The dollar is TANKING. I don't care let the MFer burn. Burn MFer Burn.

[MikeG]

http://news.yahoo.com/news?tmpl=story&cid=568&u=/nm/20041105/bs_nm/markets_forex_euro_dc_2&printer=1

[HughBeaumont]

1. Euro will be the new standard of world currency.

At the rate our currency is going, the Canadian side of Niagara Falls won't look as good a buy a couple of years down the road.

Canadians - not a knock on you. Your side is much cleaner and more entertaining.

[fob]

10. Wait til the dollar is replaced as the currency that oil is traded in and

buh-bye US economy. That's why Kerry "couldn't" be prez, his plan to create an entire new industry to address foreign oil dependency by inventing our way out of the coming crisis would leave too many bush*co dons without their power and leverage.

[Shadoobie]

2. Not an economist

This administration clearly does not care either, which begs the question: Who benefits and who is harmed by this and why should we care?

Greg

[htuttle]

5. It will lead to inflation in a couple of different ways

Worst case, the country turns into Argentina. That's worst case, although it is where we seem to be heading.

[eataTREE]

6. I only really know about this from the other side.

I lived in Canada for most of my life. Historically, the Canadian dollar was very weak compared to the American dollar, about 1.5:1. Now of course that's changing, with many analysts predicting the loonie to reach parity with the dollar within a year. That would have been unthinkable 5 years ago.

Basically, having a weak dollar makes it harder for you to buy other countries' stuff, and easier for other countries to buy yours. This is good when your economy is based around selling your stuff to other countries, as Canada's is with its plentiful exports.

However, as I understand it, the American economy is the other way around: it buys much more stuff from other countries than it sells to them. In this case, having a strong national currency is good, because it increases your purchasing power abroad. When the American dollar falls, each dollar now buys less stuff from China and Taiwan.

Having a weak dollar is bad for companies that have foriegn subsidiaries. The Canadian branch of FooCo USA, Inc. is funded with American dollars from home office. However, it pays out its costs -- its rent to the Canadian landlord, salaries to Canadian employees, etc -- in loonies (Canadian dollars). When the loonie is worth a lot less than the dollar, this is a great situation for FooCo. But as the two currencies approach parity, the situation becomes much less advantageous.

Anyone who knows more about economics than I do (which is pretty much anyone who knows anything about economics at all), please chime in.

[Shadoobie]

3. Not an economist

This administration clearly does not care either, which begs the question: Who benefits and who is harmed by this and why should we care?

Greg

[sweetheart]

9. who benefits and who is harmed

The dollar devaluation, was surely suspended during the election, and
now that the free-unfettered spenders have taken the poll, the markets
will continue to correct the dollar to account for the actual balance
of trade with the USA.

The problem, is that much of the reason the dollar IS a reserve
currency to start with, is that it has held its value over the long
term... and it is this very factor changing that will further dry
up dollar accumulation, as investing in the USA, whilst it might
pay a good return, is erased by the currency depreciation.

So as the currency depreciates, the cost of capital inside the US
will rise. This means that interest rates will go up, as fewer
investors will be willing to risk investing in a currency that is
declining. This risk premium of fiscal irresponsibility has a
ripple impact, as there is then less investment for new businesses,
new jobs and whatnot.

Some might say that a reduced dollar makes american goods cheaper..
and that might have some relevance if anybody bought ameircan goods.

Trade between nations is always balanced. The total amount going one
way across the ocean is balanced by a similar amount going the other.
However, the reality is that the amounts change over time, and to
make them equal financial markets adjust currency values. So whilst
there is a trade deficit, the outside world has been buying american
paper to keep the spending spree afloat... and as that dries up,
the dollar is being pinched down to correct. Then as it falls, the
outside world's investment's in dollars are less valuable, and
a demand for higher returns cuts the amount of investmnet, and this
further knocks on the dollar's value, and increases interest rates.

If your mortgage rate were 20%, then "who is harmed?" When
unemployment rises due to falling investment, "who is harmed?" When
goods and services costs rise, to cover the higher cost of borrowing,
then "who is harmed?"

It might help to do some reading up on who was harmed in the
currency collapses of argentina, mexico, russia, south korea,
thailand and indonesia this past decade... (short answer:
the economic lower classes)

[terrya]

4. In this climate, I'm not surprised if some want us to back...

to the gold standard.

I agree. Let it sink.

[eataTREE]

7. I mostly know about this from the other side.

I lived in Canada for most of my life. Historically, the Canadian dollar was very weak compared to the American dollar, about 1.5:1. Now of course that's changing, with many analysts predicting the loonie to reach parity with the dollar within a year. That would have been unthinkable 5 years ago.

Basically, having a weak dollar makes it harder for you to buy other countries' stuff, and easier for other countries to buy yours. This is good when your economy is based around selling your stuff to other countries, as Canada's is with its plentiful exports.

However, as I understand it, the American economy is the other way around: it buys much more stuff from other countries than it sells to them. In this case, having a strong national currency is good, because it increases your purchasing power abroad. When the American dollar falls, each dollar now buys less stuff from China and Taiwan.

Having a weak dollar is bad for companies that have foriegn subsidiaries. The Canadian branch of FooCo USA, Inc. is funded with American dollars from home office. However, it pays out its costs -- its rent to the Canadian landlord, salaries to Canadian employees, etc -- in loonies (Canadian dollars). When the loonie is worth a lot less than the dollar, this is a great situation for FooCo. But as the two currencies approach parity, the situation becomes much less advantageous.

Anyone who knows more about economics than I do (which is pretty much anyone who knows anything about economics at all), please chime in.

[Robert Oak]

8. gotta love *'s economic policy

"let the dollar fall to help the trade deficit"

interpretation: Let the standard of living in the US decline to
come into equilibrium with our new 3rd world trading partners.