Need economy wizard

[Badger1]

Doesn't the (plunging) value of the dollar overseas have more to do with the escalating gas prices in the USA than anything else? Natural gas also?

[rockymountaindem]

1. No

I'm no wizard but we did just go over this in my university econ class (real wizards can feel free to correct me so I don't mess this up on the test!) :)

It involves imports and exports as far as I know. When someone in country A wants to buy a product from country B, they have to pay in country B's currency. Currency, like any other product, experiences effects of supply and demand. If people abroad are buying fewer American products, they need to purchase fewer dollars beforehand. This means that there is less demand for our dollars, and the value of our currency falls.

Also, by raising interest rates, the Federal Reserve makes our bonds more attractive to overseas investors. This makes demand for our currency rise, but also has the obvious negative effects on the domestic economy. It's a trade-off.

[Tandalayo_Scheisskopf]

2. It's a big...

part of the equation. The other part is the lack of supply being kept, in the name of "just in time" supply, and the fact that capital reinvestment in refineries has not taken place and they are deteriorating.

Put it all together and you have some idea why feel like you cannot fart.

[whistle]

3. The plunging dollar will affect all prices...

...because virtually everything we buy and sell in this country has some element of imported value associated with it. It is interesting that the fall of the dollar relative to other world currencies (classical economic stimulus theory) hasn't done a thing to stimulate job growth in this country.

What the neo-cons miss is that labor cost being only a small part of total cost, has to be reduced even further when the dollar looses value, because the other components, most of which are imported or have imports associated with them, go up in direct proportion to the lost value of the dollar. That is almost immediate as inventories are replaced.

Lassez faire economic theory and relative currency values worked well in the 1800's when inventory stockpiles lasted for months and tariffs could be selectively levied on imports that competed with local natural resources, but then that same economic theory gave rise to the vast working classes who were paid less than subsistence wages and exploited with long hours, no benefits and child labor. Exactly where the neo-cons want this country to return economically. :wtf:

What has happened to the president's bill to allow 11 million illegal aliens to stay in this country to work for less than minimum wages as legal temporary workers and to allow companies to hires millions more as cheap labor source to do jobs that he claims Americans won't do? I haven't heard much about that bill lately.:freak: