Dollar starts the big slide against major currencies

[Robbien]

THE dollar has embarked on a big decline that will see it fall against all leading currencies, according to analysts.

The plunge is being prompted by America’s $800 billion (£438 billion) current-account deficit, they say.

The dollar has been under pressure following last weekend’s meeting of G7 finance ministers and central bankers, which emphasised “global imbalances” and said currencies should reflect economic fundamentals. Then China raised its key interest rate to 5.85%, its first hike for months, and Ben Bernanke, the new Federal Reserve chairman, hinted that American rates would pause at 5% after a rise in May. Analysts say that without interest-rate support, the dollar will be weighed down heavily by America’s imbalances.

“I think this is it,” said Tony Norfield, global head of currency strategy at ABN Amro. “The dollar has been supported by high yields but markets are saying that is no longer enough. The question for policymakers is going to be how to manage the dollar’s decline. It won’t be a one-way street but the fall is likely to be biggest against Asian currencies.”

At the bottom of the article is this news about the group of developing nations not caving into pressures from the rich nations who want to privatize their natural resources all in the name of free trade:

A declining dollar could ease protectionist pressures in America. Today’s deadline for completing a key element of the Doha trade round will pass without any progress. Sir Digby Jones, director- general of the CBI, who is visiting China, said the failure of America, Europe and Japan to reduce protection for their farmers was undermining the chances of a trade deal.

http://www.timesonline.co.uk/article/0,,2095-2157799,00.html

[wakeme2008]

1. Attn: Walmart Shoppers....

" fall is likely to be biggest against Asian currencies.” "

Watch your prices climb....



DU has known for years that we had to pay the piper for Bush, we are now seeing it in gas, next comes everything you buy...

[ixion]

9. * calls the tune and we pay the piper

nice deal, that. :eyes:

:sarcasm:

[Jack Rabbit]

53. Not if the stockboy's wages drop

Minimum wage? Isn't that zero? Or can we charge people for the honor of working for us?

[CoffeeCat]

2. I guess I need to tune into Bob Brinker--

...and find out how I can invest in non-US-based investments.

I don't have that much to invest. However, something tells me that any discretionary income
is going to be sorely needed in the coming weeks and months.

Bastards!

I don't think Junior will be happy until he destroys everything. It gives him pleasure to create misery.

Bastard!

I figure--the only way he can truly implement the heightened amount of Fascism he wants--is to get everyone in a very frenzied, upset state. That way he can justify the arrest of American citizens, the detention camps, the squashing of dissent, and the spying.

Bastards!

[acmejack]

3. How low will it go?

That is the question. I guess the markets will be answering that for us really soon too. Oh boy, let the games begin...

[TheBaldyMan]

4. I think that the situation is more complicated than the analysts assume

rather than an unavoidable decline in the dollar they have forgotten that the Chinese currency, although recently devalued, is still tied to the dollar. IMO this will prop up the dollar and weigh down the Yuan.

The collapse of the dollar is nearly impossible without the Chinese floating their currency in the international money markets.

As a caveat I'd add that Bush's pathetic attempts at so-called economic policies are the last thing that are needed. They don't help and make recovery far more difficult, I'd even go so far as to say they are probably doing irrepairable damage to long term US economic prospects.

[joefree1]

5. Oh shit

Better brush up on my Mandarin. Nee hau Ma y'all.

[NYC]

25. Hau, sye sye.

I learned Yale romanization at Columbia University. (Long time ago.)

[TexasLawyer]

31. hao ji la!!!

sounds about right!

[Warpy]

6. If the rich want a strong dollar,

they are going to have to start paying off Stupid's debt.

WE can't do it. Our wages never recovered to 1970 levels and another round of postwar inflation is about to drive us even farther down the economic ladder. Without a substantial rise in WAGES to increase the revenues from working people, there will be no other place to raise them.

The battle between cheap labor conservatives and tax cut zealots is going to be an awesome one.

[CountAllVotes]

7. Hmmm

I noted that my bank is now offering 6% APY on a 3-year certificate of deposit. That is the highest rate I've seen in years.

This is not a good situation at all except for the "haves" in our society I guess.

I might buy one of these CDs at 6% but I don't have a lot to invest.

