Dollar near recent lows on diversification talk — The Canadian dollar will be worth more shortly. Good work. Now all the jokes about the Canadian dollar will make no sense.
The dollar held near last week’s lows versus major currencies on Monday on persistent worries that central banks might gradually shift their foreign exchange reserves away from the greenback.
China’s State Information Center, a government think tank, said on Monday that China should diversify its $1 trillion foreign exchange reserves — the world’s largest — by building up strategic reserves of crude oil, metals and bulk commodities.
I’m torn – is it too soon the blame the Democrats or too late to blame Clinton?
The essential problem is that the US has been living well beyond its means for decades, really ever since Nixon took it off the gold standard. This has been shielded by benefits given by the US dollar’s position as the world reserve currency whereby other countries (and businesses) maintain US dollar reserves for trading and other purposes, reserves which cost them real value in their own currencies but which cost the US banks and the Treasury very little and which, by being absorbed globally, minimise inflationary effects in the US. This era is coming to an end partly on account of the growth and strength of the euro and its wider use and, on a longer term basis, the industrial growth of particularly China and India and it will get increasingly tough.
You might find Huber and Robertson’s book, Creating New Money interesting in this context.
Sorry, I gave the wrong address there (although it’s to other relevant material by Robertson).
I should have written: Creating New Money.
What’s the problem? A lower dollar makes your exporters more competitive, and your debt is denominated in US dollars, so the international lenders who loan you money are the ones who lose out.
Even your energy is traded in US dollars. I can’t see the down-side, unless you want to buy foreign cars, (which admittedly are a lot better than US made ones, but you can’t have everything.)
The market is self correcting. Just give it time and the economy will heal
Peter — one of the several reactionary reasons behind the Iraq invasion was that Hussein had begun to increase his nation’s oil profits by refusing to continue to trade in Petro Dollars.
Witnessing the better value, he was requiring payment for oil exports in Petro Euros. Not something the Oil Patch Boys even wish to think about.
Just a thought, but has this country been more dependent on imports since pre-Revolutionary times? Is it an anachronism for me to worry that we lost so much of our manufacturing base? Do we really want to be so tied to China?
Blame the dems indeed! HA!
GW Bush sold this country to the Chinese to pay for his so-called tax break, and now we will again reap another nasty mess this simpleton has sewn.
Most Canadian companies sell their wares Int’l based on the US price, that includes selling to Americans.
When the US dollar goes down, there are quite a large number of Canadian producing companies that take a huge $$ profit hit, and that results in lost jobs.
The milk & cheese industry is one fine smelly example. Not just blue collar unionized overpaid workers, but also the white collar (usually paid less per hour) worker.
Even Canada is in the same US overspending boat. Dates back from Reagan + Pierre Elliot Trudeau.
The biggest difference would be the last 5 years, our last two Cnd gov’t actually making a surplus and PAYING CAPITAL on our national debt. That means the Interest Upon Interest Cycle broken, the debt is going down.
Never saw – heard a US politician saying the words, paying the national debt . . . and actually doing it.
Oh, oh, oh, and we’ve even signed Kyoto. So that means Australia and Americans have more in common now, ah mate?
The service industry aint gonna provide for this country. The loss of the middle class will be the US downfall. Manufacturing makes up the middle class.
Lower Dollar = More domestic value. It is easier to buy American with a lower dollar. Food should be cheaper for world markets to buy from the US… unless we turn all the surplus into ethanol. 🙂
#1 . It’s too soon to blame the democrats for this one. No point blaming until 2008 – makes little sense. Blaming Clinton is still a possibility but my money is that this will be turned into a POSITIVE!
Something like : ” Bush economic plan is environmentally friendly as low dollar promotes trade with nearby Canada thus enabling us to import stuff from closer places…”
Something like that…but naturally has to be word-smithed a little.
Moss is quite correct in his comment #6.
But it actually goes further in that OPEC has for some time been showing interest in denominating oil payments in euros instead of in US dollars, with Iran and Venezuela particularly making the running. Venezuela has already set up a barter system and negotiated deals with China, which have directly impacted on the US economy, and Iran has or is establishing a euro-based oil bourse. In turn Syria plans to use the euro for major international trade where possible.
Saudi Arabia is currently a barrier against this being taken up by OPEC but that won’t necessarily be sufficient and if there is a major shift of that kind then the likes of Japan (which is both a major user of oil and a major subsidiser of the US) would clearly need to switch, putting even more pressure on the US.
So the problem Peter, #4, is that while in the short term there may be export benefits the US produces nothing like enough to cover its debts and if the dollar loses its status as the (only, as now, or even major, with the euro) world currency then it will increasingly have to trade in euros (or whatever) as others will no longer want many dollars. And this in turn means that the US has to give real value to buy what costs the European banks very little to produce, an exact reverse of the present situation. In short, it’s stuffed and one side effect of the Iraq adventure is to hasten these developments, particularly on account of the huge cost (debt) incurred and partly on account of the increasing disaffection felt among those Arab and other countries with the opportunity to do something about it.
We had this thread last week, and I made the same point then I’ll make now.
This doesn’t matter: We’re increasing foreign investment in the U.S., which will in turn raise the value of the dollar and increase U.S. investment in foreign countries. Ebb and flow.
When the Bush/Cheny/Rove group took over, the Canadian dollar was worth 64 cents, now worth 89. The US dollar was trading at slightly more than the Euro. It is now worth 0.78 Euro’s. More republican mismanagment of the economy. Sure we can sell the things we no longer make cheaper abroad, but the things we buy, like oil, are now more expensive.
You can spout the rush limburger line all you want but the facts make it stink.
Even though I am pretty young (18), I do know this.
Everything is cyclical and everything usually returns to normal.
So we have huge deficits, the dollar is losing value… Japan err… China is going to kill us, sounds a lot like the late 80’s to me.
If worse comes to worst maybe the Necons can just blow up China.
17 Everything is cyclical and everything usually returns to normal.
So we have huge deficits, the dollar is losing value… Japan err… China is going to kill us, sounds a lot like the late 80’s to me.
“Everything is cyclical…” glosses-over just how painful the lows can be.
Just wait until the Social Security “crisis” returns from whatever sabatical it has been on….
Remember Bush standing next to that filing-cabinet full of government bonds – documenting the money owed to Social Security by the Treasury – and scoffing at the idea of a SS “Trust Fund”
http://tinyurl.com/6y2t9
Bush offered the filing cabinet as proof that “there is no trust fund — just IOUs.”
Social Security says that due to a swelling number of retirees, benefits will begin to exceed payroll taxes in 2017. At that point it plans to start cashing in the bonds to cover every retiree’s monthly check.
#1 & #6 have got the answer – dont blame clinton (didnt we have a budget suprlus then? hrm…) – blaming the village idiot we know as Prez Bush, seems a bit underhanded – I mean, hes a moron, and stupid people cant be held accountable for their action… can they?
Blame the american public
Blame the media
BLAME CANADA!!!
#4 What exporters? Wheat is now cheaper in Europe? So what? And how do you export when China (and others) blocks imports? And, of course we allow this.
20And how do you export when China (and others) blocks imports?
Add the Genectically-modified issue, on top of that.
Even if other countries allow import of GM foods, they probably require lableling it as such, and there appears to be some resistance to “Frankenfoods” by consumers overseas. 🙂
John (#20),
you don’t make much sense. How about the entire tech industry, the entire aerospace industry, and lots of others. I live in Australia and there are plenty of US made goods here. You don’t need to sell wheat into Europe in order to have exporters. In fact, we all become wealthier when distortions to trade are removed, so that the producer with the highest natural advantage wins out.
I still maintain that there is very little downside in a slightly lower valued greenback. It’s going to make all those chinese imports more expensive, so perhaps Americans will get jobs to manufacture substitute items at home. It could be good for you.
#22, Peter, you overlook a vital point. Over the past 25 years the American economy has been slowly changing from a manufacturing base to a tech base.
Much of the heavy industry has collapsed. The steel and automotive industries are shadows of their former selves, replaced by cheap imports from Europe, Japan, China, Russia, and Korea. The electronics and textile industries have been almost obliterated from the US economy. The infrastructure is so shot in what is left that if all steel imports were stopped tomorrow, it would take 20 years to get production back to the same level currently required. Much longer with electronics and textiles as there are so few people left trained in those areas.
America is slowly falling into the super rich and very poor classes. The middle class, who have lost all the well paying jobs, have been the driving force behind America’s growth for more than 60 years.
22 I live in Australia and there are plenty of US made goods here.
Really?
Other than Boeing aircraft, Movies/TV/Music, agricuture, and Microsoft software – I couldn’t think of many goods we sent overseas.
Thank God for the internet. 🙂
http://www.ita.doc.gov/TD/Industry/OTEA/australia/oz-index.html