The sinking U.S. dollar

[Rookie120 0]

OK, maybe somebody can explain this to me so I can understand it. If the economy is so great, people are spending money. I think they are just using credit cards and owing money. The stock market is up, unemployment steady in the 4% range, interest rates low and a list of other things. Why is the U.S. dollar worth about as much as a popcorn fart these days. It used to be what people looked up to now they see it and wipe there ass with. So please explain without trying to make me feel like a dumb ass or making this a GWB sucks thread why the dollar is so low.

If you find yourself in a fair fight, your tactics suck!

[lawrocket 3]

The price of the dollar can be regulated by the supply. Let's say that you want people to buy American in the US and abroad. You devalue the dollar. This means that American goods are cheaper than foreign goods.

Many people think that a weak dollar helps employment and other things, but can cause inflation.

It's all just how people wish to balance things.

My wife is hotter than your wife.

[Rookie120 0]

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You devalue the dollar.

I don't understand how you can devalue the dollar. Care to explain a little more.

If you find yourself in a fair fight, your tactics suck!

[SpeedRacer 1]

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You devalue the dollar.

I don't understand how you can devalue the dollar. Care to explain a little more.

Well, first Allen Greenspan wipes his ass with it.....

Speed Racer
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[quade 3]

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So please explain without . . . making this a GWB sucks thread why the dollar is so low.

Well, actually, faith from foreign investors does have quite a bit to do with it. If people see the US as being unstable, they place less value on our monetary system.

It's actually quite appropriate to link, at least to some extent, the actions of the US and the value of the dollar, so yes, GWB does in fact have something to do with it.

[Andrewwhyte 1]

The Federal Reserve Board controls the supply of money; they do this by lending it to institutions and the government. The money doesn't exist until the fed lends it out so they are in effect printing money. They do this on a constant basis in order to balance the demand for money. If they create less money compared to what the big institutions want to borrow this week then the price (interest rate) will rise. If they create more then the interest rate will fall.
In order to stave of a general recession due to the sub-prime lending crises the Fed decided to lower the interest rate (by printing more money) by 1/2 a percentage point. This was more than the market was anticipating so many institutional lenders are selling American securities and buying other ones (European, Canadian, Japanese etc.) This means there are more people trying to sell US dollars than buy them so the price falls.

[FrancoR 0]

Supply and demand.
High demand high value, low damand low value.
What does the world need dollars for?
Building up reserves in a stable currency. China did that as well as most other countries, now they stop further build up and switch part of it to Euros, that's low demand.
Buying stuff. The US exports a lot of stuff, but they import far more and they have been doing so for decades. HIgher demand for foreign currency than for your own to pay for the stuff, that's lower demand.
Buying Oil, yes for that you still need dollars, will you still need dollars in 10 yeas, i doubht it.

Interest rates and trust in the currency of a country is another issue.

What can be done, start buying less, saving more and let others buy your stuff e.g. NASDAQ :-)

I earn dollars while i am in the US but i should have traded them for Euros right from the start instead of saving here. I dont thing the dollar will return to higher than 1.35 against the Euro anytime soon.

Franco

If it does not cost anything you are the product.

[kallend 1,648]

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So please explain without trying to make me feel like a dumb ass or making this a GWB sucks thread why the dollar is so low.

Supply and demand. Just like stocks and bonds, the value of a currency is what investors are willing to pay for it.

Investors expect some future return on their investment.

Wouldn't you expect a fall in the stock price of a company that was running up huge debts with no obvious end in sight, and had just cut its dividends?

Right now, investors with X amount of capital to invest in currency expect to get a better real return if they convert it into Euros than $US. So they sell $US and buy Euros.

...

The only sure way to survive a canopy collision is not to have one.