:kick:

[msongs]

17. its not the amount its that you DO IT instead of spending money on

on garbage and trash and cigarettes and cable tv and soda and cheetos and movies and over priced bean juice and all the other things that suck out your money and provide you nothing but instant gratification and toilet filling material. Start saving today and add more every time you can instead of being a consumer.

Msongs
www.msongs.com
batik & digital art
mugs and shirts

[edhopper]

8. As long term rates go up

as a result of higher yields on the dollar look for mortgage rates to follow. After that we will see what could be the biggest real estate crash in US history. (Yes, it could be bigger that the 30's)

[Pharaoh]

10. yep we're really all fucked

capitalism is a pyramid scheme and it's all about to collapse due to major greed and deregulation/corruption..........oh well,,,,,,,quick plant some turnips and cabbage!!!!!

[AndyTiedye]

18. Then I'd Really Be Fucked

Not only do I detest turnips, but they won't grow here.

[jkappy]

20. try beans and rice

they maketh the protein.

[OKthatsIT]

39. add some cheese to that!

Tofu fried in sesame oil and soy sauce...scallions to top it off...mmmmmmm

[midnight]

27. What exactly does a real estate crash do to those who own property?

Or does this impact those trying to get into the housing market?

[Media_Lies_Daily]

30. The property will lose value. If you're still making payments, you....

...could reach a point where you're paying more per month than the property is worth.

Additionally, if everything else is costing more, and you're still making the same salary/hourly wage, you will be hard-pressed to be able to pay for everything you absolutely have to have.

This is basically what happened during the Great Depression in the U. S.

[midnight]

28. What exactly does a real estate crash do to those who own property?

Or does this impact those trying to get into the housing market?

[RUMMYisFROSTED]

44. Somewhere, buried in your mortgage papers, there's a clause that

allows your lender compensation regarding the value of your loan.

If your house is valued at $100K but your loan has $150K outstanding, your lender can demand the $50K difference.

Before the crash, now, most properties are valued higher than the outstanding loan balance.
After the crash, soon, most properties will be valued below the outstanding loan balance.

That knock on your door is probably your banker. :scared:

[IndyOp]

11. I'd thank the DU economy forum everytime I check my retirement funds...

I saw their predictions about the drop in the $$ many months ago and moved my retirement funds (what little I have) out of the US Stock Market to European and Asia stocks in mid-January. After years (literally years) of 2% or 3% growth, last quarter I had 11% growth and one month into the current quarter it looks like it will post another 12% growth over the quarter. Everytime the dollar drops against the Euro, Yen, and Yuan the value of my retirement funds rise...

:eyes:

[Bigmack]

24. When Dimson stole the WH for the second time....

I was so pissed I called Fidelity and said I wanted to get my money out of the country. They said I'd end up paying taxes (it's a TSA). I asked if they had foreign investments... foreign funds. They did. I asked if they had anything in Canada. Yup. Put it all in Canada Fund (FICDX). Made 49% since November 2004. Turns out Canada Fund is heavy into Canadian oil and gas.

First goddam smart move I made.... and I did it all for the wrong reasons.

A few years ago I turned down a chance to get in on the ground floor with some silly little software company....shiiiit, those things go out of business every day. Yup... Microsoft.

[Miss Chybil]

12. Lower dollar, higher gas prices. nt

[Harper_is_Bush]

26. Good. Gas prices in the US are too low.

In Canada we pay about $1 per litre, which would be about $4 US per Gallon.

[Miss Chybil]

61. Ok. So, if I can't get to work, I'm glad it makes you feel better.

Before you say to take mass transit, let me advise you I live in Arizona. I'm sorry you have to pay so much for gas. That's called empathy. Try it out sometime.

[Prisoner_Number_Six]

13. And so it begins.

And at the same time the government is printing new currency without any actual backing. Next week's reality- a wheelbarrow of money for a loaf of bread.

Way to fuck the nation over, George. You're a brick.

[CatholicEdHead]

23. No more M3 report means we do not know how much

they are printing.

[AX10]

14. A less valuable dollar means that everything will cost more.

Here that FReepers??? Things are going to get very, very expensive and it will be very bad for the economy.

