Notices
Results 1 to 18 of 18

Thread: the weak dollar, a problem?

  1. #1 the weak dollar, a problem? 
    Forum Professor Pendragon's Avatar
    Join Date
    Jan 2005
    Location
    Nederland
    Posts
    1,085
    2004 was the year of the weak dollar (relative to the Euro and Yen). Will this be a longterm problem, or just a minor fluctuation? Or is it no problem at all?

    And I wonder, how strong is the connection between high US debts and a low dollar?


    Reply With Quote  
     

  2.  
     

  3. #2 Re: the weak dollar, a problem? 
    Forum Isotope (In)Sanity's Avatar
    Join Date
    Oct 2004
    Location
    Mesa AZ
    Posts
    2,699
    Quote Originally Posted by Pendragon
    2004 was the year of the weak dollar (relative to the Euro and Yen). Will this be a longterm problem, or just a minor fluctuation? Or is it no problem at all?

    And I wonder, how strong is the connection between high US debts and a low dollar?
    Hmm, well China has their currency linked to the dollar. Also many foreign investors in the US are being hurt by the low dollar. I think the problem is temporary. The US debt I blame mainly on the current administration, however not 100%.


    Reply With Quote  
     

  4. #3  
    Forum Ph.D.
    Join Date
    Feb 2005
    Location
    Dublin, Ireland
    Posts
    945
    i blame the commies! them and there foolish ideas...

    and i've said it before and i'll say it again... euro kicks ass, (except steriling.. we suck on that front)
    Stumble on through life.
    Feel free to correct any false information, which unknown to me, may be included in my posts. (also - let this be a disclaimer)
    Reply With Quote  
     

  5. #4  
    Forum Professor Pendragon's Avatar
    Join Date
    Jan 2005
    Location
    Nederland
    Posts
    1,085
    Maybe the old value of the dollar was just unnaturally high. The US did have a rough time in the '70s, but on general the last decades where pretty good in a macro-economic sense. Europe had a pretty deep recession in the '80s and early '90s, while China was not on the map. So the old, high value of the dollar was only a normal value in the situation of a strong US economy in the face of weak competition.

    Still I wonder whether there's such a strong connection between currency value and economic strength. For example, the Euro has a very high value recently while we're not doing so spectacularely well.
    Reply With Quote  
     

  6. #5  
    Forum Freshman
    Join Date
    Apr 2005
    Posts
    36
    Well, at least a weak dollar will increase foreign demand for U.S. exports.

    *shrug* Probably one of the good side effects.
    Sciforums Refugee.
    Reply With Quote  
     

  7. #6 Administration 
    JX
    JX is offline
    Forum Junior JX's Avatar
    Join Date
    May 2005
    Posts
    288
    Low dollar is definetly a problem, especially because we have no hope of fixing it for at least the next 3 years with the current administration in place. They are not even admitting that there is a problem with the dollar and they have no course of action. Of course neither do the Dems so I guess we are just screwed...
    Reply With Quote  
     

  8. #7  
    Forum Freshman
    Join Date
    Apr 2005
    Posts
    59
    Our current war is funded by debt. Therefore, we are not currently paying for the war, but increasing our debt.

    The dollar gained strength within the last year, but in the past few months, the value of the dollar has been declining back to the state it was a year ago.
    The strongest currencies are the dollar, euro, GBPound, and yen.
    Considering the size of Japan and Great Britan, this is an amazing feat for both of those countries.
    Whereas 200 years ago, America declared independence from British tyranny, the people of Great Britan have been experiencing increasing freedom. They are more democratic than ever before.
    The Japanese is too small a country to ever surpass the US. There economy is in a low right now, but they remain steady. They are the size of a single state, but they still hold heavy ground in the fincancial market.
    They still adjust their currencies to keep it level with the market.

    China is a huge consideration this year. I have been under the opinion that they will go ahead with the reevaluation of their Yuan. Many strategists had predicted that they would not do so because such a move would leave 200 million people unemployed. It just sounds to me like these strategists do not know how to think like a communist. I personally believe that the Yuan will be adjusted. Today, even Greenspan announced what that there is a good possiblilty that this will happen. This announcement threw the world market in the opposite direction.
    Reply With Quote  
     

  9. #8  
    Forum Freshman Undecided's Avatar
    Join Date
    Jul 2005
    Location
    Toronto
    Posts
    42
    China is a huge consideration this year. I have been under the opinion that they will go ahead with the strategists do not know how to think like a communist. I personally believe that the Yuan will be adjusted.