[Rookie120 0]

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The Federal Reserve Board controls the supply of money; they do this by lending it to institutions and the government. The money doesn't exist until the fed lends it out so they are in effect printing money. They do this on a constant basis in order to balance the demand for money. If they create less money compared to what the big institutions want to borrow this week then the price (interest rate) will rise. If they create more then the interest rate will fall.
In order to stave of a general recession due to the sub-prime lending crises the Fed decided to lower the interest rate (by printing more money) by 1/2 a percentage point. This was more than the market was anticipating so many institutional lenders are selling American securities and buying other ones (European, Canadian, Japanese etc.) This means there are more people trying to sell US dollars than buy them so the price falls.

Very good. Something I can understand. I knew it was a supply and demand but really didnt understand how they control that supply.

So here is my next question. Does anybody see the low U.S. dollar becoming a real problem. When will it get to the point where something will have to be done to lift the dollar?

If you find yourself in a fair fight, your tactics suck!

[kelpdiver 2]

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I earn dollars while i am in the US but i should have traded them for Euros right from the start instead of saving here. I dont thing the dollar will return to higher than 1.35 against the Euro anytime soon.

It wasn't that long ago (5 or 6 years) where the Euro was struggling with its goal of dollar parity, but was at 90 cents.

I recall a very simplistic explanation that Canada's currency was valued poorly because of their history of deficit spending. Now that the US is running ocean deep in red ink again, we are seeing the same consequence.

The US can also choose to encourage the devaluation in an effort to close the trade deficits.

If anyone here has a solid recommendation on a book or textbook on this topic of macroeconomics, I'm interested. Unfortunately I've found that economics is about as scientific as political science, and there are few definitive truths, spawning creations like the Laffer Curve. I'm fine with, prefer something that will address opposing theories.

[Andrewwhyte 1]

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Very good. Something I can understand. I knew it was a supply and demand but really didnt understand how they control that supply.

So here is my next question. Does anybody see the low U.S. dollar becoming a real problem. When will it get to the point where something will have to be done to lift the dollar?

Well when the US dollar falls, the price of oil (I'm sure you've noticed) and other imports rises. Basically all you Americans are taking a pay cut when the dollar sinks. When consumption in the US falls to the point that the population stops pissing their money away on luxuries they cannot afford like six and eight cylinder cars and (gasp) air conditioning, and of course wars, then the dollar might start rebounding.

[Andrewwhyte 1]

The last time the Canadian dollar was worth more than the US was during the seventies when the US was mired in an expensive war they could not figure out how to pay for or get out of, and the price of oil was very high (sound familiar?). The result of that was a decade of economic malaise and inflation followed by the worst recession since the thirties.

[vortexring 0]

Hence the situation in Iraq and Afghanistan. And pipelines too. Gosh - those crummie Persians!

'for it's Tommy this, an' Tommy that, an' "chuck 'im out, the brute!" But it's "saviour of 'is country" when the guns begin to shoot.'

[Casurf1978 0]

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Does anybody see the low U.S. dollar becoming a real problem. When will it get to the point where something will have to be done to lift the dollar?

Nope. It's cyclical. What goes up must come down and vice versa.

Another thing that impacts the dollar is what other world banks do. If you can invest in the Euro for 5.50% versus the USD for 4.50%, which would you go with? Now expand that 10,000 fold. Look at Russia. At one point in time they had close to 80+% of their reserves in USD. Now it's split, I think, 45% Euro, 45% USD and the remaining in either the pound or Yen. They had to dump USD and buy Euros, once again increasing the supply of USD. Now expand that even more to include China, Japan, and other nations.

Oil is impacted by the price of the dollar too since USD is pretty much the only currency in that market. Dollars goes down oil pretty much goes up since since the dollar is worth less. One major concern is 'what if' the oil markets transitioned to the Euro. That would pretty much be it for the USD. Oil trades would have to dump dollars and buy and keep Euros to trade oil.

[kallend 1,648]

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Does anybody see the low U.S. dollar becoming a real problem. When will it get to the point where something will have to be done to lift the dollar?

Nope. It's cyclical. What goes up must come down and vice versa.

.

I think not. There's no sign of cyclic behavior in the Zimbabwe dollar, for example.

The $US will stay down as long as we insist on spending more than we have, and the government is the worst offender.

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The only sure way to survive a canopy collision is not to have one.

[Casurf1978 0]

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I think not. There's no sign of cyclic behavior in the Zimbabwe dollar, for example.

The $US will stay down as long as we insist on spending more than we have, and the government is the worst offender.

I will agree with you upto a certain point. Although you cannot compare our economy to that of Zimbabwe. Zimbabwe's GDP is aprox $24B USD. There are pro's and con's to a weak dollar. I wouldn't want to visit Europe anytime soon though.

[AdamLanes 1]

Hyperinflation is not cyclical.

[Casurf1978 0]

Agreed but in all seriousness does anyone really worry that happening to our currency. We're talking about stable economic systems and the impact of interest rates on the currency.

[FrancoR 0]

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It wasn't that long ago (5 or 6 years) where the Euro was struggling with its goal of dollar parity, but was at 90 cents.

True, but who would have invested in a completly new currency of a group of countries that keeps fighting and arguing over everything. With countries that have made it a habit to devalue their currency to pay for their debth. Even the population of most of the countries wanted to keep their liras, DM, francs.
Not easy to start a new currency.

Frano

If it does not cost anything you are the product.

[akarunway 1]

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OK, maybe somebody can explain this to me so I can understand it. If the economy is so great, people are spending money. I think they are just using credit cards and owing money. The stock market is up, unemployment steady in the 4% range, interest rates low and a list of other things. Why is the U.S. dollar worth about as much as a popcorn fart these days. It used to be what people looked up to now they see it and wipe there ass with. So please explain without trying to make me feel like a dumb ass or making this a GWB sucks thread why the dollar is so low.

It's doing greathttp://www.iht.com/bin/print.php?id=7720834

I hold it true, whate'er befall;
I feel it, when I sorrow most;
'Tis better to have loved and lost
Than never to have loved at all.

[Rookie120 0]

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It's doing greathttp://www.iht.com/...print.php?id=7720834

A little disturbing, but that is telling the results of our dollar being so low. Is there anything that can be done to bring it up?

If you find yourself in a fair fight, your tactics suck!

[kallend 1,648]

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It's doing greathttp://www.iht.com/...print.php?id=7720834

A little disturbing, but that is telling the results of our dollar being so low. Is there anything that can be done to bring it up?

Stop running up huge deficits. Live within your means.

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The only sure way to survive a canopy collision is not to have one.

[CanuckInUSA 0]

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Stop running up huge deficits. Live within your means.

What about the Jones? I want to be just like the Jones. Their life looks so good.

Hasn't war always been the cure for the US economic woes since the 50s? I mean when you guys need a little jolt to get your economy going, a nice invasion always seems to do the trick to get those factor workers back making their paychecks and spending their hard earned military industrial complex dollars keeping up with the Jones? What happened this time around? Fear not, there's always Iran.

Try not to worry about the things you have no control over

[akarunway 1]

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Stop running up huge deficits. Live within your means.

What about the Jones? I want to be just like the Jones. Their life looks so good.

Hasn't war always been the cure for the US economic woes since the 50s? I mean when you guys need a little jolt to get your economy going, a nice invasion always seems to do the trick to get those factor workers back making their paychecks and spending their hard earned military industrial complex dollars keeping up with the Jones? What happened this time around? Fear not, there's always Iran.

Hits nail on head.

I hold it true, whate'er befall;
I feel it, when I sorrow most;
'Tis better to have loved and lost
Than never to have loved at all.

[pop 0]

Because of the sinking dollar, my money that was sent to me in Canadian funds, ended up being more in US funds then I ever expected. Thank you current administration for the extra money in my pocket!

7 ounce wonders, music and dogs that are not into beer