[xultar]

15. And so it begins!

[barb162]

16. it will get ugly

[warrior1]

19. A truer measure of America's ballooning deficit

http://www.msnbc.msn.com/id/12563725/

The federal government keeps two sets of books, but the Bush administration only wants you to see one of them. There is the highly publicised "President's Budget" issued by the Office of Management and Budget, and the almost-secret "Financial Report of the United States" issued by the Department of Treasury. The budget says that the 2005 US fiscal deficit was $319bn, but the Financial Report claims it is $760bn.

Which view is correct? Is the deficit a mere 2.6 per cent of gross domestic product and shrinking, as the former OMB director and now White House chief of staff Joshua Bolten claims, or an alarming 6.2 per cent of GDP and growing, as John Snow, Treasury secretary, writes in the Financial Report?

snip

[Up2Late]

21. It's definitely the second number.

The first one is TOTALLY Bogus!

Remember, Bush and his Cabal still think what Ken Lay did at Enron was just good business, and that Arthur Anderson got a raw deal.

[Julius Civitatus]

33. The US government taking a page from ENRON's book

Two books? Two accountings? The Bushies are cooking the books with your tax dollars.

[Tight_rope]

45. That's right Bushco is cooking the books and fudging the numbers!

[nolabels]

49. This is only simple arithmetic

Reminds of this guy at work who is constantly trying refi, sell his house, get a better second job, borrow from his Friends, reshuffle his payments, etc. The US Treasury and the government that is supposed to managing it is in shambles and is run by front men and frauds.

[Up2Late]

22. This is GREAT news! Finally, U.S./Canadian Dollar parity.

...but really, I am glad to hear this collapse is coming sooner rather than later. If it had come later (say 2008-2009), guess who would have gotten the blame?

[Media_Lies_Daily]

29. What makes you think the NeoCons are ever going to give up control?

[Up2Late]

37. I'm hoping that if it gets bad enough, they'll all flee the country...

...but that's just MY dream.

[Julius Civitatus]

32. How will this affect the real estate market?

We've been hearin gfor a coupel of years now that teh RE market bubble is about to burst. It's been on a tighrope for a while. I wonder if this devaluation fo the dollar may be the decisive factor, since it will raise inflation.

[Up2Late]

36. The Real Estate Market's bubble popped about a month ago...

...at least in the placed like So.Cal and NY/NJ.

The Real Estate Market Bubble and the high Oil prices are both a reflection of the painfully slow recovery in the Stock market. The only reason Bush can say things a so much better, is because things got so bad. The Stock market is just now starting to move higher than it was 5 years ago.

You should go though the archives of the APM radio show "Marketplace," often they only mention it is passing, but they've been saying the Real Estate bubble has popped for a while now: <http://marketplace.publicradio.org/shows/index.html>

[AngryAmish]

42. Real Estate has not popped everywhere

Real estate is different than commodities. There is no such thing as a nationwide real estate market. Some places may be overpriced but not everywhere.

[Up2Late]

54. I agree, but when they refer to the Real Estate Bubble, I think they...

...are mostly referring to the places were the prices have gotten way out of control.

I recently heard a report that a 1500sq ft houses are going for over $1,000,000.00, in L.A., that just crazy.

I see very little evidence near me in Georgia, of this sort of thing, so their is little danger here. It's mostly near the East and West Coasts I think.

[lovuian]

34. We are going to pay our debt with cheaper dollars

hang onto your hats...

[northzax]

48. so? the debt is in dollars

that's our creditor's loss, not ours.

sure, it makes it harder to borrow more money, but it makes it easier to pay what you already owe. think of it this way, you take out a mortgage for $1000/month over 30 years. If inflation continues at any rate, in 30 years, that $1000 is much less, in real terms, than it is now. But your payment doesn't increase, right? Rent goes up, fixed rate mortgages stay. it's the beauty of the system. inflation makes it EASIER to pay debt, on a grand scale.

[Julius Civitatus]

50. It means the debt is going to cost more

as the value of the dollar decreases, it will open the door for inflation, in all senses and areas.

Hold on to your hats.

[northzax]

59. no, it doesn't

it means the value of the debt in real terms decreases for the holders of the debt. the inflation comes from the higher interest rates demanded by creditors in the future. If the government owes a trillion dollars, there is literally nothing stopping it from printing another trillion dollars and paying the debt. well, except for all the problems that would cause. But debt is in solid numbers, in dollars, it doesn't care how much the dollar is worth against the Yen, Pound or Euro. If you lend me a million dollars, I owe you a million dollars, no matter how much those dollars are worth on the day I repay you.

[Bigmack]

63. China is a huge creditor of ours...

We won't be paying them off in smaller dollars for long.

They'll just stop lending us the money that we need to keep from going broke.

Who the hell is going to loan money to a 3rd world banana republic with a huge debt, no manufacturing base, few exports, and expensive tastes?

[Phrogman]

35. Here in the Philippines the dollar is dropping like a rock!

Even with the recent state of emergency, the dollar has dropped from 56 to 1 down to 49 pesos for a dollar.

And the black market money changers are giving way less than the banks, which is a sign that it hasn't reached bottom yet.

[fasttense]

40. Damn, I had some friends move to the Philippines to make ends

meet. The wife was born in the Philippines and when they saw the exchange rate they retired and moved. Their fixed income went a whole lot further there. I hope they do alright.

[Phrogman]

41. Its still a bargain to live here.

Your friends are doing fine.

[fasttense]

46. Thanks Phrogman. There are real nice people

and they deserve a good retirement. Great to know.

[Tight_rope]

47. Welcome to DU Phrogman!

[termo]

38. cheap holidays !

... as soon as I get my biometrical passport :popcorn:

[lumberjack_jeff]

58. The reverse, I think.

Time to invest in foreign stocks and disneyland.

[Tight_rope]

43. Awww...this is just the beginning!

[pauliedangerously]

51. There's a flip side to this that no-one mentioned...

If the dollar sinks enough, it will encourage businesses to set up shop here in America instead of overseas.

Further, in the interim, American people will be forced to become more thrifty and less wasteful. Not only that, but if money gets REALLY tight here, then people will have to learn to cooperate more with one another and this stupid "self-made-man" illusion will begin to fade away.

Face it, you can't be number one forever and there's nothing wrong with not being number one. There's plenty to enjoy in this country and one need not be wealthy to enjoy it; though being thrifty and wise helps a lot.

Sure, this is speculation, but I certainly don't buy into any of these pessimistic posts. BTW, I moved a bunch of my retirement savings over to international funds as well. The only people who really lose are the ones who don't pay attention to what's going on. Life isn't as easy as it was in the fifties, but it's still easy to live in this country compared to most anywhere else.

Be happy with what you have and cultivate quality friendships.

[Zynx]

57. That's absolutely correct.

There are some strange upsides to a collapse in the dollar.

[mainegreen]

52. Personally, I can't wait till the dollar falls against the yuan.

China is using the fixed rate as unfair government subsidies to exported industrial goods. Once that normalizes you can expect US exports to become more competitive, especially as there are no other coutries that could soak up as much outsourcing as China, especially if the Rupee gains against the dollar.

But thats just my non-economist take on it.

[Bigmack]

62. What do we make that China wants?

Or anybody?

Here in the Northwest, it's Boeing planes and apples, maybe.

What else?

We've outsourced a helluva lot of manufacturing jobs.

Can we look forward to lower real wages? Hyperinflation?

[demo dutch]

55. Visited France in March, exchange rate was absolutely terrible!!!

[Spazito]

56. Loonie cruises near 90 cents US

The Canadian dollar continued its upward trajectory on Monday as market watchers suggested it is headed back to parity with the U.S dollar.

In afternoon trading, the loonie was going for 89.98 cents US, up 0.53 cents from Friday's close.

The Canadian dollar has been on a tear recently, rising from 86.01 cents US at the end of March to 89.26 cents US at the end of April.

With the loonie approaching 90 cents US, some economists are now suggesting that a return to parity with the U.S. dollar is only a matter of time.

more

http://www.cbc.ca/story/business/national/2006/05/01/loonie-060501.html

[Canuck55]

60. Exactly, not sure why this is now news...

...we may not be a 'major currency' but we are the currency that the largest trading relationship on the planet is based against. Loonie has been climbing for 18+ months, last time i remember seeing the little sign in the stores denoting the exchange rate showing 85%+ was in the late '80's.