    The communist party of China for all intents and purposes is not Marxist anymore, nor is it a capitalist state it is a mercantilist state like most other states in East Asia meaning it in not only in their economic interests to keep the Yuan low, they have a vested interest in maintaing a trade surplus, as what is known to all is that a trade surplus raises the value of the currency, so the Chinese to remain competitive against other low wage nations has to maintain a low Yuan which accounts for a large portion of her competitiveness. China is now in a "Bretton Woods informal agreement" with the US, the Chinese keep their Yuan low, which causes deflation in the US which offsets the stagnate real wages for most Americans, which in turn allows for billions of FDI to flow into China, which China sells to the US, who in turn buys American treasuries bills and bonds. Revaluing the Yuan would damage both economies at this stage as it would mean Chinese goods are more expensive, and the Chinese would not be in a position any longer to buy all those T-Bill's and Bonds. I do not see the Yuan revaluing for a while to come, US pressure is not phasing China. So keep those pants on...the world economy no longer exists in textbooks.
    Reply With Quote  
     

  10. #9  
    Forum Freshman
    Join Date
    Apr 2005
    Posts
    59
    I'm not talking about text books. You fail to understand that China doesn't really give a damn. They will do what is in the best interest of the overall economy at the expense of the individual.
    Reply With Quote  
     

  11. #10  
    Forum Freshman Undecided's Avatar
    Join Date
    Jul 2005
    Location
    Toronto
    Posts
    42
    Quote Originally Posted by cool skill
    I'm not talking about text books. You fail to understand that China doesn't really give a damn. They will do what is in the best interest of the overall economy at the expense of the individual.
    Where did I suggest otherwise? I am well aware of China's position, she knows that her economy relies on exports, and at that the US market. So she must give a damn about others if she gives a damn about herself, that is why China's rise can be quite beneficial. No one is suggesting altruism is the motive...
    "A conservative government is an organized hypocrisy."

    -Benjamin Disraeli
    Reply With Quote  
     

  12. #11  
    Forum Freshman
    Join Date
    Apr 2005
    Posts
    59
    It is not in the best interest of the Chinese economy overall to revalue the Yuan. It is in the best interest of the dictators. Therefore, they will revalue it according to their best interest at the expense of the country as a whole.


    Take any country even the US. It is not in the best interest of the environment of any country for motor vehicles to exist. If built correctly to eliminate motor vehicles and therefore large roads, our communities would progress at a relatively skyrocketing rate. But society does not wish to eliminate motor vehicles because of worthless attachments to an ineffective transportation system that kills more people each year than all wars combined since the US independence. Why? Because it would be too much effort for those in control.
    Reply With Quote  
     

  13. #12  
    Forum Freshman
    Join Date
    Jun 2012
    Posts
    59
    The dollar is on the verge of collapse. A run on the dollar could see the Federal Government spending hundreds of billions to stop several major banks going to the wall.
    Reply With Quote  
     

  14. #13  
    Moderator Moderator
    Join Date
    Apr 2007
    Location
    Washington State
    Posts
    8,416
    Quote Originally Posted by TimeLord View Post
    The dollar is on the verge of collapse. A run on the dollar could see the Federal Government spending hundreds of billions to stop several major banks going to the wall.
    A run by whom? Most of the debt is held by Americans--in the form of other government agencies (e.g. social security) or directly through bonds and whatnot. And I agree with Undecided, China is so locked and intertwined with the American economy that they are quite unlikely to start anything drastic.
    Meteorologist/Naturalist & Retired Soldier
    “The Holy Land is everywhere” Black Elk
    Reply With Quote  
     

  15. #14  
    Time Lord
    Join Date
    Mar 2007
    Posts
    8,035
    Quote Originally Posted by Undecided View Post
    China is a huge consideration this year. I have been under the opinion that they will go ahead with the strategists do not know how to think like a communist. I personally believe that the Yuan will be adjusted.

    The communist party of China for all intents and purposes is not Marxist anymore, nor is it a capitalist state it is a mercantilist state like most other states in East Asia meaning it in not only in their economic interests to keep the Yuan low, they have a vested interest in maintaing a trade surplus, as what is known to all is that a trade surplus raises the value of the currency, so the Chinese to remain competitive against other low wage nations has to maintain a low Yuan which accounts for a large portion of her competitiveness. China is now in a "Bretton Woods informal agreement" with the US, the Chinese keep their Yuan low, which causes deflation in the US which offsets the stagnate real wages for most Americans, which in turn allows for billions of FDI to flow into China, which China sells to the US, who in turn buys American treasuries bills and bonds.
    I don't think China is going to have a choice as to whether or not to revalue the Yuan. They can't simultaneously keep an unequal trade balance with the USA , and a favorable currency exchange forever. That's like trying to completely block a river, or filling a balloon with an unlimited amount of air. There's a natural market force at work here, which should drive the price of Yuan upward.

    The only way to overcome that natural market force is if the USA keeps continually selling them T-Bills. The T-bills act like goods and services to balance the exchange rate (as though an equal amount of goods and services were being traded.) But..... they're not goods and services. They're IOU's.

    Revaluing the Yuan would damage both economies at this stage as it would mean Chinese goods are more expensive, and the Chinese would not be in a position any longer to buy all those T-Bill's and Bonds. I do not see the Yuan revaluing for a while to come, US pressure is not phasing China. So keep those pants on...the world economy no longer exists in textbooks.
    Chinese goods are "inferior goods", so there is a chance that if their price raises just slightly, they'll actually sell more of them because the increased price crowds out the budgets of consumers so they can't afford as many "superior goods" from elsewhere.

    If so, then the trade balance will get worse, and that would hasten the revaluing. That would be a good time to have some Yuan in your portfolio - and a good time to sell them before China's economy collapses.
    Some clocks are only right twice a day, but they are still right when they are right.
    Reply With Quote  
     

  16. #15  
    Moderator Moderator
    Join Date
    Apr 2007
    Location
    Washington State
    Posts
    8,416
    I don't think China is going to have a choice as to whether or not to revalue the Yuan. They can't simultaneously keep an unequal trade balance with the USA , and a favorable currency exchange forever. That's like trying to completely block a river, or filling a balloon with an unlimited amount of air. There's a natural market force at work here, which should drive the price of Yuan upward.
    The river and balloon keep growing and don't have a maximum size. It is not a zero sum game.
    Meteorologist/Naturalist & Retired Soldier
    “The Holy Land is everywhere” Black Elk
    Reply With Quote  
     

  17. #16  
    Time Lord
    Join Date
    Mar 2007
    Posts
    8,035
    Quote Originally Posted by Lynx_Fox View Post
    It is not a zero sum game.
    I don't know why everyone keeps saying that. That's true of economics. It's not necessarily true of finance.

    Currency exchange rates are simple supply and demand. Either an exactly equal amount of each currency is being offered and bid, or one currency will be higher than the other (by the amount that its offers/bids exceed the other's.) It is an equation that most certainly does have to sum to zero. The way the situation is set up, no other outcome would be possible.

    Sooner or later, my fellow Americans need to realize that China isn't trying to beat us at the game of "economics". They're trying to beat us at the game of "finance".
    Some clocks are only right twice a day, but they are still right when they are right.
    Reply With Quote  
     

  18. #17  
    Ascended Member Ascended's Avatar
    Join Date
    Apr 2012
    Location
    Norfolk
    Posts
    3,418
    Quote Originally Posted by Lynx_Fox View Post
    Quote Originally Posted by TimeLord View Post
    The dollar is on the verge of collapse. A run on the dollar could see the Federal Government spending hundreds of billions to stop several major banks going to the wall.
    A run by whom? Most of the debt is held by Americans--in the form of other government agencies (e.g. social security) or directly through bonds and whatnot. And I agree with Undecided, China is so locked and intertwined with the American economy that they are quite unlikely to start anything drastic.
    I don't really think there is anyone out there with enough money to hurt the dollar, the sheer amount of dollars would make any sum needed to do that absolutely staggering and don't think even the chinese could do it and I certainly can't see why they'd want to, would make no sense economically. The banks on the other hand are more vunerable and could become exposed, but again who is likely to start a campaign against american banks, couldn't really see anybody really gaining from it.
    Everything has its beauty, but not everyone sees it. - confucius
    Reply With Quote  
     

  19. #18  
    Forum Professor river_rat's Avatar
    Join Date
    Jun 2006
    Location
    South Africa
    Posts
    1,517
    This is just the old currency trilemma playing out again:
    • You can fix your exchange rate
    • Allow free money flows across your borders
    • Have an independent monatary policy
    But only choose two.
    As is often the case with technical subjects we are presented with an unfortunate choice: an explanation that is accurate but incomprehensible, or comprehensible but wrong.
    Reply With Quote  
     

Bookmarks
Bookmarks
Posting Permissions
  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •