"Another day, another fall in the dollar" Guardian/UK

[TexasLawyer]

Another day, another fall in the dollar

The White House wants a strong greenback but the US deficit is weighing heavily

Ashley Seager
Wednesday November 29, 2006
The Guardian

The dollar came under pressure for the fifth day in row yesterday as further evidence of weakness in the world's largest economy emerged and as a key international body warned that the US economy was running out of steam.

Henry "Hank" Paulson, the US treasury secretary, reiterated on a visit to London that the Bush administration remained wedded to a "strong dollar" but this failed to stem the tide as dealers bet that the long-expected slump in the greenback's value had finally arrived.

Having recovered some lost ground late on Monday, the dollar set a fresh two-year low of just above $1.95 against the pound in hectic trading yesterday. There is widespread speculation that it could soon breach the $2 level - something it has not done for 14 years. It also slid to a 20-month low against the euro of $1.318. The US currency has now shed 11% of its value against the euro this year and 12% against the pound.

In reality, though, the dollar has been falling steadily for four years. On a trade-weighted basis against a basket of other currencies, it has lost nearly 31% of its value as fears over its giant current account deficit drag on the currency. A big deficit, caused by Americans consuming more goods from abroad than they export, theoretically pushes a currency down until imports become more expensive and exports cheaper, at which point the deficit is reduced. But the dollar has held up because big exporters to the US, such as China, have used their current account surpluses to reinvest in American assets, thus keeping demand for dollars high.

<snip>

http://money.guardian.co.uk/news_/story/0,,1959561,00.html

[UpInArms]

1. the millstone around the dollar's neck?

U.S. NATIONAL DEBT CLOCK

The Outstanding Public Debt is:



The estimated population of the United States is 300,339,516
so each citizen's share of this debt is $28,732.66.

The National Debt has continued to increase an average of
$2.03 billion per day since September 29, 2006

and for an historical perspective:

http://www.publicdebt.treas.gov/opd/opdpenny.htm

11/24/2006 $8,623,103,300,538.74
09/29/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/28/2001 $5,807,463,412,200.06
09/29/2000 $5,674,178,209,886.86

[Anakin Skywalker]

2. DELETED. DUPLICATE.

[Anakin Skywalker]

3. Good! Other Nations Should Call In The Debt Soon. 'Murkins Need Waking Up.

Why do Americans love borrowing so much? I don't understand that.

[Warpy]

4. You can't offshore the paychecks

Onshore the bills, and expect anything but a gargantuan trade deficit.

Oh, wait, you can also expect a lack of national security as key industries go bye-bye and you're utterly dependent upon the good graces of foreign countries and undisrupted trade routes.

Ha.

The system is unsustainable.

[AlamoDemoc]

5. Many writers outside of MSM have been talking about the meltdown of the dollar

Mike Whitney stands out....

'The Dollar's Full-System Meltdown'

By Mike Whitney

10/30/06 "Information Clearing House" -- -- The U.S. Dollar is kaput. Confidence in the currency is eroding by the day.

A report in The Sydney Morning Herald stated, “Australia’s Treasurer Peter Costello has called on East Asia’s central bankers to ‘telegraph’ their intentions to diversify out of American investments and ensure an ‘orderly adjustment’….Central banks in China, Japan, Taiwan, South Korea, and Hong Kong have channeled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down interest rates,’ said Costello, but ‘the strategy has changed.’”

(snip)

The central banks now want to reduce their USD reserves while trying to do as little damage to their own economies as possible. That’ll be difficult. If a sell-off ensues, it will start a stampede for the exits.

In September, we saw early signs that the dollar was in trouble. The trade deficit registered at $70 billion but the Net Foreign Security Purchases (NFSP) came in at a paltry $33 billion. That means that our main trading partners are no longer buying back our debt which puts downward pressure on the greenback. The Fed had two choices; either raise interest rates substantially or let the currency fall. Given the tenuous condition of the housing bubble and the proximity of the midterm elections, the Fed did neither.

http://www.informationclearinghouse.info/article15440.htm

[jordi_fanclub]

6. World's largest economy?

"The dollar came under pressure for the fifth day in row yesterday as
further evidence of weakness in the world's largest economy emerged and as a
key international body warned that the US economy was running out of steam."

World's largest economy in terms of what? GDP?
Let's see the "inside information" at the CIA's Factbook...

GDP (purchasing power parity):
United States $ 12,310 trillion (2005 est.)
European Union $ 12,180 trillion (2005 est.)
https://www.cia.gov/cia/publications/factbook/rankorder/2001rank.html

But the GDP (official exchange rate) is:
European Union $13.31 trillion (2005 est.)
United States $12.49 trillion (2005 est.)
https://www.cia.gov/cia/publications/factbook/fields/2195.html

The "curious" part is - maybe by an "error" - in this last table
the GDP (official exchange rate) cannot be presented by rank... :)

[UpInArms]

7. Welcome to DU, jordi_fanclub!

Glad to have you here! :hi:

[Stevious]

8. Thanks George W. Bush!

assclown.

[TexasLawyer]

9. We are near a 15 year low

US setbacks see dollar plunge to near 15-year low

By Ambrose Evans-Pritchard
Last Updated: 2:37am GMT 29/11/2006

The dollar tumbled to a near a 15-year low against sterling yesterday on fresh signs of economic trouble in the United States. An 8.3pc crash in US industrial orders and an admission by the Federal Reserve chairman that Washington does not know how bad housing really is set off another day of wild gyrations on the currency markets.


Ben Bernanke
The Federal Reserve chairman Ben Bernanke said
Washington did not know how bad a state the American
housing market was in.

US house prices fell 3.5pc to an average $221,000, the third month of declines. Stocks of unsold homes rose to 7.4 months' supply, the highest since 1993. The US consumer confidence index fell sharply to 102.9. The "truckers index" of tonnage shipped by US haulage companies was down 1.8pc in October, a leading indicator of contraction. Merrill Lynch called the fall "borderline recessionary".

The dollar continued its slide against the euro, dropping to $1.3194 after the Federal Reserve chairman, Ben Bernanke, said the housing slump "would be a drag on economic growth into next year". Mr Bernanke said official figures did not pick up the "sharp increase" in cancellations on house deals and might understate the inventory glut.

"Any significant effect on consumer spending arising from further weakness in housing would have important implications for the economy," he said.

<snip>

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/11/29/cndollar29.xml

[TexasLawyer]

10. Drudge Report

http://www.drudgereport.com/

I just noticed that the latest Drudge Report links this article with a big banner headline. Maybe MSM will cover it now.

[tom_paine]

11. But...but...Her Bushler says Weakness is Strength

Aren't outsourcing and the weak dollar both WONDERFUL economic signs?

According to Bushler...they are.

[modrepub]

12. Revise GDP up

Raise the GDP and say "see things aren't that bad". Watch the foreign capital come back (dollar go up). Need interest rates to go down to save the housing market? Simple, revise GDP down and show a slowing economy. Anyone see a pattern here? What happens when you need both at once?

I guess this can keep working as long as no one still has faith in the numbers....