Ailing dollar falls to record low.

[Say_What]

<clips>

The dollar has fallen to a record new low against the euro, before Tuesday's interest rates decision in the US.

In late afternoon Monday trading, one euro bought $1.2241, a new high, as the dollar continued to be hit by growing US deficits and low interest rates.

The dollar also stayed near an 11-year low against pound sterling, which buys $1.7251, and it fell to 107.1 yen.

The US Federal Reserve Board had been expected to keep interest rates low, but may now be persuaded otherwise.

http://www.falkland-malvinas.com/Detalle.asp?NUM=2967

[nothingshocksmeanymore]

1. OK can someone come along and tell those of us less in the know

what this means?

[chiburb]

2. For one thing...

It means our imports are getting more and more expensive. It'll take a lot more dollars to buy something priced in yen or Euros (Toyotas, BMWs, etc.).
It also makes our "debt" a lot less attractive of an investment to other countries. If we can't sell our debt, we have to cut spending. And guess who's backs those cuts will ride on?
You already know...

OT: For NSMA:http://www.lyricsdepot.com/paul-petersen/she-cant-find-her-keys.html

[nothingshocksmeanymore]

5. LOL on the side note!

:D

[alcuno]

3. Here's what I think it means.

1. Good for foreigners to visit the US. Bad for US citizens to go outside of US on vacation. Prices would be VERY expensive.

2. It makes the cost of things we export lower so conceivably you'd sell more.

3. It makes the cost of things we import higher.

4. I think it's bad for other counties buying our debt (which we want.) They'd get a better return on non-US investments.

[htuttle]

4. As far as those effects go...

...don't forget that most of things we export are made from things we import, so US manufacturers (the ones that are left) could likely get their profit margins squeezed pretty thin.

In other words, like the old saw goes, if you lose a little on each transaction, you're never going to make it up in volume...

[nothingshocksmeanymore]

6. So while we are WALMARTIZING wages in this country

We are increasing prices?

[chiburb]

9. Yes.

It seems contradictory that they would lower wages at a time prices are destined to go up: If things cost more but we have fewer dollars, how can that be good for the economy? A little inflation isn't a bad thing, but I don't see how it'll work given the above.
Of course that assumes that we believe there IS a policy other than to rape and pillage the US Treasury. I'm not convinced it's otherwise.

[Gin]

8. whats left to export? see #2 below...

2. It makes the cost of things we export lower so conceivably you'd sell more.

we export...wheat..corn...bombs..planes..jobs..that will not help me because I am not in the market...or in those industries.

If we were a major manufacturing country like we were in the old days...this would be good news.

[54anickel]

7. Monetary policy is attempting to create Managed inflation.

That's one reason this admin keeps saying they aren't worried about the dollar dropping. Inflation from a drop in the dollar is less risky than the hyper-inflation that could arise from raising interest rates before the "recovery" takes hold.

The prospect of deflation was so great that they are willing to create inflation.
Either one can spiral out of control quickly on them, deflation being the one that is harder to control with monetary policy.

At least that's my take on it.

http://web.mit.edu/krugman/www/deflator.html

And a bit more on deflation from today.
http://www.abc.net.au/am/content/2003/s1006237.htm

[chiburb]

10. Good links, thx, but...

How can this be inflationary when wages are going down and jobs going away? How can both 'policies' work at the same time?

[54anickel]

11. That's what puts us in a very precarious position.

Inflation will normally hit wages as well, bad thing is the job situation. That is why, despite all of the other "good news", the Fed will still hold interest rates down, they wanted to see higher job numbers as evidence that the "recovery" is sustainable.

Hate to hit you with more links, but it's easier than trying to explain.

Mind the Gap discusses the unsustainability of these phenomenal 1 trillion in profits being reported.
http://www.cfo.com/article/1,5309,11295,00.html?f=featured

The Confidence Game discusses the tough time the Feds will have and may at least partially answer your question.
http://www.financialsense.com/Market/archive/2003/1118.html