 billion for the month, and oil imports were about 11 million barrels per day x $40 per barrel x 30 days per month = $13.2 billion, or about a quarter of the total trade deficit for the month. If March served as an average for the year, the total value of oil imports for 2004 would be about $156 billion — but this number depends on volume of imports (which is unlikely to decrease) and price of oil (which is likely to fluctuate).

US PRODUCTION, early 2002: About 5.9 million barrels of oil per day, plus about 2 million barrels of natural gas liquids and condensate; and 55 billion cubic feet of gas per day. Oil production is a decline from 8-9 million b/d in 1986.

WORLD PRODUCTION/CONSUMPTION: Production in 2000-2002 was about 75 million barrels per day, about equal to the world consumption of about 27 billion barrels per year. Consumption is increasing at a faster rate than the increase in production.

alansmithee, I can see the consistancy in the points you tried to make in your post, with what I perceive to be your political philosophy and sympathies. I see a U.S. administration that continues to passively observe a currency collapse that was signifigantly aggravated during it's tenure. I see no effective policy to encourage energy efficiency or to discourage domestic consumption. Monetary policy seems to consist of escalating federal borrowing and unrestrained creation of new consumer and corporate credit.

Please stop posting opinion with no references that can be fact checked.

Willravel · 02-25-2005, 11:16 PM

Quote:

Originally Posted by host

Please stop posting opinion with no references that can be fact checked.

I couldn't agree more. Your opinion is only as valid as the facts is it based on.

The real question is: what can be done to save US currency?

chickentribs · 02-26-2005, 01:07 AM

Quote:

Originally Posted by alansmithee

Actually, the lowering of the dollar isn't as big a problem for the US as it is for the rest of the world, at least as far as trade is concerned. It makes US products cheaper in comparison to the rest of the world's, which other countries have problems with. This can also be seen in China, which has been accused of artificially lowering their currency's value to stimulate trade.

Yeah, that would be super if we didn't import much more than we export. Alan, do you really think through your answers or do you just figure supporting Bush on everything is the way to go? Seriously.

The falling dollar value has become a favorite excuse for manufacturers who are closing down operations here in the U.S. and moving to other countries for cheaper labor and raw goods. It can be considered instant inflation, smothers trade, and forces interest rates up dramatically. It is a much bigger problem for us than the rest of the world.

flstf · 02-26-2005, 05:39 AM

I will be the first to admit that I do not understand macroeconomics and how these currencies are valued. However as I understand it the European Central Bank originally launched the euro Jan. 1, 1999 and placed the value at about 1.20 dollars to the euro. Over a few years it dropped to as low as .82 and today the value is at about 1.34. Going from 1.20 to 1.34 does not seem like that much of a dollar collapse to me.

Was the dollar value too high when it was at .82 and too low at today's 1.34? I don't know, was it supposed to stay at the euro's launch price of 1.20 dollars to the euro instead of today's 1.34?

I don't understand why the dollar compared to the euro going from 1.20 dollars to 1.34 in 6 years is such a big deal.

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.

flstf · 02-26-2005, 09:44 AM

Quote:

Originally Posted by chickentribs

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.

But doesn't a low dollar help make our exports less expensive and imports more expensive thereby helping to lower the trade imbalance and creating more jobs here? Aren't the Europeans complaining because their unemployment is so much higher than here caused in part because they can't compete as well with the low dollar?

chickentribs · 02-26-2005, 10:25 AM

The issue is the cost of producing goods has risen, and the cost of labor has stayed the same within the U.S. While we may ship more goods because of the price levels others are getting off of us right now, you have to deal with the shrinking margins and unless you are willing to raise your prices abroad you have to ship more to realize the same revenue. Without tax penalties for US corporations that produce overseas and ship back into the US, there is no reason for them to be here. You want to operate on a cost level from the stronger currency market to reduce operating costs., and then get the benefit of selling from the weaker currency market without paying the import taxes for your raw goods. Euro companies are having difficulty competing with the drop in real price of US firms, but they are not losing jobs to us.

The Euro labor market has historically run a higher unemployment rate, but the level is more stable than ours in its reaction to economic indicators.

I guess my hope is that the Fed and Bush will get serious about incentives - be they stick or carrot - to U.S. companies to get the jobs back here. The "jobless recovery" our economy has enjoyed isn't helpful to unemployed workers.

NCB · 02-26-2005, 12:55 PM

Quote:

Originally Posted by chickentribs

The Euro labor market has historically run a higher unemployment rate, but the level is more stable than ours in its reaction to economic indicators.

I guess my hope is that the Fed and Bush will get serious about incentives - be they stick or carrot - to U.S. companies to get the jobs back here. The "jobless recovery" our economy has enjoyed isn't helpful to unemployed workers.

1. Europe has a higher enemployment rate (often in double digits), but their labor market is stronger becasue the unemployment rate rarely changes? That tells me that their labor markett is weak, not strong.

2. It's only a jobless recovery in the Dem halls in DC, the Upper East Side, and LA. The rest of the country has seen a boon. That said, I too wish the Bush Admin would be more proactive in having other countries accepts our goods. It pisses me off to no end that we are open to all markets, but all markets are not open to ours.

alansmithee · 02-26-2005, 02:51 PM

Quote:

Originally Posted by host

Opinions, alansmithee, or do you have sources to post to substantiate your assertions in your last post ? I disagree with much of what you posted.

I submit that compared to the U.S., countries that use the Euro as their
currency have experienced only a small fraction of the increased expense of
oil imports, when compared to oil prices and currency values four years ago.

As you can see, if the numbers below are accurate, U.S. currency has already collapsed. It can be argued that U.S. equity market indexes (Dow 30, Nasdaq 2000, S&P 500) only appear to be "up" when observed by people who live in the U.S........ Equity indexes, just like barrels of crude oil , have been "re-priced" to reflect the collapse of the U.S. dollar value. When viewed in Euros, the values of U.S. equity indexes have dropped in half since the 2000 presidential election.

alansmithee, I can see the consistancy in the points you tried to make in your post, with what I perceive to be your political philosophy and sympathies. I see a U.S. administration that continues to passively observe a currency collapse that was signifigantly aggravated during it's tenure. I see no effective policy to encourage energy efficiency or to discourage domestic consumption. Monetary policy seems to consist of escalating federal borrowing and unrestrained creation of new consumer and corporate credit.

Please stop posting opinion with no references that can be fact checked.

I find your tone very condecending. You are not half as demanding on those who post things you agree with. You do not want facts, you want opinions that mesh with your own. How has the US currency "collapsed"? Where is the rampant inflation that usually accompanys such a collapse? So here's some sources for you to dismiss because they don't agree with what you believe to be the truth, along with the comment that I made that was supported by them:

Quote:

Originally Posted by myself

Actually, the lowering of the dollar isn't as big a problem for the US as it is for the rest of the world, at least as far as trade is concerned. It makes US products cheaper in comparison to the rest of the world's, which other countries have problems with. This can also be seen in China, which has been accused of artificially lowering their currency's value to stimulate trade.

And the rising price of oil has hurt the EU's economy more than it has America's, because oil prices are based on the dollar. OPEC needed to raise prices to compensate for the devaluing of the dollar

Quote:

Pricing oil on the sliding dollar
A strong dollar helped them in stabilizing fluctuations in their financial wealth and had covered the exchange rate risk. But since January' 02 as it started weakening against key currencies, hurting the interest of the oil producers, mainly GCC countries that have pegged their currencies to dollar.

Dollar depreciation has proven a hidden tax on their revenues as their purchasing power has reduced significantly. For their imports from Europe alone they have to pay 52 per cent more than what they paid in 2001. Other major imports to these countries are from Japan that is also proving expensive for them...

The long-term growth prospects of Europe are not as bright as US, while EU is also facing other political problems and switching from dollar to euro may result in a rather more volatile currency markets...

Given these scenarios, if the private investors retreat from dollar, as the data shows that foreign capital flow from private investor is now edging downward, then international governments will most likely to intervene to bail out any crisis by purchasing dollar as this would also be equally important for their own economies and the currency market would be driven more on political grounds than on economic fundamentals.

Quote:

Strong Euro, high oil prices hurting German morale, survey shows
Surging oil prices and the strength of the euro, currently at an all-time high around 1.32 dollars, are currently weighing on business morale in Germany, the eurozone's biggest economy, a new poll showed on Thursday.
And with confidence also fading fast in other eurozone countries, such as Belgium and Italy, the pressure is likely to increase on the European Central Bank to step in and prevent the stronger euro from choking off recovery altogether, analysts said.
The widely watched business climate index calculated each month by Munich-based think-tank fell to 94.1 points -- its lowest level in 14 months -- in November.
The barometer had been treading water at around 95.3 points in the preceding three months.
The fall in the November reading was much steeper than analysts had been expecting -- consensus forecasts had foreseen a fall of just 0.5 point.

Quote:

http://www.europarl.eu.int/comparl/e...wyplosz_en.pdf

Much as the strong dollar of the late 1990s came at a propitious time for the US, today’s weak
dollar is good for the US economy. For the Eurozone, it is a mixed blessing, softening the oil
shock but weakening an already modest economic recovery.
The ECB finds itself in an uncomfortable position. Limiting the inflationary impact of the oil
shock calls for tightening up monetary policy. Limiting its contractionary impact calls for
loosening monetary policy. The strong euro limits the first impact and, provided second round
oil shock effects are contained, as seems to be the case, the ECB should stay put at this stage.
In addition, the ECB cannot do much to prevent a strong euro. Foreign exchange
interventions are largely ineffective. It could lower the interest rate, but this would require a
large reduction, which is not desirable at this stage.

Quote:

Originally Posted by myself

The reason I believe that reducing reliance on oil isn't higher priority is because there's no need yet. There are still vast oil reserves, many untapped. From a business perspective it's more expensive trying to develop new energy technologies than relying on oil

Quote:

http://www.fe.doe.gov/programs/reser.../40010-373.pdf

Quote:

Fossil Fuel Reserves World crude oil reserves are estimated to be more than 1012 barrels, of which the 11 OPEC Member Countries hold more than 75 per cent. OPEC's Members currently produce around 28 million barrels of oil per day. This is around 40 per cent of the world total output, which stands at about 75 million barrels per day. It is estimated that as world economic growth continues, crude oil demand will also rise to 90 million barrels/day in 2010 and 103 million barrels/day by 2020.

Oil is a limited resource, so we will eventually run out. Oil producers claim that this will not happen for many years to come, while others claim that this will happen within the next 20 years. Some people have been saying that there is only 20 years' supply of oil since the early 1970's. OPEC claims that it's oil reserves are sufficient to last another 80 years at the current rate of production, while non-OPEC oil producers' reserves might last less than 20 years. The worldwide demand for oil is rising and OPEC is expected to be an increasingly important source of that oil. It is further claimed by OPEC that if we manage our resources well, use the oil efficiently and develop new fields, then our oil reserves should last for many more generations to come.

I think those were what you were disagreeing with mainly. I don't have the time (or ability) to teach ECON 101 to explain the differences between private finances and national finances. If you feel there is no difference, fine. And ill even concede that debt reduction should be larger if it makes you feel better.

I don't understand your need to constantly challenge opposing views that people here put forth. Are your beliefs so fragile that they can only find validation through internet "facts"? Or do you just not believe that anyone who disagrees with you can possibly have any knowledge at all? When I originally posted, what I put down was things I found to be true based upon my study in college and what I have seen on various business shows, and business articles in newspapers and magazines.

Why do you bother posting on the political board? You obviously have nothing but contempt for those you disagree with, so you aren't trying to examine other viewpoints. And your personal views are obviously backed by hours of hard internet research, so you don't need validation for your own views. Is it just to antagonize people who you disagree with? Do you have some insane need to be constantly "right"?

Please quit being a condecending ass.

Quote:

Originally Posted by chickentribs

Yeah, that would be super if we didn't import much more than we export. Alan, do you really think through your answers or do you just figure supporting Bush on everything is the way to go? Seriously.

The falling dollar value has become a favorite excuse for manufacturers who are closing down operations here in the U.S. and moving to other countries for cheaper labor and raw goods. It can be considered instant inflation, smothers trade, and forces interest rates up dramatically. It is a much bigger problem for us than the rest of the world.

What does relative imports and exports have to with our goods being cheaper overseas? Above I have shown where our falling currency is as much, if not more of a problem for the EU.

And nobody said anything about supporting Bush. I find his economic policy fairly appaling. He might be the first president who has tried to make less (by lowering taxes) and spend more. What I don't agree with is the "sky is falling" mentality of many who do oppose Bush. I think the economy is strong in spite of Bush, not because of him.

chickentribs · 02-26-2005, 03:06 PM

Quote:

Originally Posted by NCB

2. It's only a jobless recovery in the Dem halls in DC, the Upper East Side, and LA. The rest of the country has seen a boon. That said, I too wish the Bush Admin would be more proactive in having other countries accepts our goods. It pisses me off to no end that we are open to all markets, but all markets are not open to ours.

NCB, I am registered and vote still in Columbus, Ohio which is considered prime "fly over" territory in the Midwest and we shoulder a large part of the blame/praise for casting the electorial votes giving Bush his second term. The manufacturing plant where Bush held his last of many, many speeches in Columbus ironically closed in January and left another 400 workers unemployed and uninsured.

Ohio has lost 50,000 jobs net during the past 4 years, most of which are blue-collar labor manufacturing jobs that aren't coming back to Ohio or anyplace else in the U.S. when companies can manufacture elsewhere in the world without penalty from our government. G.W. came to Columbus about every other week the last 3 months of the campaign, selling workers on pride in America, innovation and training in the workforce, and "circling our wagons" against the bad men who want to hurt us. Do you think he even knows the factory is closed today? He was pushing legislation this week to shave another week off of unemployment benefits that these people are living on now... "Tough love" I think he called it.

Revenues are up, that is true. The UPS guy picks up the smaller payroll checks every week to ship overseas.

chickentribs · 02-26-2005, 03:25 PM

Quote:

What does relative imports and exports have to with our goods being cheaper overseas? Above I have shown where our falling currency is as much, if not more of a problem for the EU.

And nobody said anything about supporting Bush. I find his economic policy fairly appaling. He might be the first president who has tried to make less (by lowering taxes) and spend more. What I don't agree with is the "sky is falling" mentality of many who do oppose Bush. I think the economy is strong in spite of Bush, not because of him.

I was responding to your assertion that a weak dollar was a good thing because it would stimulate US exports due to increased purchase power for the EU and Asia. My point was that the rise in our import costs would wipe out any benefit realized on exports seeing how we import at about a 2:1 ratio.

Fair enough about assuming your support for Bush carte blanche. Sorry.

NCB · 02-26-2005, 03:26 PM

NC knows all about job loses and jobs going overseas. It's not unique to just the Rust Belt. We've lost most of our jobs in tobacco (lawyers), textile (Mexico and Central America), and furniture (China and Thailand). However, we;ve more than made up those job loses. We have a Dell plant coming in, a FedEx hub, the drug manufactuers in RTP, ect...

Now what's the difference between OH and NC?

1. NC tends to be union free. Less than 5% of employees are unionized.
2. Good legal enviroment for employers (ie, no few bullshit lawsuits)
3. Excellent NC community college and university system
4. Lower taxes

So in essence, it's not that just the Rust Belt is getting a random shafting, it's y'alls enviroment. What company in their right mind would choose a heavily union, higher tax, litigation prone state to locate their business.

Sometimes, it's just not Bush's fault. Perhaps its time for the Rust Belt to take a long hard look in the mirror

chickentribs · 02-26-2005, 04:14 PM

Quote:

Originally Posted by NCB

So in essence, it's not that just the Rust Belt is getting a random shafting, it's y'alls enviroment. What company in their right mind would choose a heavily union, higher tax, litigation prone state to locate their business.

Sometimes, it's just not Bush's fault. Perhaps its time for the Rust Belt to take a long hard look in the mirror

I knew we'd agree eventually! We are hopeful that our dem. gubernatorial front runner, Jerry Springer (true), will send Bob Taft packing. Strangely, Ohio has a plenty of white collar tech and management jobs available for the educated workers, but we have to account for a large rural population somehow.

alansmithee · 02-26-2005, 04:42 PM

Quote:

Originally Posted by chickentribs

I was responding to your assertion that a weak dollar was a good thing because it would stimulate US exports due to increased purchase power for the EU and Asia. My point was that the rise in our import costs would wipe out any benefit realized on exports seeing how we import at about a 2:1 ratio.

Fair enough about assuming your support for Bush carte blanche. Sorry.

I would assume that the rising costs of imports would cause an increase in domestic sales, as businesses went to cheaper domestic goods. This would in turn cause less reliance on imports.

And you could counter that many Asian countries still have goods priced far cheaper than domestic, and have government policies that heavily regulate imports regardless of price, and would not increase trade to those nations anyways.

And here I would agree, and then say that the US, EU, Great Britain, and Japan should focus on curtailing the trade irregularities that occur when dealing with countries who don't have the worker protections found in Western industrialized nations (and I know Japan isn't in the west, but their economy functions more like other western economies than the "developing" nations found throughout the majority of Asia).

chickentribs · 02-26-2005, 05:10 PM

Unfortunately most of what we import tends to be raw goods with steady demand that we can't supply from the US (ie. Oil) so we couldn't respond to cost pressures if we wanted to. I agree with you Alan about the need to reduce Artificial inflators in our dealings with other countries, especially Japan. We nearly handed them our domestic automobile business on a silver platter back in the late 80's while they maintained an embargo against Ford and GM. It didn't surprise me at all to hear that Honda has gone against the "gentleman's agreement" they had with us and will be introducing the first Honda Pick-up Truck this year.

flstf · 02-26-2005, 06:32 PM

Quote:

Originally Posted by chickentribs

Strangely, Ohio has a plenty of white collar tech and management jobs available for the educated workers, but we have to account for a large rural population somehow.

