DOLLAR FALLS - Does this scare you as much as it scares me? Opinions please.

[BigBearJohn]

Dollar Falls as Concerns Grow About Economy

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November 24, 2006
Dollar Falls as Concerns Grow About Economy
By JEREMY W. PETERS and CARTER DOUGHERTY

The dollar dropped sharply against a broad range of major currencies today,
and the euro broke through the $1.30 mark for the first time in a year and
a half, highlighting concern about the strength of the American economy.

A number of factors, including slower growth and the multibillion-dollar
trade deficit, put the American economy in a vulnerable position compared
with its global competitors. While the most recent data show that the trade
gap tightened in September, the decline was largely due to falling oil prices.
The trade deficit was $586.2 billion for the first nine months of the year,
and it remains on track to break last year’s record of $716.7 billion.
The biggest chunk by far represents imports from China.

Analysts said that the dollar’s drop today reflected a growing anxiety over
Chinese economic policy. China’s central bank holds a large amount of
American currency, and begin selling off dollars to avoid being burned if the dollar collapses.

Also lurking behind the dollar’s depreciation is the rising probability, in the
view of some economists and currency investors, that a weakening American economy
will force the Federal Reserve to begin cutting borrowing costs next year.
(emphasis added)

Source: http://www.nytimes.com/2006/11/24/business/24cnd-econ.html?ei=5094&en=d93b69f8292d1df2&hp=&ex=1164430800&adxnnl=1&partner=homepage&adxnnlx=1164402686-aZ0q/ZAdmkaelOfvURCApw&pagewanted=print

[ChairmanAgnostic]

1. a bunch of positives, actually.

oil prices rise - meaning conservation becomes cheaper by comparison
import prices rise - meaning we will wean ourselves off the Walmart disease
exports rise - meaning more employment here
the amount of money china owns falls - meaning that they will quit investing in our debt, and force us to cut useless military spending.

[screembloodymurder]

3. I'm putting some of my money in a currency ETF.

Therefore the dollar will rise from this point forward.

[DemBones DemBones]

17. LOL, you're probably right! But I'm planning

to do the same. "Sound as a dollar" is a phrase of the past, like "American made" or "Mom and Pop store."

[jannyk]

25. Not before Jan 15th it won't

that's when I get back from Paris :(

[Warpy]

6. I agree about the positives, but they come at a very high price

This is going to slam people who are already in a precarious economic situation with at least double digit inflation. People who had counted upon an expensive home seeing them through their retirement years either through its sale or via a reverse mortgage are going to be in real trouble. Remember, the list of things we no longer make are the bread and butter items like cloth, clothing, shoes, agricultural and construction machinery, most electronics and most tools. Even the spare parts for our cars are from overseas.

As for weaning ourselves off Walmart, that isn't going to happen. Sleazy foreign made goods wear out very quickly and the only place people are going to be able to afford replacing them is (tada) Walmart.

Mid level retailers, on the other hand, are going to start going under as more and more people fall out of the population able to spend money at a mall instead of a discount store.

Remember, as the money supply becomes inadequate and hard choices need to be made in favor of economy, the fewer choices people still in decent economic shape will have to select from. Supermarkets will drop that pricey out of season asparagus and stock more turnips and squash, for instance. Mid level retailers will be restricted to the largest cities.

There is always a tremendous lag between inflation and the wage levels needed to cope with it. Witness the fact that the average wage still hasn't come anywhere near the purchasing power of the pre oil shock wages of 1970.

This is going to hurt a lot of people long before it helps any of them.

The one certainty is that a government unable to find a sucker to buy its debt will have to start looking for places to cut. You know what they always want to cut first, anything that goes to human beings. I doubt any pol will want to stop the gush of money into the black hole known as the Pentagon.

[matt819]

21. Watch these generalizations

I have a small business selling products manufactured in Europe. It doesn't matter what the products are other than to note that they are not manufactured in the US, and I refuse to buy their Asian knock-offs. My costs are skyrocketing. For the moment, my selling prices are not. You do the math. This is not a good thing for businesses like mine. True, they are super for exports, and there is a tremendous benefit to Walmart and such, but keep in mind the impact on other businesses, even blue ones.

[ChairmanAgnostic]

23. any generalization is a poor substitute for reality, esp. in a case like yours.

Of course the respublicanistas just love to generalize and instruct.

[OzarkDem]

33. Agree, we aren't exporting much

because we aren't producing much.

It makes the cost of imports higher, which results in higher prices for consumers and inflation - with all the fun that brings.

[tsuki]

34. I started getting things from Canada to offset the high price of

European imports. Good quality, lesser price. It has helped sales.

[Vitruvius]

40. MORE ARTICLES -- WITH LINKS

Dollar falls to 19-month euro low, 2 1/2-month yen low: http://www.marketwatch.com/news/story/dollar-slumps-19-month-euro-low/story.aspx?guid=%7BB1219ADF%2DA78D%2D47C8%2DB692%2D8DE0FB576697%7D&siteId=

What a Week: Dollar Dilemma: http://www.thestreet.com/_dm/markets/marketfeatures/10324137.html

Dollar's Dive Drives Gold: http://www.thestreet.com/markets/commodities/10324098.html

Dollar Bears May Be Overreaching: http://www.thestreet.com/markets/commodities/10324098.html

[petgoat]

43. Another positive

As WalMart crap becomes more expensive, it will become less attractive.

People will start repairing old stuff instead of throwing it away and
buying new. Experience in repairing stuff will help teach people to
distinguish well-made stuff from crap, and to evaluate the repairability
of stuff they do buy.

Entrepreneurial opportunities in repairing and rebuilding old stuff will
increase.

An example: higher prices on new cars will stimulate the remanufacturing
of old Lexuses, Mercedes, Range Rovers, Volvos and BMWs.

Maybe people will even start repairing TVs, stereos, and radios again?

Maybe America can recover some of that good old-fashioned "yankee ingenuity"
and "can-do spirit" and "roll up your sleeves" attitude.

[Mr_Geodesic]

2. Correction (not quite as scary)

"China’s central bank holds a large amount of American currency, and speculation has intensified recently that it could begin selling off dollars to avoid being burned if the dollar collapses."

[dipsydoodle]

5. One of the problems

is that of they did so then an accelerated dollar slide could become a self fulfilled prophesy.

[Cleita]

4. This is not good for retirees like me.

If the value of our nest eggs drop, we can't make up the difference. Funny, I shocked the family over thanksgiving telling them I wanted to buy euros.

[CTyankee]

9. How do you do that? I just returned from Italy and was burned

by the dollar's low buying power compared to the euro.

Where do you go to buy euros? What do you do with them when you buy them; keep them at home? How do you plan to redeem them? I don't know of a bank in my home city (New Haven CT) that will sell/buy them.

[Cleita]

11. I haven't thought it out, but I have family in Ireland through

marriage. I thought I might research the possibility there first.

[diamidue]

15. euros

We were in Italy this summer and before leaving, we ordered several hundred Euros thru AAA on-line. They were delivered to our door a couple of day later. We also ordered some Euros and other currencies on-line thru Wells Fargo Bank. One of these sources gave us an envelope to return any unused currency for a refund in US dollars - forget which one. I've been thinking about ordering some more. If nothing else, we can use it on our next trip abroad or sell it to someone else going. Biggest setback is that there is a decent sized processing fee tho.

[CTyankee]

37. Thanks. That's good to know. I forget how much in euros you can

take home from abroad, but there was a limit. I didn't think to bring home a lot because when I go to Europe next year, I am counting on there being plenty of ATM machines around and they seem to charge the lowest fees, compared to an exchange in a bank or by using traveler's checks (which the Italians don't want to take; I don't know about other Europeans).

[rockymountaindem]

41. Don't confuse currency depreciation with inflation

It's not necessarily that the value of the dollar is falling within the US (from inflation) but that other currencies are more valuable compared to the US dollar. The problem you might be facing is that imported goods you buy (say, a TV from Japan) will become more expensive, and that foreign travel will be more expensive as well.

[MidwestTransplant]

7. Its because the market doesn't expect any more fed raises

It's probably a good thing in in as much as the fed doesn't reaise unless of course it REALLY tanks.

[Tellurian]

8. The way I'm reading it..

This summer the Euro and the dollar were just about even.
Now the Euro has increased it's value against the dollar by 30%.

As we stand on the edge of a precipice brought on by the continuation of the Iraq War.
China being the biggest stake holder of American dollars, (our debt with them being in
the Trillions of dollars) is in a position to push the US economy over the edge, if they
continue to flood the market with American dollars.

nice!

[BigBearJohn]

10. that's the way I see it too. That's what scares me.

[Massacure]

12. China olds 342 billion dollars of treasury securities

Japan is our biggest foreign holder with 639 billion. The U.K is third with 207 billion. Total foreign holdings of treasury securities is about 2.1 trillion dollars. Americans hold the other six or so trillion.

edit:

link: http://www.treas.gov/tic/mfh.txt

[Cleita]

13. Well, historically, the way the Weimar Republic of Germany

were able to cancel a large part of their debt after WWI, was the devaluation of the Mark rendering the debts almost worthless to the debtor. The downside of it was that a lifetime's savings of the ordinary German became so worthless it couldn't buy a weeks worth of food.

I'm afraid this could happen to us if some wiser heads don't prevail and undo this Bush mess before it gets that drastic. I know most of us in the lower enchelons of the economy will probably be the ones to lose out the most.

:-(

[Tellurian]

16. Agreed-

The thing of it is, I'm a sore loser. I hate losing money if I don't have to.
So, I guess my question is, how do we protect ourselves from the government's
control of the dollar?

[Cleita]

20. I don't think it's the government's control that I worry about.

My problem is how do we get special interests from dipping into our Treasury and putting us into unreasonable debt. I mean the next time we get a surplus to actually run our country as it should be run how do we put all that money into trusts to be used for their intended purpose that can't be broached, Al Gore's lockbox if you will?

[durtee librul]

26. awwww geeee

and here I thought dubya told me OBL was going to get me and make us amerikans go under.....

[fishwax]

28. The euro and the dollar were nowhere near even this summer

(In fact, they haven't been even for a long time.) This summer the euro hovered around 1.25. It was up at 1.27 in May, so the increase isn't nearly as severe as that. (whew!)

[Jcrowley]

14. M3

This is a classic case of "ignore what they are saying, because what they are doing is speaking so loud:" While the Federal Reserve has been reporting rather flat money supply growth in M2 (blue line), in reality they have been dramatically increasing the cash (red and blue line) available for speculation.



Hence, that sloshing sound you heard. They have been providing the fuel for the rally, the huge M&A activity, the explosion in derivatives -- even the eye popping Art auctions are part of the shift from cash to hard assets. It is just supply and demand -- print lots of lots of anything, and that thing becomes increasingly devalued. It works the same for cash as it did for Beanie Babies.

Its not just the increase in Money Supply that should be concerning to investors -- its the misdirection about it. If Money Supply matters so little, as Fed Chair Bernanke has been out explaining to anyone who will listen, why pray tell has the Fed been working those printing presses overtime?

Given M3 increases, its no wonder the European Central Bankers laughed at the suggestion.

http://bigpicture.typepad.com/comments/2006/11/the_return_of_m.html

[ayeshahaqqiqa]

18. I think the fall of the US Economy is inevitable

and the rise of the economies of India and China something that is already happening. No, I'm not investing in other currencies or gold-you have to have something to invest to do that! :)

[bridgit]

19. i only get concerned when the chinese get concerned...

[BlooInBloo]

22. Are you equally heartened when the dollar rises? Or...

... are you scared shitless no matter *what* happens?

[BigBearJohn]

27. What kind of a question is that? Are you trying to insult me?

[applegrove]

24. American workers become more competative. There is inflation risk.

Canada had a low dollar in the first few years of Nafta and our job situation improved.

