Euro2day :: Strong economic data push US dollar down again — The Canadian dollar matched the US dollar the last time during the Viet Nam War. This is about to happen again negating years of great comedic material about the Canadian dollar. It looks as if it will be even with our dollar within a couple of years thanks to fine conservative fiscal policies. None of this seems to mean anything to the knee-jerk Bush supporters. I guess they are all too rich to care.
The dollar also fell 0.6 per cent to a new 28-year-low of C$1.1073 against the Canadian dollar, with the latter buoyed by rising oil and gold prices and the likelihood of further rate rises.
However, Ms Fan cautioned that further Canadian dollar strength would lead to increased anxiety at the Bank of Canada, reducing the chances of a widely expected May rate rise being followed up in July.
As a result, Ms Fan argued it would be difficult for the loonie to move sustainably below C$1.10, a view echoed by JPMorgan, which saw little scope for further gains before mid-June.
Now wait a minute, which is it? Bush or conservative fiscal policy? The two are mutually exclusive.
One of the world’s biggest problems is floating currencies. This is because central banks never know how much money to print relative to demand and so in some cycles there’s too much paper (causing inflation, like now) and others too little (like the late 90s when we had the deflation monster which helped kill Telecom I.
3 years ago oil was 35 and gold was 340. Neither of their values have changed, but their “prices” have doubled simply bc the dollar has halved in value. All the fed would have to do is sell T-bills to mop up excess liquidity and both oil and gold and all other commodities would come down. Lowering interest rates to increase dollar demand would also help. Instead they will follow this wrong headed notion that raising rates will bring down prices, but it won’t. It’ll have the opposite effect like it has over the last 3 years, and the economy will have another crash like it did in 2000, except this time it will be inflation lead instead of deflation lead.
The U.S. has plenty of water vs. China who doesn’t have enough. At least not clean water. Maybe we can sell the Chinese water and boost exports. There’s a guy in Texas bottling rain, calling it Heaven Juice. He has big tanks of the stuff and filters. He collects it off the roof and has a whole plumbing system worked out. The story said he was doing good with it.
Not everybody can sell BS. The we hate America market is growing. Now it’s the we hate the dollar BS. You’re all wet, so why not make beer out of the rain? As Ben Franklin said, beer is proof that God loves us and wants us to be happy. You want us to moan and groan. Have a beer and forget about it. The bartender will take your dollar. Don’t humbug me.
You can now buy into hedge funds betting against the US$.
Of course, “patriots” wouldn’t think of doing such a thing.
Ironic, I look out the window. The plumber is driving by. There are dollars to be made, beers to be drunk and pipes to be fit.
Bush must be using Nixons plumbers.
Everything is leaking, even the CIA and that
ain’t good folks.
I’m starting a $100.00 bill collection. Will accept donations.
Hey, they’re going to be worthless so what the heck.
It beats sending them to Iraq to be lit on fire.
Crashes are inevitable in our capitalistic economy – the boom bust cycle is an inherent part of the structure. Saying that currency shouldn’t float is a ridiculous answer. Most of the world’s money was tied to the gold standard (not floating) before the Great Depression. It did not help there, and actually likely made the problem worse.
A lower US dollar is good for domestic US producers. I live in Canada, and our exporters are hurting now. It is harder to compete when our dollars are closer to parity with yours. It is great for those of us that want to shop in the US, and encourages Americans to spend their dollars at home. A low value dollar has always been a boon to the Canadian economy. Don’t knock it until you try it.
As a soon to be ex-pat, I’ve been worried about the dollar for some time. What was going to be a life of indolence may now be ruined by having to pick up a part-time job at a local call-center offshored by Dell.
You buy a house for $20,000 and in 30 years it’s a $140,000 house. Ask a realtor. Really it’s still just a $20,000 house, you just need more dollars to buy it. The agent just wants a commission and you want to live like a Persian king. So you get a mortgage and pay the $140,000 plus interest for 30 years, so it’s a really a $1,250,000 house that you are taking a loss on until they build a strip mall nearby. Then you need a commercial realtor for the deal and can afford a townhouse and country club.
Crashes are not inevitable and neither is inflation or deflation. The point is not a low dollar or a high dollar. The point is that the world desperately needs a standard unit of account, ie a dollar that doesn’t fluctuate in value. The Great Depression was caused by the Smoot-Hawley Tariff.
International trade should be driven by intrinsic value, not by money manipulations. In the 70s oil quadrupled in “price” because gold quadrupled, ie after Nixon closed the London Gold window and the fed injected massive liquidity to pay off the debt, the dollar’s value sunk by a fourth. This is why as Jim pointed out that a house in 1970 that went for 35k is 350k, and a car that went for 3500 is $35000.
The boom bust cycle is definitely a reality in our capitalist society. Intrinsic value is a noble concept, but historically speaking if we human being had stuck with only charging and paying intrinsic value – trade would never have evolved beyond the barter system. In a capitalist society the only value an item has it what its buyers are willing to pay for it.
Don’t get me wrong, I abhor this reality of capitalism. I was even a marxist activist when I was younger. However, standardizing currency has historically never worked and seriously stifled economies that were tied to this sort of system. I am no economics expert, but I do consider myself a dedicated student of history ( 2 years of Honours in History at university); and historically speaking, it does not work. Inflation still occurs and is often even worse because currencies cannot be devalued or inflated to adjust to the new reality.
Crashes are not inevitable and neither is inflation or deflation. The point is not a low dollar or a high dollar. The point is that the world desperately needs a standard unit of account, ie a dollar that doesn’t fluctuate in value.
The dollar fluctuates in value, as does every other floating currency, according to the value given it by other nations and traders. An agricultural country, like Australia or Canada is dependent upon good harvests. If one year a crop is poor, then that country has much less food to sell to the world. The world food prices increase due to supply is less then desired. Food importers, such as Japan or China, now pay more for food then previously. So because Australia and Canada have less to export their currency falls in value. Because China and Japan have to pay more for imports, their currency value falls.
By attaching an artificial value to the currency only gives an “official rate”. Black markets now open up that will sell goods that can’t be bought through official markets. This was the outcome of the artificial currency rates set by communists countries. Even with artificial controls, the currency will have a true value to the international community.
Macro Economics 101.
The Great Depression was caused by the Smoot-Hawley Tariff.
The Great Depression was the result of inadequate regulation and oversight of financial and securities institutions. Brokers allowed investors to put up as little as 5% of the purchase in cash and the rest was on call-if the stock held its price. The banks found willing borrowers to finance these deals. Everything was fine until some stocks got called and the investors now scrambled to find the money. Because so much of the economy was built on “paper money”, ie, issued stocks, certificates, etc., there was no substantial solid value lost, only the paper value. A gold coin was still worth $20. But it was that paper money lose of value that killed the whole economy because that is what everyone had invested in.
A similar situation happened in 2000. People wanted to be on the ground floor and so bought stock in companies that were based on the Internet. The value of these companies was all fictitious or paper money. When they couldn’t produce their value plummeted and a lot of people lost a lot of money.
We have the same problem today in America. And the foreign markets see it. Today we import so much more then we export. So every day more currency leaves then comes back. To finance this, consumers and much of industry, is indebted to the hilt. The only thing keeping the economy afloat right not is the abundance of financial institutions lending the same money over and over. Sooner or later, the poop will hit the fan and we will be hit by another recession. Certainly worse then the late 1950s or early 1990s and possibly close to the 1930s or 1870s. Probably as soon as Bush decides the world needs us to invade Iraq.
I apologize for the length, but I’m feeling verbose tonight. Must be the home made ice-cream.
every day more currency leaves then comes back.
So we get lots of cars and electronics in exchange for pieces of paper. Sounds like a great deal to me.
Got a “verifying” chuckle email, this morning. A bud of mine who bought into one of the hedge funds that bets against the US$ — last week — couldn’t wait to let me know that his Stop Loss order is now higher than the current Buy Price!
And I’m the guy that told him about iShares.