Dollar sinks even lower against the Euro

[rumguy]

http://news.yahoo.com/news?tmpl=story2&cid=568&u=/nm/20031215/bs_nm/markets_forex_dc_8&printer=1

Funny, yesterday some right wingers were gloating about how the dollar was going to gain after Saddam's capture. As if, somehow, the capture of this one man would cure all our problems.

[elfin]

1. Not just right wingers...

Nearly ALL of the economic analysts predicted a strengthening of the dollar - sorry no link.

[LincolnMcGrath]

2. Dubya`s "Strong Dollar Policy"

[KA]

42. actualy

i learned that a week $ might be a good thing.
because it will make our exports cheaper and are imports more expensive. and that will help our balance of trade

[htuttle]

44. Not if you have to buy your components overseas

Not a whole lot of stuff is built from all-American parts nowdays.

Farm products is about all I can think of, except that farming nowdays uses tremendous amounts of petroleum -- partly to fuel the machinery, but even more to create the fertilizer and pesticides. With the dollar dropping, oil will go up (OPEC said as much the last time they limited production in the last month or so). Rising oil prices cause EVERYTHING to be more expensive (transportation, power, etc...).

I think on balance it is NOT a good thing -- we aren't the America of the 1940's anymore. Chicago's 'big shoulders' slumped long ago, and all the Milwaukee Iron has gotten pretty rusty after long disuse.

[ozone_man]

47. Also, what about those foreign countries that are holding our debt?

Aren't they going to demand higher interest on the bonds, or decide to dump U.S. bonds? A weaker dollar at some point would cause a monetary failure. Where that point is, is a good question, but I think we're getting close.

On edit: I always liked that pirate avatar. Was that Buttle?

[underpants]

3. W (today)"pro-growth" includes strong dollar, tort reform, less regulation

Damn W and that was only 2 1/2 hours ago.

[PinkTiger]

4. Someone explain what makes the Euro fluctuate.

I'm not an economist. And this is all rather confusing. But what needs to be done to make the Euro go back "down?" (I put quotes around it, because I'm not sure if down is the right word.)

And, is it good or bad when the Euro is up or down?

[TrogL]

8. Dollar-centric viewpoints

What's really happening is the greenback is sinking like a rock for a variety of reasons (varies from analyst to analyst).

All the newspapers here are crowing about the loonie rising. It is, but only by a tiny bit. It's really the greenback going down the toilet.

[mbperrin]

10. Currencies are commodities, just like peanut butter or anything

else that can be bought and sold. Investors want the best return on their money wherever that might be. So when you have a country that's normally quite stable with a positive business climate, good profits, low taxes and so on, it's quite natural to want to do business there. So you buy dollars and sell your own currency. This makes the dollar strong and their currency weak by comparison. "There" has been the US for quite a while, but lately, things have been different - corporate scandal, big government shakeups, bankruptcies among states and individuals and so it doesn't look as good as it did. So sell dollars and buy something else.

[NoKingGeorge]

28. The amount forieners invested (bought treasuries etc) in the U.S.

in August was 44 billion. The amount of inflow in September was 4 Billion. That's right 40 billion dollars less was invested in one month(and 38 B of that was from one source,Bank of Japan,propping up their trading partner). I think Oct may have gone up to 21 billion. We need 2 billion a day to pay our interest .
This is a pool of money that is circulated to trade in mortagages etc. What happens when demand is higher than supply? The value of the commodity goes up. Think Interest rates.

[PinkTiger]

5. Someone explain what makes the Euro fluctuate.

Sorry. Duplicate post by accident.

[indepat]

6. Everything is coming up roses for America and all

Americans.

[mumon]

7. AND THE STOCK MARKET WENT down today TOO!

Some right wingers are gloating indeed.

But I'm pretty happy being bearish...

[ozone_man]

11. Sell on the news?

A fantastic entry point for a short position on the DOW/SP500, don't you think?

[joeunderdog]

34. I agree. This market is inconsistent with other indicators (read: bubble)

I'm still gun shy. The market is outstripping the economy again, and I'm not getting burnt this time.

Along with a bunch of other investors, it's hard to feel good being up 20% on a 70% loss. BFD!!! Where the hell is the push on the Dow coming from? Cisco, GE and others have Market Caps down over FIFTY PERCENT since Chimp's been in office.

Think I'll go buy some more Xmas gifts--toothbrushes or keychains for everyone.

[UpInArms]

9. related article:Dollar dips to new lows vs euro, shrugs off Saddam

http://www.forbes.com/technology/newswire/2003/12/15/rtr1181520.html

NEW YORK, Dec 15 (Reuters) - The dollar skidded to record lows against the euro on Monday as initial euphoria about the capture of former Iraqi President Saddam Hussein waned and investors focused on the prevailing U.S. structural economic problems.

"Essentially, while news of the capture of Saddam Hussein was a positive factor, it doesn't change the outlook for the dollar," said Omer Esiner, foreign exchange market analyst at Ruesch International in Washington.

"The factors that have been weakening the dollar for the last few months -- the current account deficit and the Bush administration seemingly favoring a weaker dollar -- are still in place," he added.

...more...

Anyone with a brain would know that Saddam Hussein had nothing to do with the fiscal soundness of the US dollar.

All that hype and crap made me nauseous.

[spotbird]

12. Is this the way * want's it?

There was someone on Kudlow who said that this is the way * wants the dollar because it punishes those who didn't support him.

[Dirk39]

13. Exactly...

Hello from Germany!
The USA are import-masters Nr. 1. "We produce, you consume; we work, you eat". The USA have drastically changed from an exporting nation to an importing nation. Germany is now Nr. 1 in exports worldwide and our economy needs these exports. When the dollar is low and the euro is high, european products become more expensive and the exports drop. This is the reason, the Bush-Admin is using a low dollar as a kind of weapon to punish those, who didn't support the illegal Iraq-invasion.
The sad thing for Bush somehow is, that the USA aren't in the position to punish anyone. Will they import from Eritrea and Albania instead?
Many european nations realize now, that the USA needs them much more, than we depend on the USA with its' trade deficit of 20% and an airbulb economy with many more Enrons to come.
Many economists state, that the USA will lose about 20% of their wealth.
Some people suppose, that the theatralic Iraq-invasion and the war against terror are desperate attempts to prove to the rest of the world that we need the USA because of their military strenght to further draw investions into the USA.
Dirk

[spotbird]

14. But how will this hurt the US?

If we borrow from you when a Euro costs one dollar and pay you back with a US dollar worth .75, aren't you screwed?

[Dirk39]

16. I'm not an expert in the financial markets, but from my limited....

knowledge, I would reply: short-term yes, we're screwed, but long-term: not at all. And if I'm correct: the companies, who import gods, have to pay in Euro. And if they simply need the gods, they have to buy them.
Just a cynical example that might even shed a light on Germanys' official position towards the invasion of Iraq: without german hitech, the aircraft of the US army wouldn't have the ability to hit a single goal.
Dirk

[Just Me]

38. Does this have any bearing upon possible US bankruptcy?

Someone once stated that it did and that we teeter on another depression.

[Mokito]

41. Totally off subject: Is that a typo?

the companies, who import gods, have to pay in Euro. And if they simply need the gods, they have to buy them.

A typo or not, I like it.

[Dirk39]

46. I admit everything, but be cautious and gentle to me...

I have Euros. I always thought it's just capitalist propaganda that "Waren" are called "goods" in english.
Dirk

[mbperrin]

18. That's why European investment will flee the US,

draining money from the markets and sending the Dow lower (much lower if the dollar really weakens like it's starting to.)

Imports cost more and your favorite protectionist friends think this is good because it will enable domestic companies to charge more here. Conversely, it makes exports cheaper, so they argue we get more jobs here when exports increase.

Couple of problems: financing the huge deficit next summer will require either extremely high interest rates to borrow a declining pool of dollars or extremely high inflation as we crank those printing presses up. Either way, consumer purchasing power dries up and business investment ceases as the government crowds out other borrowers.

Now, exports can't increase because it's hard to export mopping floors at closing time in a fast food restaurant. And the combination of higher interest rates and or inflation blows away the chance of starting up new manufacturing enterprises.

So you end up with high prices, high unemployment, high interest rates, and savings worth nothing. It's called stagflation and we already did it once in the mid 70s.

Own real things and pay cash. This will help you get through it.

[spotbird]

35. What should I do with my 401k?

It doesn't have a foreign currency or gold option?

It is my only hope for retirement.

[Kellanved]

19. yes

But you're borrowing more than ever and that while the Euro is at an all-time high...

[aneerkoinos]

21. Depends

If the loan is in other currency than dollar, when dollar falls the amount of debt increases.

[smirkymonkey]

32. Just like that idiot *, cutting off

his nose to spite his ugly face. Unfortunately, the rest of us are paying for it as well.