[CK_John]

29. China is highly overrated as an economic power. IMO China is

about to implode. Every week we read (bbc mostly) about polluted rivers, village riots over land acquisition by corrupt regional managers, coal mine deaths, the have not rioting over the position of the haves, the on again off again flow of the internet, unrest over the one dog policy, the youth vs the elders, etc.

[Odin2005]

39. I agree. IMO Latin America and India will be the new movers and shakers 50 years from now

The US will still be a Great Power, it just won't be the Hegemeon anymore. China looks like it is going to implode into civil war within the next 30 years.

[upi402]

30. I bought a little gold and directed 100% of my stocks to foreign co's

America will take many nations down with her, should the crash be as hard as I suspect.
I have zero loyalty to American corporations who have disdain for American workers and America herself.

[vssmith]

32. Have you looked at GLD, an exchange traded gold fund?

[sweetheart]

31. slow, long and firm

Lilliput's ropes tighten on gulliver, one currency tick at a time.

[JNelson6563]

35. One thing to watch

Treasury note auctions. If those don't go well than you know there is a real pull back and have good reason to be afraid.

Julie

[GETPLANING]

36. China does not want the US economy to collapse.

They are trying to balance protecting themselves through diversification and preventing a global depression if the US economy collapses. Hard times are ahead, but I don't think it will be a catastrophe.

[lumberjack_jeff]

38. Their investments give them veto authority over US policy. n/t

[rockymountaindem]

42. Hardly

They need us as much or more than we need them.

[LittleClarkie]

44. Timing sucks

It's the DEMS!! They did it! They're not even in office yet and they're driving our economy down! That lovely economy that was thriving under Bush is already dying now that the Dems are in!

:sarcasm:

[gulliver]

45. I hedged against it by buying foreign assets.

Once I see the Bush Administration's lax oversight of our business environment improve, I will start to think about buying U.S. again. I expect that to happen when Bush and Cheney leave Washington in January 2009 (hopefully in a fresh new coat of tar and feathers). If we get a Dem administration in 2008, I think there will be a giant sucking sound as partial credibility of the U.S. business environment returns in short order. It's already looking pretty good with people like Waxman there to police the malfeasance and incompetence of Bush and the pack of corrupt pigs he feeds.

So far I have been extremely happy with the performance of my foreign mutual funds. It sucks, because I want America to prosper. But I'm damned if I'm going to watch a bunch of pitiful, ignorant, misinformed suckers vote in a bunch of thieves and leave my money out there to be mismanaged and stolen.

[Bigmack]

48. My Fidelity Canada fund...

Up over 50% since Dumbya's 2004 theft.

(singing) O Canada..
Our home and native land!
True patriot love in all thy sons command.

With glowing hearts we see thee rise,
The True North strong and free!
- - - - -
I've even learned the language... eh!

[spillthebeans]

46. Cheney is happy

Is Cheney Betting On Economic Collapse?

Wouldn't you like to know where Dick Cheney puts his money? Then you'd know whether his "deficits don't matter" claim is just baloney or not.

Well, as it turns out, Kiplinger Magazine ran an article based on Cheney's financial disclosure statement and, sure enough, found out that the VP is lying to the American people for the umpteenth time. Deficits do matter and Cheney has invested his money accordingly.

The article is called "Cheney's betting on bad news" and provides an account of where Cheney has socked away more than $25 million. While the figures may be estimates, the investments are not. According to Tom Blackburn of the Palm Beach Post, Cheney has invested heavily in "a fund that specializes in short-term municipal bonds, a tax-exempt money market fund and an inflation protected securities fund. The first two hold up if interest rates rise with inflation. The third is protected against inflation."

Cheney has dumped another (estimated) $10 to $25 million in a European bond fund which tells us that he is counting on a steadily weakening dollar. So, while working class Americans are loosing ground to inflation and rising energy costs, Darth Cheney will be enhancing his wealth in "Old Europe". As Blackburn sagely notes, "Not all bad news' is bad for everybody." <snip>

http://www.counterpunch.org/whitney07052006.html

[Nikki Stone1]

47. kick and recommend

:kick: