| reply to cscottm
Re: Help me understand, Why is the US Dollar still depreciating? said by cscottm:Remember that "officially" the debt is around 13-14 Trillion, but really its more like 90-100 Trillion (if you also count all the unfunded liabilities). It's really like 13-14T. If we include the number of plants in the country then divide by the number of fish in the sea then add the number of gallons of gas in every station. We can make it anything we want by twisting stuff. We're just sticking to the facts for now though. |
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| reply to ThirdShifter
It's a long time to recover from the uncontrolled mis-management and greed of commercial giants. |
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 r81984Fair and BalancedPremium
join:2001-11-14
Katy, TX
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 ·row44
| reply to ThirdShifter
said by ThirdShifter:In other words, the money being pumped into car manufacturing is not coming from Europe, but from US itself but the profit flows out.
That is not true.
A multinational corporation keeps money in each country to avoid extra taxes. Money can flow out, but not like you think.
If you buy a US BMW then your money goes to the assembly plant in the US under its US BMW corporation.
That plant then buys items from local suppliers, foreign suppliers, and other BMW plants in other countries at prices set for them to cover all their expenses (payroll, operations, engineering, etc).
Now other BMW plants can charge higher prices to take more of the profit, but most of the profit stays in the US to invest in US operations or to be saved to build up assets. It is an asset of the parent multinational corporation, but they necessarily do not get the money unless they want to pay taxes moving it between countries.
This works both ways. US companies have lots of money trapped overseas because they do not want to pay the taxes.
Many times it is even cheaper to take out loans for local operations then it is to move money into a country and get taxed on it.
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Your behavior is inconsistent with your desire to be treated like everyone else. |
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 GomezExile in waitingPremium,Ex-Mod 06-11
join:2001-02-21
Atlanta, GA | reply to ThirdShifter
said by ThirdShifter:The trend will have to stop and the dollar should be bouncing back, but the decline has been ongoing and 6 years later, it is still labeled as weak.
What are the causes?
Half of Europe economy is just as bad as US, if not worst, yet the EURO is still appreciating by the day.
Your simple answer:
it's not unlike the way stocks work.. The National economy has a perceived value, like the Market cap of a corporation.
If a corporation issues more stock, the stock suffers dilution, or it the corporation incurs debt, it's core value decreases..
In a non-flat currency, the sum of the currency is valued against the holder. Generating more currency has the same dilution factor, and debt is equally unwelcome.
Debt is fine as long as it has parity with growth, which it hasn't for sometime time now.
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 VigThread-safe since 1997Premium
join:2004-03-23
San Diego, CA | I think this is a really good simplified answer. I'd also throw in some more on the human psychology side of the value equation. It seems to me like the world has been pretty used to US currency being the pat answer to safe storage of value. People figured they couldn't go wrong having dollars because everyone would always honor them, so they never thought about it. They were happy with their reserve currency choice.
Then this giant crisis comes along and institutions that nobody ever thought twice about are suddenly in question (companies, national banks, even nations themselves). That makes a lot of people question their assumptions, including their reflexive faith in the dollar. They're looking around for options on something they've never thought about before, and uncertainty always creates nervousness that manifests itself in revaluation. The US has done plenty to undermine its own currency, but there's also a general fear and nervousness that's making the dollar suffer. Investors are re-evaluating how many eggs they want in the dollar's basket right now. |
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 macsierraBaby NewfoundlandPremium
join:2003-11-30
Minden, NV
 ·Charter
| reply to cscottm
said by cscottm:Remember that "officially" the debt is around 13-14 Trillion, but really its more like 90-100 Trillion (if you also count all the unfunded liabilities).
Dollar keeps depreciating because the fed prints money. The government knows they cannot pay back the money they owed, so instead of defaulting, they will inflate their way out.
Exactly, the feds plan is to to inflate their way out. On the other hand China doesn't want our money to inflate because our debt would become worthless to the Chinese.
Watch what the smart money does in the near future.. Out of cash, into land, stock holdings and some select foreign currency.
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I was Anti-Obama before it was cool!
Will Rodgers never met Harry Reid.. |
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 japPremium
join:2003-08-10
038xx | reply to r81984
Thanks for that explanation, r81984. To the degree which I understand intl business and flows (very little) what you say makes sense. |
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japPremium
join:2003-08-10
038xx | reply to r81984
said by r81984:China has trillions of our money so they can easily manipulate the price of it on the open market.
Any time China sees our market value going up they can sell a bunch of our money on the exchange to lower its value. Is there a history of China applying their leverage in this way? |
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 J E F FWhatta Ya Think About Dat?Premium
join:2004-04-01
Kitchener, ON
·Rogers Hi-Speed
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 ·magicjack.com
| reply to ThirdShifter
I think it has a lot to do with the price of gold. Gold hasn't gone up in value against other currencies at much as the USD.
Of course, one could also argue that the USD was also grossly inflated for years.
Price of OIL is also a factor.
Poor recovery is another factor. The US has been outpaced in this recovery for quite some time.
Many, many reason. A low US$ isn't a bad think for your nation, it makes your goods less expensive and outside goods more expensive - which should be a positive for the US.
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If you can't explain it simply, you don't understand it well enough. - Albert Einstein |
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r81984Fair and BalancedPremium
join:2001-11-14
Katy, TX Reviews:
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| reply to jap
said by jap:said by r81984:China has trillions of our money so they can easily manipulate the price of it on the open market.
Any time China sees our market value going up they can sell a bunch of our money on the exchange to lower its value. Is there a history of China applying their leverage in this way? Well its much more than just China.
Our money is not tied to anything tangible like gold so the treasury can make as much as they want.
Everything in this world is primarily traded with US dollars. Even money exchanges convert to USD as a middle currency between two other currencies. Many banks in the world have stock piled US money as their reserve to justify their own currency. We have a trade deficit so US dollars keep flowing out.
To have enough money for everyone the treasury had to print way more than the US economy can justify.
With everything being made in China, most US dollars flow out to China so they hold more USD than anyone outside the US.
said by :
China today has the largest trade surplus with the US, more than $100 billion a year. Japan is second with $70 billion. Canada with $48 bn, Mexico with $37 bn and Germany with $36 bn make the top 5 trade deficit countries, a total deficit of almost $300 billion of the colossal $480 deficit in 2002.
Whenever the US dollar starts to rise all it takes is for one or some of those banks/countries to flood the market with US dollars to lower its value.
China's yuan is artificially low and fixed to the value of the US dollar (by their choice to 6:1 ratio) so they manipulate the value of our money to ensure their currency stays low and their products can stay cheap to the world.
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Your behavior is inconsistent with your desire to be treated like everyone else. |
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japPremium
join:2003-08-10
038xx | Yes, I know all that and more. Question is if China has used it's position to dump US dollars specifically for the purpose of devaluing the currency. Me thinks I would recall such an event.
In any event they'd have a helluva lot to lose in the bargain. Immediate pecuniary, longterm trade stability and intl. relations. |
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macsierraBaby NewfoundlandPremium
join:2003-11-30
Minden, NV Reviews:
·Charter
| reply to ThirdShifter
said by ThirdShifter:The trend will have to stop and the dollar should be bouncing back, but the decline has been ongoing and 6 years later, it is still labeled as weak.
What are the causes?
Half of Europe economy is just as bad as US, if not worst, yet the EURO is still appreciating by the day.
Bouncing back? I trade some in the FOREX market, mostly Dollar vs Euro etc. One thing that's blatantly clear is these two currencies in SHORT TERM trade up or down on the emotions of the day rather than solid economic justification.
As far as big traders are concerned it's profitable to go against the trend of the small traders. A large trader can dump dollars in the morning for a higher price, that drives the currency down so they can buy back in the afternoon at a lower price. Who's going to lose? Yes, the small trader..
It's just a big crap game and the one who has the most money to begin with wins. The trend is only steady until the large traders desire to reverse it. Some economic justification is necessary to reverse a trend but it's mostly news of the day that sparks emotion.
To put it simply, our US dollar is weak because the majority of the voters have exchanged productivity for political freebies.
In the end, it's not how much the Dollar is worth vs the Euro but rather which country has the most tangible assets in the ground and how they use them.
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I was Anti-Obama before it was cool!
Will Rodgers never met Harry Reid.. |
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| WHy is the Euro rising? The Euro is now $1.38 to 1, how is this. We paid back TARP and the PIIGS are still in major deficit.How is the Euro still rising?? |
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macsierraBaby NewfoundlandPremium
join:2003-11-30
Minden, NV Reviews:
·Charter
| said by peggypwr1:The Euro is now $1.38 to 1, how is this. We paid back TARP and the PIIGS are still in major deficit.How is the Euro still rising??
European bankers are going to push up their interest rate up to fight inflation. The CPI is going up but Bernanke is keeping rates down, or so he sez. Euro pays higher interest so it's goes up, interest return drives the currency market..
Some good info to see here on Euro vs Dollar:
»www.forexrazor.com/Analysis/Quick-View.aspx
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I was Anti-Obama before it was cool!
Will Rodgers never met Harry Reid.. |
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| Well the US needs to raise something, savings rate are pathetic. |
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 ThirdShifterPremium
join:2002-03-16
Vernon Rockville, CT
kudos:1
·Comcast
| reply to macsierra
said by macsierra:said by peggypwr1:The Euro is now $1.38 to 1, how is this. We paid back TARP and the PIIGS are still in major deficit.How is the Euro still rising??
European bankers are going to push up their interest rate up to fight inflation. The CPI is going up but Bernanke is keeping rates down, or so he sez. Euro pays higher interest so it's goes up, interest return drives the currency market.. Some good info to see here on Euro vs Dollar: » www.forexrazor.com/Analysis/Quick-View.aspx That is an excellent read, an enlightenment, for me atleast.
I have never thought of this aspect when it came to currencies strength. |
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