Declining $$

[Seito4Counter]

So with the U.S. Dollar at record lows against the Euro, what is your opinion about 1. Why it fell, 2. Why it is still losing value, 3. What can be done to help the dollar recover?

 

[vat_man]

Maybe if your economy stopped running such enormous current accout deficits, it might improve - but there's no prospect of that in the short to medium term.

 

[Danoff]

The dollar has been in decline with respect to last year's dollar pretty much since the dollar was invented - it has to be, deflation would be very very bad.

I'm not much of an economist but I would say that inflation is low with respect to history, so if it's not quite as low as the inflation of the euro, what do I care?

Maybe someone with an economics background can help me out here but this doesn't seem like a big deal to me.

 

[emad]

it sort of is a big deal because, as example, about 8 or so years ago, the Canadian dollar was worth something like $1.20 per $US. Over time, the exchange rate between our countries went to $1.65. In less than 3 years, we've gone from $1.65 to $1.3 and it is continually improving. The trend also has been that whenever the Exchange rate is close, American companies don't buy goods from us (in many cases, buying from Canada is much cheaper) and occassionally, the government will put tarrifs on our goods (namely lumber) in order to prevent companies from buying from Canada. That sort of helps boost American industries (that IS what everyone wants, right? Have their country do more business internally?) and bring the exchange rates back in check (I'm not sure if they do this to other countries as well but Canada gets affected by it constantly)

That can't JUST be inflation causing the US Dollar to drop and it can't JUST be the Canadian economy improving because things up here haven't changed all that much...

 

[Seito4Counter]

i think its kind of dangerous particularly because if industries get worried and switch from dollars to euros it can create a snow ball effect and then you have some inflation..(this namely happened recently with oil and japan)

 

[Mike Rotch]

Well if I havent forgotten my international trade lectures...

As I see it, it is supply and demand. Yesterday Greenspan said he would not be increasing interest rates in the US anytime soon. The result was a weakened dollar. As I see it, non-US investors wanted a higher interest rate return on any funds they invest in the US. As interest rates are so low in the states, and not so in Europe ( both in real terms), money will flow to where it earns the highest return.

Thus there is lessened demand for $ and increase demand for Euro's. Increased supply of $ on the international money market means weakening of the $ v other ex-rates, and conversely, strengthening of the Euro. As other currencies take their lead from the Euro (via complex relationships), the trend is self supporting.

Personally, it benefits me in the form of lower gas prices and lower interest rates 👍

 

[vat_man]

That's basically it, Mike - although nowadays with hedge funds increasingly being pressured to become profit centres for banks and other financial institutions, there is a bit more of a speculative angle to it as well, so currencies tend to reflect medium term opinions on economic affairs of countries.

Danoff - you're getting inflation confused with foreign currency.

 

[TurboSmoke]

Personally, it benefits me in the form of lower gas prices and lower interest rates 👍

and also it benefits people who want to holiday there...the flights are cheap and your British pound almost gets you 2 Dollars these days..

 

[Jay]

i am going to the US soon so it will benefit me, the US dollar is looking much better against the AUS dollar now aswell

 

[Danoff]

Danoff - you're getting inflation confused with foreign currency.

Don't see how that's the case.

The trend also has been that whenever the Exchange rate is close, American companies don't buy goods from us (in many cases, buying from Canada is much cheaper) and occassionally, the government will put tarrifs on our goods (namely lumber) in order to prevent companies from buying from Canada. That sort of helps boost American industries (that IS what everyone wants, right? Have their country do more business internally?) and bring the exchange rates back in check (I'm not sure if they do this to other countries as well but Canada gets affected by it constantly)

Yea.... they bring the exchange rates back in check. I still don't think it's a big deal.

 

[Seito4Counter]

Originally posted by Mike Rotch
Well if I havent forgotten my international trade lectures...

As I see it, it is supply and demand. Yesterday Greenspan said he would not be increasing interest rates in the US anytime soon. The result was a weakened dollar. As I see it, non-US investors wanted a higher interest rate return on any funds they invest in the US. As interest rates are so low in the states, and not so in Europe ( both in real terms), money will flow to where it earns the highest return.

Thus there is lessened demand for $ and increase demand for Euro's. Increased supply of $ on the international money market means weakening of the $ v other ex-rates, and conversely, strengthening of the Euro. As other currencies take their lead from the Euro (via complex relationships), the trend is self supporting.

Personally, it benefits me in the form of lower gas prices and lower interest rates 👍

wow that was a really good explanation Cheers.

 

[milefile]

It's not important. All it means is that foriegn goods and services will be more expensive in America, and American products are more affordable to other countries. It's pretty much a win-win situation either way. It's not a sign of something bad looming at all. Take a look at Argentina.

 

[Seito4Counter]

.. I dont want goods to be more expensive in america..Also something like this shouldnt be ignored, these are record lows

i hate this view that because america is wealthy its impervious to decline.. its sort of victorian..

 

[emad]

what's cool is that currently, it's cheaper for me to buy electronics from the US than it is from even the cheapest stores up here

 

[milefile]

Originally posted by Seito4Counter
.. I dont want goods to be more expensive in america..Also something like this shouldnt be ignored, these are record lows

i hate this view that because america is wealthy its impervious to decline.. its sort of victorian..

What? Who's ignoring it? Did anyone even so much as mention that America is impervious to decline? Victorian?

 

[1X83Z]

Originally posted by vat_man
Maybe if your economy stopped running such enormous current accout deficits, it might improve

Yeah, well maybe if your economy stopped calling ours names, ours might accomplish some things.

Jeeze.

Did anyone even so much as mention that America is impervious to decline?

Not here, not ever, and it's not an intelligent viewpoint.