I wonder if we will ever be able to compete with third world countries for these jobs in a global economy. If your experience is anything like mine then most of your friends and family will be employed in the service sector. How many investment advisors, lawyers, teachers, accountants, advertising sales, etc... do we need anyway?

It is interesting to look in the newspaper under "movers and shakers" and see how few people are being promoted in jobs that actually involve a manufactured product. Sometimes I think that we may all be employed delivering each other pizzas some day.

chickentribs · 02-26-2005, 06:46 PM

Quote:

I wonder if we will ever be able to compete with third world countries for these jobs in a global economy. If your experience is anything like mine then most of your friends and family will be employed in the service sector. How many investment advisors, lawyers, teachers, accountants, advertising sales, etc... do we need anyway?

I know exactly what you mean - I sell software, and I can't think of one friend who sells or produces an actual good. We all run in a circle servicing each other to support some good somewhere I guess... I painted houses in college and I still look back on that a bit romantically. There was something to be said for finishing your day and having something to show for it. I still drive by homes I did and have tremendous pride about it!

james t kirk · 02-27-2005, 11:46 AM

Quote:

Originally Posted by chickentribs

Ohio has lost 50,000 jobs net during the past 4 years, most of which are blue-collar labor manufacturing jobs that aren't coming back to Ohio or anyplace else in the U.S. when companies can manufacture elsewhere in the world without penalty from our government. G.W. came to Columbus about every other week the last 3 months of the campaign, selling workers on pride in America, innovation and training in the workforce, and "circling our wagons" against the bad men who want to hurt us. Do you think he even knows the factory is closed today? He was pushing legislation this week to shave another week off of unemployment benefits that these people are living on now... "Tough love" I think he called it.

Revenues are up, that is true. The UPS guy picks up the smaller payroll checks every week to ship overseas.

Interesting.

I was watching CNN the other night and they were talking about the economic crisis in Erie County (Buffalo NY). Seems like a similar situation is occuring there where good solid middle class jobs in manufacturing are being lost and shipped to China and the like.

It's so bad that Erie county is now talking about laying off 25% of its workforce, including cops, ambulance, municipal workers, etc.

I watch this and part of me thinks that we have no-one to blame but ourselves. We as consumers demand cheaper and cheaper stuff all the time, so business has no alternative but to relocate production to cheap overseas factories in China, etc. Walmart is the prime example. I wonder how many people in Erie County shop at Walmart all of the time. I know this has been covered before, but it's very real. The same guys who are now being laid off have probably been shopping at Walmart for years "because it's so cheap, and I can get way more stuff for my money, blah blah blah."

Well, now the chickens are coming home to roost buddy. You thought that it wouldn't affect you, but guess what. It does and now it is.

If people out there refused to buy manufactured goods produced in cheap third world countries, these jobs would NEVER have been lost. Business responds to the demands consumers place upon them. We demand to buy a Sony 27" colour TV for 500 bucks, then there is only one place in the world where they can make them. (I remember in 1972, my parents bought a 26" Fleetwood Colour TV (our first) that cost more in 1972 dollars to buy than a new 27" TV costs today in today's dollars)

These good middle class manufacturing jobs that have been lost to Asia are NEVER coming back. It's over. Those guys at the factory who have lost their jobs will most likely never know such a pay day again. At best, they might end up working at Walmart for minimum wage. (Walmart is now the largest employer in 25 of 50 states.)

What's going to eventually happen is a huge social upheaval in China and places like that where people get sick and tired being oppressed and of working for peanuts and revolt just like North Americans did in the early 1900s. Right now, Western culture is enjoying a cheap existance off the backs of the Asian workers. Some day, that is going to end.

Then we'll be really screwed because it will cost way more to buy the crap we are buying now for peanuts and they won't bring those jobs back to North America that they are shipping over there right now.

stevo · 02-28-2005, 12:42 PM

Quote:

Originally Posted by james t kirk

What's going to eventually happen is a huge social upheaval in China and places like that where people get sick and tired being oppressed and of working for peanuts and revolt just like North Americans did in the early 1900s. Right now, Western culture is enjoying a cheap existance off the backs of the Asian workers. Some day, that is going to end.

Then we'll be really screwed because it will cost way more to buy the crap we are buying now for peanuts and they won't bring those jobs back to North America that they are shipping over there right now.

So if/when the chinese revolt and costs go up there, why wont these jobs come back to the US? If the jobs follow cheap labor, wouldn't they come back when the labor here is cheaper than it is in china?

james t kirk · 02-28-2005, 02:03 PM

Quote:

Originally Posted by stevo

So if/when the chinese revolt and costs go up there, why wont these jobs come back to the US? If the jobs follow cheap labor, wouldn't they come back when the labor here is cheaper than it is in china?

1. Too long of a timeframe to do any people thrown out of work now any good.

2. Chinese labour will just catch up to the US, they won't surpass the US.

3. India

Yakk · 02-28-2005, 02:39 PM

Quote:

Originally Posted by NCB

1. Europe has a higher enemployment rate (often in double digits), but their labor market is stronger becasue the unemployment rate rarely changes? That tells me that their labor markett is weak, not strong.

Part of the higher unemployment rate is longer and more generous unemployment benefits.

Lets say that it takes 1 year to get your job back, but your benefits run out after 4 months in the USA, or 1 year in Germany.

After 4 months, you are no longer "unemployed" in the US, you have been considered to have left the labour market. You are still unemployed in Germany.

(this is low reliability information)

As far as I'm aware, that is what is known as 'structural unemployment'.

In addition to that effect, the US military and prison system has unemployment lowering effects. An otherwise unemployable person who is in prison or in the military is either out of the market or employed. Other forms of government support don't nessicarially remove someone from the labour market or mark them as employed. The US has an unusually large prison and military population (over 2% of the US's workforce).

Quote:

Originally Posted by chickentribs

I was responding to your assertion that a weak dollar was a good thing because it would stimulate US exports due to increased purchase power for the EU and Asia. My point was that the rise in our import costs would wipe out any benefit realized on exports seeing how we import at about a 2:1 ratio.

A lower dollar is "good", but not in a way that means "make USA wealthier".

A lower dollar means importing goods makes less sense and exporting goods makes more sense.

The interesting part here is how much of the US's debt and current-account deficit is being financed by a handful of large overseas banks, purchasing large amounts of US government bonds.

And many of those banks are talking about 'diversifying' their reserves. Which makes sense -- the current rate which they are purchasing US debt is insanely unsustainable, even in the short term.

Quote:

Originally Posted by chickentribs

Unfortunately most of what we import tends to be raw goods with steady demand that we can't supply from the US (ie. Oil) so we couldn't respond to cost pressures if we wanted to.

Imagine Wal-mart prices going up 25%-50% (and Wal-mart stock going down 75%!). Imagine petrol prices hitting 3-4$. Imagine imported fruit doubling and imported cars going up 50% in price.

You can do without. You won't want to. But you can do without.

The alternative is to start investing in productivity improvements now. Educate your populance, pump out Engeneers, work on robotics to make manufacturing cheap, and start before things get bad.

Quote:

Originally Posted by james t kirk

Then we'll be really screwed because it will cost way more to buy the crap we are buying now for peanuts and they won't bring those jobs back to North America that they are shipping over there right now.

Actually, the jobs will come back. You'll be forced to work to provide for Chinese workers. Every unit of work they do for you, you will do for them.

NCB · 03-01-2005, 01:07 PM

News on the thriving socialist economy of Germany

http://news.bbc.co.uk/2/hi/business/4307303.stm

smooth · 03-02-2005, 04:34 AM

Quote:

Originally Posted by Yakk

Part of the higher unemployment rate is longer and more generous unemployment benefits.

Lets say that it takes 1 year to get your job back, but your benefits run out after 4 months in the USA, or 1 year in Germany.

After 4 months, you are no longer "unemployed" in the US, you have been considered to have left the labour market. You are still unemployed in Germany.

(this is low reliability information)

As far as I'm aware, that is what is known as 'structural unemployment'.

In addition to that effect, the US military and prison system has unemployment lowering effects. An otherwise unemployable person who is in prison or in the military is either out of the market or employed. Other forms of government support don't nessicarially remove someone from the labour market or mark them as employed. The US has an unusually large prison and military population (over 2% of the US's workforce).

A lower dollar is "good", but not in a way that means "make USA wealthier".

A lower dollar means importing goods makes less sense and exporting goods makes more sense.

The interesting part here is how much of the US's debt and current-account deficit is being financed by a handful of large overseas banks, purchasing large amounts of US government bonds.

And many of those banks are talking about 'diversifying' their reserves. Which makes sense -- the current rate which they are purchasing US debt is insanely unsustainable, even in the short term.

Imagine Wal-mart prices going up 25%-50% (and Wal-mart stock going down 75%!). Imagine petrol prices hitting 3-4$. Imagine imported fruit doubling and imported cars going up 50% in price.

You can do without. You won't want to. But you can do without.

The alternative is to start investing in productivity improvements now. Educate your populance, pump out Engeneers, work on robotics to make manufacturing cheap, and start before things get bad.

Actually, the jobs will come back. You'll be forced to work to provide for Chinese workers. Every unit of work they do for you, you will do for them.

Fairly close, yakk.

Our unemployment is figured on random polling via household surveys--not unemployment recipients.

To be considered as "unemployed" one needs to be "actively seeking work." So if one quits looking for work after two weeks, one is no longer unemployed, even if that person is pulling benefits.

Of course, people in prison, homeless (I think almost everyone I know, except ex-cons, state that homelessness is the most unemployed and in most dire straits, whereas my personal experiences lead me to say prison was worse than homelessness), and other institutionalized person artificially lower the unemployment rate.

The employment rate only counts the "civilian workforce." So no government workers or military are in that count. Marginally attached workers (people who want to work full-time, but can't because their company won't let them), seasonal workers, and people below the poverty line also don't show up in the unemployment count.

Since migrant workers aren't in the figures either, an argument can be made that sometimes figures are overestimated. But that argument is hard to maintain unless one knows whether illegal workers are making more than poverty.

I don't know the percentage of miliitary compared to population, but on any given day we incarcerate 2 million+ people--none of which are counted in unemployment figures.

I don't know, there are a lot of other factors as to why our figures are problematic but I just wanted to give you more info to back up what you didn't seem to sure about.

Yakk · 03-02-2005, 07:41 AM

Quote:

Originally Posted by smooth

Our unemployment is figured on random polling via household surveys--not unemployment recipients.

To be considered as "unemployed" one needs to be "actively seeking work." So if one quits looking for work after two weeks, one is no longer unemployed, even if that person is pulling benefits.

I thought you get cash if you claim you are still looking for work when you are on UI, and don't if you don't claim you are looking for work.

Don't UI programs in the USA require that you be looking for work?

Quote:

Originally Posted by smooth

The employment rate only counts the "civilian workforce." So no government workers or military are in that count. Marginally attached workers (people who want to work full-time, but can't because their company won't let them), seasonal workers, and people below the poverty line also don't show up in the unemployment count.

Really, if you called someone and they said they had a job working for the government, they wouldn't be counted as employed or unemployed?

Wouldn't that make outsourcing of government work a zero-sum artificial way to decrease unemployment? (only slightly -- adding 1 employed person without taking away an unemployed person would decrease the % of unemployed)

I really doubt that this is true. . . Even the poverty line thing.

Oh yes, and as an aside: "Poverty" as is reported in the popular press in the USA is a relative-income measure, calling it poverty is a misnomer. If someone gets richer, it can cause other people to suddenly become poor.

smooth · 03-02-2005, 07:21 PM

Quote:

Originally Posted by Yakk

I thought you get cash if you claim you are still looking for work when you are on UI, and don't if you don't claim you are looking for work.

Don't UI programs in the USA require that you be looking for work?

Really, if you called someone and they said they had a job working for the government, they wouldn't be counted as employed or unemployed?

Wouldn't that make outsourcing of government work a zero-sum artificial way to decrease unemployment? (only slightly -- adding 1 employed person without taking away an unemployed person would decrease the % of unemployed)

I really doubt that this is true. . . Even the poverty line thing.

Oh yes, and as an aside: "Poverty" as is reported in the popular press in the USA is a relative-income measure, calling it poverty is a misnomer. If someone gets richer, it can cause other people to suddenly become poor.

Fortunately for me, I don't have to waste too much time pitting my opinion against yours since each of what I stated is available to the public directly from the US government. The next time you have a question or are confused about an aspect of how my government operates, feel free to peruse the websites it maintains. None of its methodology or definitions are secret. I was just giving you some more information since you seemed to pose your position as unsure, so I don't quite get the cynical or doubtful tone you take in your responses. I wasn't writing a thesis, so I wasn't particularly precise. I don't know what a government worker might tell you his or her status was, but that doesn't preclude the government pollsters from classifying him or her in some other fashion. However, not all government workers are excluded from the civilian workforce, or the page (last updated 4 years ago, is outdated information which is entirely possible).

Quote:

What is the CES definition of employment?

Employment, except for national federal government estimates, is the total number of persons on establishment payrolls employed full or part time who received pay for any part of the pay period which includes the 12th day of the month. Temporary and intermittent employees are included, as are any workers who are on paid sick leave, paid holiday, or who work during only part of the specified pay period. A striking worker who only works a small portion of the survey period and is paid would be included as employed under the CES definitions. Persons on the payroll of more than one establishment are counted in each establishment. Data exclude proprietors, self-employed, unpaid family or volunteer workers, farm workers, and domestic workers. Persons on layoff the entire pay period, on leave without pay, on strike for the entire period, or who have not yet reported for work are not counted as employed. Government employment covers only civilian workers.

Federal government employment represents the number of persons who were employed during the last full pay period of the month. This data is provided by the Office of Personnel Management (OPM). Federal government statistics are for civilian U.S. workers only. Overseas installations are excluded from the CES survey, as are all military personnel. In addition, the following agencies are excluded: the Central Intelligence Agency, the National Security Agency, and the Defense Intelligence Agency.

Business.gov

You can also look at the explanation of how the government measures unemployment directly from the U.S. Department of Labor
Bureau of Labor Statistics.

Both sources state as clear as possible that seasonal workers and people who don't make above the poverty line do not get counted as unemployed. Why would this be important? Well, employment figures are supposed to illustrate the strenght of our economy. If people are sliding out of the unemployment figures as a function of securing non-livable wages, working 12 hours per week instead of 40, or just quite looking from fatigue or despair, the resulting decrease in unemployment is by no means accurately portrayed as a recovery.

Your analysis of how relative poverty is figured is flawed. Relative poverty is determined by taking half of the median income. Median measures are resistant to outliers. The median income does not fluctuate because one person at the top suddenly makes a billion extra dollars. If anything, relative poverty underestimates poverty (for much of the same reasons I outlined earlier in our estimation of the unemployed) and that's one of the reasons we use it here, versus absolute poverty as reported in the rest of the Western nations.

Like I said, however, I was just trying to be helpful to you. Please do your research instead of bickering with me. I don't come into these forums very often usually as a consequence of what I perceive to be one-up-manship mentality. What I saw was someone from another country making an attempt to understand a complicated issue in how my country calculates unemployment and poverty levels, initially stating that the basis of his points were shaky. Then respond to my clarification with, I doubt this to be so and I doubt that, too. So doubt all you want, I suppose, but such responses obviously don't compel me to lend you some clarification in the future.

Yakk · 03-03-2005, 07:54 AM

Quote:

Originally Posted by smooth

The employment rate only counts the "civilian workforce." So no government workers or military are in that count. Marginally attached workers (people who want to work full-time, but can't because their company won't let them), seasonal workers, and people below the poverty line also don't show up in the unemployment count.

Ah, I understand now!

I thought you meant workers below the poverty line "are not counted as employed or unemployed", when you where really just saying the working poor/underemployed where counted as employed.

And civilian government employees count towards 'employment', while people in the military (and intelligence) are considered 'out of the workforce'. That makes sense!

My apologies, I misunderstood.

Quote:

Originally Posted by smooth

Your analysis of how relative poverty is figured is flawed. Relative poverty is determined by taking half of the median income. Median measures are resistant to outliers. The median income does not fluctuate because one person at the top suddenly makes a billion extra dollars. If anything, relative poverty underestimates poverty (for much of the same reasons I outlined earlier in our estimation of the unemployed) and that's one of the reasons we use it here, versus absolute poverty as reported in the rest of the Western nations.

The number of people below the poverty line is a crude measure of the income disparity of the nation, at best. While income disparity is important, it isn't real poverty, it's relative poverty.

I am not aware of a Western nation that uses absolute poverty as a measure. There are very few absolutely poor people in Western nations, it would be pretty much useless. I do know that Canada uses a slightly different low-income line. Quite possibly I'm wrong about other Western nations.

The international measure for absolute poverty is 1$/day. Now, practically, you should bias this at purchasing power parity, but even beggers on the street in the West are not-poor by world standards.

Relative poverty is a problem (and a pretty big one! Many crimes and many measures of happiness corelate in not-good ways with wealth inequity), but the measures nations use tends to be crude and often misused, at least in my opinion.

I was doubting that U.S. economists would use the poverty line as a requirement for 'employment', because I misunderstood your first post. You where saying that they did not use poverty as a requirement, which I do believe. Sorry about that misunderstanding on my part.

One person getting richer can make 2 people poor under the described poverty line, with no change in the newly poor people's standard of living. I would not claim it would be common, but it is possible. It requires someone to move from below the median to move above it.

1$,1$,5$,5$,8$,12$,30$,30$,30$
median income is 8$. 1/2 median income is 4$. 2 people are under the poverty line.
Someone earning 1$ starts earning 30$
1$,5$,5$,8$,12$,30$,30$,30$,30$
median income 12$. 1/2 median income is 6$. 3 people are under the poverty line.

The only change is someone got richer.

Quote:

Originally Posted by smooth

Like I said, however, I was just trying to be helpful to you. Please do your research instead of bickering with me. I don't come into these forums very often usually as a consequence of what I perceive to be one-up-manship mentality. What I saw was someone from another country making an attempt to understand a complicated issue in how my country calculates unemployment and poverty levels, initially stating that the basis of his points were shaky. Then respond to my clarification with, I doubt this to be so and I doubt that, too. So doubt all you want, I suppose, but such responses obviously don't compel me to lend you some clarification in the future.

Thank you -- I didn't know that US military where outside of the US employment/unemployment statistics.

I tried to express how I understood your statement, and it lead to things that didn't make sense. A good chunk of that was because I misunderstood you. My apologies if my doubts where offensive -- it turns out most of them where myself doubting a false model of what you said. *sigh*

KMA-628 · 03-04-2005, 11:11 AM

As to the original topic, I think this is a temporary problem.

I am not citing any evidence, as I have none, it is just a feeling.

Before the Euro came around, the dollar was powerful because it really didn't have any competition. Also, with some of the chaos in the world, many felt that the dollar was the only stable, long-term monetary form (i.e. why we no longer use gold/silver to back the dollar).

Now, with the Euro, the dollar has competition.

However, I think the dollar has an advantage over the Euro in that the dollar only relies on one economy, while the Euro relies on many vastly different economies.

Some of the news we are hearing out of Germany (i.e. unemployment) could ultimately have a long-term negative effect on the Euro and give some of the value back to the dollar. People outside of Germany, that are effected by the drop of the Euro created by problems in Germany, can't do anything about it.

I have no idea of the time-frame, but I really think the dollar will win back its place in prominance. I don't think a single form of currency can hold value successfully when it is based on multple countries with mulitple economies and no way for one hand to control what the other is doing.

Like I said, just a thought.

Yakk · 03-04-2005, 01:13 PM

KMA, right now asian governments are spending billions of dollars (by the 100s) per year buying American dollars (actually government bonds, which are 'zero risk' assets whose only risk is the currency risk). This props up the American dollar, allows the American government to spend money it doesn't have, and finances the American trade deficit, while simultanionsly forcing savings on their own people and depressing their dollar.

This is a temporary problem. It cannot be sustained.

The raw amount of money those national banks are pouring into US currency will start to expose them to ridiculous amounts of currency risk. Already many of them have started talking about diversifying their holdings (not selling! that could trigger a currency crash). But failing to continue to buy at accellerating rates is enough to prevent the continued level of the US dollar from being sustainable.

A person can choose to borrow against future earnings, or save up and invest.
A nation can choose to borrow against future earnings, or save up and invest.

The Asian economies are 'saving up and investing' by depressing their currency and building up an export infrastructure. It lowers their standard of living in the short term.

America is doing the opposite.

There isn't anything particularly wrong about either path. They both have consequences. Amoung them is it all ending in currency destabalization and chaos.

KMA-628 · 03-04-2005, 01:39 PM

Yakk -

I am not arguing that at all, in fact I agree.

I was commenting on the dollar vs. Euro thing--i don't see any long-term to the situation.

jorgelito · 03-04-2005, 05:03 PM

Isn't the Us-Euro thing just part of a "normal fluctuation" cycle?

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.

02-26-2005, 10:25 AM	#11 (permalink)
chickentribs Addict Location: Mansion by day/Secret Lair by night	The issue is the cost of producing goods has risen, and the cost of labor has stayed the same within the U.S. While we may ship more goods because of the price levels others are getting off of us right now, you have to deal with the shrinking margins and unless you are willing to raise your prices abroad you have to ship more to realize the same revenue. Without tax penalties for US corporations that produce overseas and ship back into the US, there is no reason for them to be here. You want to operate on a cost level from the stronger currency market to reduce operating costs., and then get the benefit of selling from the weaker currency market without paying the import taxes for your raw goods. Euro companies are having difficulty competing with the drop in real price of US firms, but they are not losing jobs to us. The Euro labor market has historically run a higher unemployment rate, but the level is more stable than ours in its reaction to economic indicators. I guess my hope is that the Fed and Bush will get serious about incentives - be they stick or carrot - to U.S. companies to get the jobs back here. The "jobless recovery" our economy has enjoyed isn't helpful to unemployed workers. __________________ Oft expectation fails... and most oft there Where most it promises - Shakespeare, W.

02-26-2005, 05:10 PM	#19 (permalink)
chickentribs Addict Location: Mansion by day/Secret Lair by night	Unfortunately most of what we import tends to be raw goods with steady demand that we can't supply from the US (ie. Oil) so we couldn't respond to cost pressures if we wanted to. I agree with you Alan about the need to reduce Artificial inflators in our dealings with other countries, especially Japan. We nearly handed them our domestic automobile business on a silver platter back in the late 80's while they maintained an embargo against Ford and GM. It didn't surprise me at all to hear that Honda has gone against the "gentleman's agreement" they had with us and will be introducing the first Honda Pick-up Truck this year. __________________ Oft expectation fails... and most oft there Where most it promises - Shakespeare, W.

03-04-2005, 11:11 AM	#31 (permalink)
KMA-628 ....is off his meds...you were warned. Location: The Wild Wild West	As to the original topic, I think this is a temporary problem. I am not citing any evidence, as I have none, it is just a feeling. Before the Euro came around, the dollar was powerful because it really didn't have any competition. Also, with some of the chaos in the world, many felt that the dollar was the only stable, long-term monetary form (i.e. why we no longer use gold/silver to back the dollar). Now, with the Euro, the dollar has competition. However, I think the dollar has an advantage over the Euro in that the dollar only relies on one economy, while the Euro relies on many vastly different economies. Some of the news we are hearing out of Germany (i.e. unemployment) could ultimately have a long-term negative effect on the Euro and give some of the value back to the dollar. People outside of Germany, that are effected by the drop of the Euro created by problems in Germany, can't do anything about it. I have no idea of the time-frame, but I really think the dollar will win back its place in prominance. I don't think a single form of currency can hold value successfully when it is based on multple countries with mulitple economies and no way for one hand to control what the other is doing. Like I said, just a thought. __________________ Before you criticize someone, you need to walk a mile in their shoes. That way, if they get angry at you.......you're a mile away.......and they're barefoot.

03-04-2005, 01:13 PM	#32 (permalink)
Yakk Wehret Den Anfängen! Location: Ontario, Canada	KMA, right now asian governments are spending billions of dollars (by the 100s) per year buying American dollars (actually government bonds, which are 'zero risk' assets whose only risk is the currency risk). This props up the American dollar, allows the American government to spend money it doesn't have, and finances the American trade deficit, while simultanionsly forcing savings on their own people and depressing their dollar. This is a temporary problem. It cannot be sustained. The raw amount of money those national banks are pouring into US currency will start to expose them to ridiculous amounts of currency risk. Already many of them have started talking about diversifying their holdings (not selling! that could trigger a currency crash). But failing to continue to buy at accellerating rates is enough to prevent the continued level of the US dollar from being sustainable. A person can choose to borrow against future earnings, or save up and invest. A nation can choose to borrow against future earnings, or save up and invest. The Asian economies are 'saving up and investing' by depressing their currency and building up an export infrastructure. It lowers their standard of living in the short term. America is doing the opposite. There isn't anything particularly wrong about either path. They both have consequences. Amoung them is it all ending in currency destabalization and chaos. __________________ Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

02-25-2005, 08:01 PM	#2 (permalink)
Zeld2.0 Cherry-pickin' devil's advocate Location: Los Angeles	With international trade built on the dollar, as it decreases in value, the more likely a big problem will occur in the future, especially at how we are spending money this fast without ever trying to pay it back. A few years ago, the U.S. was a bit above the Euro. At that time I should've invested my money into the Euro because right now, 1 Eu = $1.32. 1 GBP is now $1.92. As our dollar goes down in value, we will be hurt.

02-25-2005, 08:35 PM	#3 (permalink)
alansmithee Junkie	Actually, the lowering of the dollar isn't as big a problem for the US as it is for the rest of the world, at least as far as trade is concerned. It makes US products cheaper in comparison to the rest of the world's, which other countries have problems with. This can also be seen in China, which has been accused of artificially lowering their currency's value to stimulate trade. And the rising price of oil has hurt the EU's economy more than it has America's, because oil prices are based on the dollar. OPEC needed to raise prices to compensate for the devaluing of the dollar. The reason I believe that reducing reliance on oil isn't higher priority is because there's no need yet. There are still vast oil reserves, many untapped. From a business perspective it's more expensive trying to develop new energy technologies than relying on oil. National finances are quite separate from personal finances. In personal finance, borrowing can be seen as a sign of weakness, whereas that's not the case for national finance. Also, there is really no way to collect on national debt, because it's allocated throughout many places. It's on a totally different level. As for debt reduction not being a higher priority, again I don't think it's seen as a large problem. And even if it was, it's hard to explain macroeconomic theory to the masses in a way that it could be traded on for political capital.

02-25-2005, 10:26 PM	#4 (permalink)
Zeld2.0 Cherry-pickin' devil's advocate Location: Los Angeles	The oil issue is important though, imo. Keep in mind its not simply build more nuclear/fusion power plants whenver. It takes energy to create energy - the energy needed to power the machines. Not to mention the research. The power needed to start the powering of a fusion plant for instance is a lot. Reserves or not in oil doesn't matter - its going to come sooner or later and I'd rather be prepared for sooner than reach it and realize there is no later. Of course, thats a different issue from this at hand. I'd go into more about the money problem but thats for another day right now im afraid.

02-26-2005, 05:39 AM	#8 (permalink)
flstf Easy Rider Location: Moscow on the Ohio	I will be the first to admit that I do not understand macroeconomics and how these currencies are valued. However as I understand it the European Central Bank originally launched the euro Jan. 1, 1999 and placed the value at about 1.20 dollars to the euro. Over a few years it dropped to as low as .82 and today the value is at about 1.34. Going from 1.20 to 1.34 does not seem like that much of a dollar collapse to me. Was the dollar value too high when it was at .82 and too low at today's 1.34? I don't know, was it supposed to stay at the euro's launch price of 1.20 dollars to the euro instead of today's 1.34? I don't understand why the dollar compared to the euro going from 1.20 dollars to 1.34 in 6 years is such a big deal.

03-01-2005, 01:07 PM	#26 (permalink)
NCB Junkie Location: Tobacco Road	News on the thriving socialist economy of Germany http://news.bbc.co.uk/2/hi/business/4307303.stm

03-04-2005, 01:39 PM	#33 (permalink)
KMA-628 ....is off his meds...you were warned. Location: The Wild Wild West	Yakk - I am not arguing that at all, in fact I agree. I was commenting on the dollar vs. Euro thing--i don't see any long-term to the situation. __________________ Before you criticize someone, you need to walk a mile in their shoes. That way, if they get angry at you.......you're a mile away.......and they're barefoot.

03-04-2005, 05:03 PM	#34 (permalink)
jorgelito All important elusive independent swing voter... Location: People's Republic of KKKalifornia	Isn't the Us-Euro thing just part of a "normal fluctuation" cycle?