I remember trading my euros at 1.55 and 1.6 at one point even.
Now its like 1.25, doesnt count for weak USD.
I remember trading my euros at 1.55 and 1.6 at one point even.
Now its like 1.25, doesnt count for weak USD.
Why are people so worried or even concerned, if you look at the last 30 years the USD has been going up and down like a bloody ship at sea in a major storm, nothing to be worried about in the end. Yes you have downward trends and then economic booms, happened in the 80's again in the 90's then in the 00's. As for the Euro I have to agree with an other poster its survival is more tied into politics rather then actual economics (very simplified I know, but core of it). The USD will bounce back at some point then will soar again and then we will have another set of greedy...........(input type of idiots) and it will go down again.
What it means for us is this the rich get richer and the poor get shafted, the peeps in the middle will get to moan and be the ones that'll have to pay for it, welcome to 1st world economics.
The USD took a hit in the 70s from OPEC (oil), 80's S&L scandal(s), 90's internet bubble, 00's greedy bankers.
Last edited by Risale; 2012-11-16 at 12:42 PM. Reason: added a sentence
As long as the dollar holds its petrodollar status. It is not going anywhere.
Wait a minute. You want the US to go to a Chinese currency? Thus marking the US and China as the two superpowers, so everyone learns both English and Chinese in the near future?
Sounds familiar. Where have I heard of this befo-
http://en.wikipedia.org/wiki/Firefly_(TV_series)In addition, it is a future where the only two surviving superpowers, the United States and China, fused to form the central federal government, called the Alliance, resulting in the fusion of the two cultures.
Yaaaaaaaaaaayyyyyyy!
Currently, the utter economic dysfunction that is Europe is causing many investors to seek "relative" safety in the dollar.
Its all relative.
If Europe ever straightens out the mess it is in, then you'll see some re-balancing that will drag down the dollar's value as people invest in euros on the cheap. But that is not the current age we're living in. Europe is viewed as a massive sinking ship, dragged under the waves by unmanageable pensions and benefits. The European people are also demanding the EXACT wrong course to fix their problems as well. They want to protect their benefits at all costs it seems.
Either Europe catches up to modern times by cutting back pensions and benefits, or it becomes a backwater to places like the the Far East. China and India will just pass them by.
Incorrect.
The value of the dollar is being undermined by supermassive debt spending, QE, and low interest rates.
In a true free market system, interest rates act as a natural check on government debt spending. If a government debt spends too much, the nation will begin to feel economic pain in the form of higher interest rates. The concept is simple. If a borrower holds a lot of debt, it makes him a higher risk of bankruptcy, and that risk gets priced in to any future borrowing in the form of higher interest rates.
The function of QE, or quantitative easing, is to interfere in the free market system. QE is the process where the Federal Reserve gives itself a line of credit and buys massive amounts of treasuries. The process is beyond the scope of this post, but to sum up, when you sop up the supply of treasuries available for customers to buy, it has the side effect of holding down interest rates artificially.
QE allows the federal government to rack up debt spending and feel no side effects.
The problem is that the Fed now has this HUGE balance sheet of treasuries. They will eventually have to sell those back into the market. And when they do, it will have the reverse side effect, artificially driving UP interest rates. That will put a cap on future growth.
The only other alternative is to devalue the dollar by a large amount, such that selling those treasuries has little to no effect. The US could also just abandon the dollar and make the entire problem moot. Of course, either of those solutions create even bigger problems.
What the US is doing is going to cause MASSIVE problems for them in the future, but for Obama and the current crop of politicians who won't be in office when the bill comes due, it has the false appearance of a recovery....
Last edited by Grummgug; 2012-11-16 at 01:17 PM.
What do you do to attract foreign investors? You devaluate your coin. The end.
'Twas a cutlass swipe or an ounce of lead
Or a yawing hole in a battered head
And the scuppers clogged with rotting red
And there they lay I damn me eyes
All lookouts clapped on Paradise
All souls bound just contrarywise, yo ho ho and a bottle of rum!
The value of the dollar is largely irrelevant to the position it holds in international trade.
So does the mere fact that the government is borrowing money.The function of QE, or quantitative easing, is to interfere in the free market system.
---------- Post added 2012-11-16 at 04:18 PM ----------
What, exactly, is the dollar slipping from anyway?
I took all my money out of US stocks a few months ago. I'm hoping there's a big crash. I'll get back in while everything is low. Worked for me in 2008.
You can get some really great returns on Muni Bond funds while you're waiting for the next disaster.
'Twas a cutlass swipe or an ounce of lead
Or a yawing hole in a battered head
And the scuppers clogged with rotting red
And there they lay I damn me eyes
All lookouts clapped on Paradise
All souls bound just contrarywise, yo ho ho and a bottle of rum!
No, that bit is incidental. The government borrows money to do what it wants to do without pushing uncomfortable tax hikes on people.
It's difficult to get into without explaining how the foreign exchange works.What, exactly, is the dollar slipping from anyway?
World currencies are traded on a global market. Governments can either "peg" their currency or "float" their currency. Floating is significantly simpler, but more risky if your economy is shaky.
When you float your currency you essentially go about your own business as the private free market determines your currency's worth compared to all other currencies in the world (eg. I'll give you 1.05 dollars for every Swiss Franc you give me) as private entities decide to move in or pull out of certain countries. It's important to point out that this is the ideal system as it provides an amount of liquidity even central banks can't endanger on their own as well as operating 24 hours, 5.5 days a week around the world (When markets in London shut down, New York is up. When New York goes down, Tokyo goes up).
When you peg your currency you essentially work within the standard foreign exchange system, but work at manipulating the value of your currency. When an economy gets very big, this is a pain in the ass to other countries because, since everything is done on the foreign exchange in terms of two currencies, you're directly affecting a foreign nation's currency as well.
So, for example, China could keep their renminbi artificially low by printing more and selling them on the foreign exchange. They would then sell them in relation to either the US Dollar or a basket of currencies. When they do that, they drive up the value of the US dollar.
It's important to know that "up" and "down" are not positive or negative terms on the foreign exchange. If you're a nation that's a net exporter (such as Japan or Germany) you want a weak currency. Before the Euro the German Mark was around 2.5 Marks per US Dollar. The Japanese Yen is 81.8 Yen per US Dollar. They are (or were, in the case of the Mark) two of the world's most important currencies despite being "weak". A "weak" currency increases your economy's selling power
In comparison, if you're a net importer (Like the US) you want a strong currency so you can continue to buy stuff from abroad. A decline in the value of your currency decreases your country's buying power.
A "weak" currency CAN be good for the United States as it means our exports can begin ramping up which would address a myriad of problems in our system.
Last edited by Laize; 2012-11-16 at 06:34 PM.