Quote:
Originally Posted by Snake Doctor
(Post 13313126)
A falling dollar has a stimulatory effect on our overall economy, that's an economic fact.
Americans have lost no purchasing power at home, and our exports are booming.
You say the dollar is falling like a stone.
I say it was overvalued and is simply correcting itself.
Prove that I'm wrong.
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Prove something? Do you read any financial reports or have an awareness of what is actually happening??? Trying to quote "economic facts" and forgetting the full scenario is pointless. Hang on... I'll gloat over the $4 profit on the corp P&L account and forget the $5mill bank loan :1orglaugh
To say the dollar is "overvalued" would be correct - in that it is worth less now. Also do not claim the dollar is "falling like a stone" - it's not. It is in a downwards spiral.
The fall in dollar currency is directly associated with a failure to produce a sustainable fiscal policy over a fairly long timespan during which both govt and public have been living on credit - basically a national credit card. During that period, the borrowing from other nations has been at an unsustainable level - around $10-12billion/day - and with around 30% of that being borrowed from the Central Bank of China alone.
At the same time the country has never actually had a trade surplus for almost 40 years (last was around 1968) and where no segment of industry or agriculture has shown a trade surplus - other than two items - wheat and arms. It is more than obvious that this scenario is financially unsustainable.
It is correct to say that "a falling dollar has a stimulatory effect on our overall economy" and this has shown a positive side in that there has been approx $150bill extra in exports over the last year. However, to put this in perspective, when borrowings run at an average of around $11bill/day. What is the significance of $150bill against that level of borrowing? Peanuts. Also, when the Fed dumps around $80bill in fresh current to keep the banks liquid and in the same week China dumps.. think $65billion in their dollar reserves - that alone, wipes the whole extra exports of $150bill for the year into the trash bin.
As comparison... China alone produces around $890 billion exports every month - forgetting the other Asian countries. This again, tho more subtle, is a reason for the weakening of the dollar - and this element affects all western countries, not just the US. There has been a global shift of what is now an economic powerhouse to both Asia and China and this will continue. The challenge for western industrialized countries is to be in a fit economic state to manage that change. The US is currently very noteable in that it is currently prob the one country of all western industrialized nations to not be in a position to easily cope with economic change.
The dollar is falling, not because the Fed want it to drop, but thru lack of confidence in the economy from other markets/countries/bankers. The Federal Reserve (and the Treasury) would be very happy to see a stronger dollar, especially when the main problem with balancing trade is attributable to oil imports. The weaker the dollar, the higher oil prices rise and the cost of imports will rise when a weak dollar is used to pay for these imports.
It would be correct to say that the economy has performed well in the last 90 days at a level of 3.9%, and better than forecast. However, the fundamental core problem remains - unsustainable debt, and the next 90 days is expected to result in a poor economic performance (at a level worth hiding under the carpet).
The other main factor for the current weaken of the dollar is due to the home market slump which was an attempt by Wall Street to get too greedy and issue loans to people who had little chance of repaying these loans - and it bounced back in their face and is starting to show serious asset value losses. One such company wiped off $8bill of it's assets this week and expects to wipe off more. Foreign funding has been withdrawn by hedge fund managers and others because of the obvious risk - that also is a reflection of the confidence in the dollar and in the economy as a whole. The effects of the home market problem ripple outwards to affect almost 24% of the economy and hit all industries from construction, retailers to furniture manufacturers.
On market performance, this has been totally abysmal over the last five years and has shown returns of under 3.5% on an annual average basis. If you compare that to eg Canadian and other markets - Canada has a 12% annual gain over the same period, the UK has a 12.8% gain etc etc. The US market has been living in a fantasy and this appears to be much in line with struggling to earn a dime from sub-prime mortgages. The next "scam" to entice unsuspecting investors is to repackage a portfolio and describe this as "prime investment". It is not prime investment and, when examined, contains substantial amounts of sub-prime problems where it is more than obvious any investor will lose money. In effect, brokers are hiving off bank debts and problems and calling them "prime investments" - this does nothing for any economy and only causes investors further problems. Ironically, the US market once was one of the best for investment prospects ever. That is no longer the case.
On the debt itself - this is around $9trillion and a few people far more qualified to discuss economics are having doubts on the ability to pay the interest on this debt - forget capital repayment. This is topic I'd guarantee you will hear more of shortly.
In the spring of 2002 (or may have been 2003), the US Treasury produced the most extensive report on the economy ever. It took 15 years to prepare. In simplified terms, it mean't (at that time) that 94% of all homes and the contents therein was debt. (This is obviously far higher now and probably a deficit). The Treasury recommendation as a solution to this problem was, quote, to "raise taxation immediately to 60% and hold this level for the foreseeble future". Of course, no politician could stomach proposing this to the electoral, especially when they were verbalising tax cuts in another attempt to stimulate the economy. So... that was hidden under the carpet, but, will have to be addressed at some future time.
On your claim of "Americans have lost no purchasing power at home" - this is clearly total fantasy and ludicrous. Oil prices are now $94/barrel and will increase further as the dollar weakens. All imported product will rise in price - manufacturers in other nations do not cover the losses of a weak currency. Shipment of product into the country will cost more - and this also, will be passed on to consumers.
There is no point in detailing what is obvious when any one "banker" has control of significant volumes of currency and where that banker can dump currency and cause dollar damage. The same risks apply to OPEC where they have, in effect, been supporting the US since around 1970 and are 'unofficially' rumbling over using another currency to replace the petro-dollar - the effects of that would be dramatic and doubt there would be *any* recovery.
So.. overall - from the comments in your post, you think this is simply a matter of an "overvalued" currency?? I don't think so :1orglaugh