[Nlighten1]

15. Bush was talking about his "commitment to a strong dollar" today.

Just another lie but then a strong dollar isn't always a good thing.

[The Zanti Regent]

17. Watch what happens when OPEC abandons the dollar for the Euro

That will be the point where the dollar collapses!

[loudsue]

20. I vote on January / February....

I think the "New Year" is going to bring some surprises to the working class families in the U.S. of A. There might be a few disillusioned newby rich folks as well....since the working class keeps them afloat.

Truly interesting days ahead.

:kick:

[cliss]

22. Interesting....

I can't help but think that this is going to affect many wealthy families, as well.

I'm also thinking that some corporations who import from Europe are going to be hurt by this. Earlier this year, their american dollars bought a certain amount of European goods. Now, their american dollars won't get nearly as much because the $$ has fallen in value.

Which means fewer goods. I suspect many companies who are less profitable will fold now. And many wealthy families will see their assets melt like butter in the sun.

Will Bushya be able to help them now?

[muriel_volestrangler]

23. one thing a low dollar (v. euro) helps

is European tourism to the USA - since 'where do we go for our vacation?' is a question influenced quite a lot by 'where's cheap this year?'.
Of course, it would help if the Europeans (especially the French) didn't expect to find a 'freedom fries' mentality when they arrived. A government doing its job can do quite a lot to promote a welcoming face abroad.

[KayLaw]

24. Ron Paul - R ( Texas )

He wrote this about the dollar. It is such a terrifying situation. If only we had an honest, responsible media who would explore these very vital stories and talk less about true crime stories.

http://www.gold-eagle.com/gold_digest_03/paul121103.html

[ProfessorGAC]

25. It's Terrifying Because Ron Paul Says So?

Sorry, but i'm not one of the "doom and gloomers" in the economics community. And, Ron Paul's credibility on issues of economics is nearly zero.

So, this isn't exactly an endorsement of the idea that we should be freaking out over this.
The Professor

[KayLaw]

29. It does freak me out

I have a son who is very severely disabled and will someday rely on interest from money his grandfather will leave him. It makes sense to me that a weak dollar will hurt savers. Is this wrong? I'm reading a book by Paul Krugman and he seems to feel the way Ron Paul does.

[ProfessorGAC]

30. I Doubt Krugman Feels The Way Ron Paul Does

I think you're misreading something if you think that the economic philosophy of Paul Krugman and Ron Paul have anything in common other than they're both capitalists.

The weak dollar has to be AWFULLY weak to hurt savers. I mean AWFULLY weak. (Think Brazillian weak.) The asset base of the U.S. economy obviates that sort of hyperinflation and currency devaluation. Hence, RP's suggestion that currency value is based solely on a promise is not really true.

I don't fully concur with every one of Krugman's analysis, but he and i are from a similar school of economics and are far more alike than we are dissimilar. And, i have a tough time believing that Krugman is seriously considering the doom and gloom dimension. He's too logical and too data driven for that.

The current resurgence in the equity markets indicate that the analysts are not suggesting burying one's money in the backyard, so the idea that there is a value collapse imminent for the dollar is just not supported by the current economic or market data.

I understand your concerns from a personal perspective, but saving is NEVER bad and it's extraordinarily unlikely that we will see a precipitous plunge in dollar value that makes saving money a risk, especially on a long time horizon.
The Professor

[KayLaw]

33. I believe he might

Maybe you could do a Google search and read his October 14th column entitled, " Don't Look Down." He thinks the US will be able to borrow for a few mores years, then...that's when Krugman makes his Wele E. Coyote comment. He doesn't say this will happen for certain.

I hope they're both wrong and you are right for everyone's sake. I also worry it will be harder to immigrate to another country with a weak dollar.

[ProfessorGAC]

37. I Am Of A Similar Mind to Krugman. . .

. . .for the most part, but i disagree with his time horizon on this issue. We can borrow for a lot more than a few years without the debt pressure causing economic disaster.

That being said, i am a deficit hawk. As a TRUE fiscal conservative, i believe that gov't should balance tax rates to cover the cost of doing business. No cutting programs after the fact! You've got such and such financial obligations, so one must now bite the bullet and increase marginal tax rates to bring in the same amount of money.

Deficits should be short term only (say 3 years) but a tax plan must be in place to immediately begin moving rates up so that the borrowing ends in six years and balanced budgets are resumed in no more than 6.

So, i am as against deficit spending as is Krugman. My models and papers (6 published) regarding the impact of deficits on economic health all suggest that the worst thing gov't can do is run continued deficits.

So, i agree with Krugman that this is bad. I don't agree on his timeline. And i don't agree with you that Krugman is saying that we are on the verge of disaster. He's just illuminating the "maybes" that come with excessive running of deficits. On that we are of a like mind.
The Professor

[slothrop]

39. it is not terrifying because you say so?

what is your credibility?

[ProfessorGAC]

40. Read the Post for An Answer

I've got three advanced degrees as my educational background.

I work full time as an operational and cost optimization expert for a multinational chemical company.

I am an adjunct professor at three universities in the Chicago area specializing in the mathematics of modeling complex systems. I provide instruction in very specialized graduate level courses as the need arises.

I have over 40 published papers on the subject, several of them in econometric modeling.

I am a member of the Economics Club of Chicago and know just probably 80% of the professional economists and econ professors in this area of the country.

So, i've given you my credentials. What are yours?

Smartass.
The Professor

[slothrop]

43. smartass

Well obviously one can never ask what a poster's credibility is, heaven forfend that an unknown entity who has a rather large ego demonstrated by his economic prognostications, be asked what his credibility is, any one who does that is automatically a smart ass.

My credentials are a BA in philosophy and a BS in Mechanical Engineering, though I am sure that those of you who have fallen into the trap of viewing the world as an economic entity, would not regard those as credentials.

And by the way I read the post, it did not convince me.

The planet does not operate on economic principles, and the value of the dollar is based on a lot emotion like the valuations of the DOW. When we manage to irritate the rest of the world enough so that they are actively looking for ways to end the empire, and peak oil production arrives what then?

[Petrodollar Warfare]

45. The dollar is currently immune to many economic factors...

<<<<The planet does not operate on economic principles, and the value of the dollar is based on a lot emotion like the valuations of the DOW. When we manage to irritate the rest of the world enough so that they are actively looking for ways to end the empire, and peak oil production arrives what then?>>>>>

Yes, the dollar operates outside traditional economic models due to the geopolitical preculuarity that it is the only hard currency in the world that is directly convertiable into matter/energy. In this case, $1 is worth between 1.5 and 1.9 gallons of crude oil (using 42 gallon production barrel and OPEC price ranges). You can't buy a barrel of oil with yen or peso, but at some point you will with euros. At that point the rules of economics will stop applying to the euro, and begin applying to the dollar. My hope obviosuly is a tranding band at parity with an OPEC dual currency transactiopn standard. Otherwise the 21st century will be one of oil warfare.

Remember, life is nothing more than competition for energy. Water is not a commodity for human consumption, and oil is not a commodity for industrialized societies either. Both are necessaities.

As for pissing off the world? Well, the neocons have excelled at that, and here's one possible outcome...but not just yet...

OPEC's Silva: OPEC evaluating trading in euros (Dec 10, 2003)
http://www.petroleumworld.com/storyT1127.htm

...BTW, Russia mentioned the same thing. Central banks will hold much less dollars if they do not guaranteee access to oil, and then our deficits will really come back to haunt us...as will Peak Oil.

[Orrin_73]

27. Ron Paul is an arch libetarian/conservative

he would rather see the government nullify all social programs that were enacted by progressive presidents in the last 7 decades. Be cautious with this person.


deanforamerica.com
clark04.com
kucinich.us
sharpton2004.org

[TheLastMohican]

26. What kind of economy is that if the the news

on the capture of one man, no matter how important he is, sink or lift the economic turnover of some entities which have no connection to Hussein whatsoever.
I say that is speculative economics and it will not stand the test of times. The question is not "if" but "when" will be the big "boom". Healthy economics based on actual services delivered and goods sold will prevail but not that crappy shifting of speculative capital from Asia to Europe, from Europe to America and vice versa.
Someone earned big time on the hysterics connected with Saddam's capture! You don't have to be an economist to figure that one out.

[ProfessorGAC]

31. The Markets Are Not Economics. They're Finance

Your point is well taken, but what the markets do is not connected, either as an input or outcome, or the macroeconomy except in a tangential way. (Consumer and investor confidence type stuff.)

So, while you're right that the capture had an undue, and clearly speculative, impact on the markets, that isn't likely connected to the performance of the whole economy over the next 12 months.
The Professor

[lebkuchen]

36. Then how can Bush say he has a "strong dollar policy?"

Answer: He can't, without lying.