Dollars drop becomes ominous

[ringmastery]

http://uk.news.yahoo.com/031221/325/ehl5i.html

Dollar's drop becomes more ominous
By Nick Olivari

NEW YORK (Reuters) - After months of looking at nothing but the bright side of a weaker dollar, investors are starting to look at the dark side of its struggle against the euro.

Demand for the dollar has been dampened by concerns about the widening U.S. current account deficit and expectations that benchmark U.S. interest rates will remain low.

For most of the past six months, that was seen as positive for the most part, as U.S. goods and services become cheaper compared with those produced overseas. Now though, investors are looking at the pace of the dollar's decline, fearing that an orderly drop in demand may turn into a rout.

[Tansy_Gold]

1. Only problem is. . . . .

. . . . there are no U.S. goods and services to sell!

sheesh.

[kalian]

2. You know the repuke line....

it must be Clinton's fault... :eyes:

[knight_of_the_star]

3. Yeah, that's gotta be it

Bill Clinton's almighty dick has cursed the dollar so that it will sink like a ton of lead :eyes:. Haven't they figured out yet that is a little old?

[NewJeffCT]

4. beat me to it...

Those balanced budgets, surpluses and overall fiscal sanity caused the vicious cycle that is now leading to the plummeting dollar.

[Deja Q]

5. Well, a few more tax cuts for the rich and greater "defense" spending will

surely help out this sad situation?!

Gee, there's little worth defending anymore. Corporate america is so without ethics that only an equally unscrupled dumbshit would protect them...

Hopefully the turn to foreign outsourcing, like basing their companies offseas, will backfire as well.

[kentuck]

6. But it's better if we can pay off the humongous debt with cheaper $$$...

isn't it? If we pay off the Treasury notes with cheaper dollars, the person or country holding the notes get back less than what they paid for them, in effect? Is that not correct?

[wuushew]

7. Actually a weakened dollar makes government securities less attrative

necessitating a higher interest rate paid to attract foreign investment. This snowballs and would quickly wreck the economy. In a larger sense it is true that inflation does make a dent in the national debt, but I am more a fan of the Clintonian approach.

[kalian]

8. Bingo....

he problem with inflation...leading to hyperinflations, is that
there is really now way of controlling it. It could spiral way
out of control. As prices of good start to skyrocket, people would
be demanding higher wages in order to keep up. Do you think that
companies are going to be willing to do this...? :eyes:

We're already seeing the first indications that inflation is here
amongst us: case in point, somebody started a thread asking about
grocery prices... I for one, have seen a noticeable increase in
basic foods and I'm trying to figure out why.

And then...just wait until energy prices start to climb...

[mlawson]

9. Remember, an exchange rate is the price of one currency in terms

of another. When 'foreign investors' redeem their dollar denominated bonds, they receive the face value of the bond, plus any accrued interest, in dollars. So when they buy their own currency back with those dollars, they receive fewer Euros, Yen, etc.

If they then refuse to buy any more dollar denominated securities, then the demand for the dollar falls, which could lead to the price of the dollar falling further.