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Posted: 9/19/2007 10:25:28 PM EST
[Last Edit: 9/19/2007 10:26:24 PM EST by sherrick13]
Please make this prediction. How long do you think it will be before the red items come to pass? These were taken from an article about how the falling dollar is going to kill us all.


Working Americans rarely have any reason to check the latest foreign exchange rates. Minor currency fluctuations simply don't have a visible impact on their lives. But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers.

The dangers entailed in Bush's approach are two-fold. First, the damage done to the European and Canadian economies will eventually curtail their imports from all countries, including the U.S., and undercut global economic growth. Although some U.S. exporters have benefited from the lower dollar, these benefits will be short-lived.

The second danger stems from the fact that a further decline in the dollar will force the U.S. Federal Reserve to jack up interest rates to hold on to the foreign investors who are financing the U.S. deficits.

U.S. consumers are carrying huge debt burdens and will be in a dangerous position if interest rates rise significantly. Also, higher rates will cripple industries that are highly sensitive to interest rate increases, such as the housing and auto industries. Widespread layoffs will occur.
Link Posted: 9/19/2007 10:34:37 PM EST
bush and crew purposely running the economy into the ground so we will be forced into a NAU with a new currency to pull us from economic depression ??
Link Posted: 9/19/2007 10:42:25 PM EST

Originally Posted By HommieDaKlown:
bush and crew purposely running the economy into the ground so we will be forced into a NAU with a new currency to pull us from economic depression ??


You didn't make the prediciton. When will our economy be considered "run into the ground"?
Link Posted: 9/19/2007 11:13:58 PM EST

Originally Posted By sherrick13:Please make this prediction. How long do you think it will be before the red items come to pass? These were taken from an article about how the falling dollar is going to kill us all.


Working Americans rarely have any reason to check the latest foreign exchange rates. Minor currency fluctuations simply don't have a visible impact on their lives. But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers.

The dangers entailed in Bush's approach are two-fold.

First, the damage done to the European and Canadian economies will eventually curtail their imports from all countries, including the U.S., and undercut global economic growth.

Not enough to worry about yet. Depending on how bad the bank runs get, I doubt there'd be a problem until next year

Although some U.S. exporters have benefited from the lower dollar, these benefits will be short-lived.

The second danger stems from the fact that a further decline in the dollar

will force the U.S. Federal Reserve to jack up interest rates to hold on to the foreign investors who are financing the U.S. deficits.

won't happen any time soon. The Fed just decided to lower interest rates to unfreeze the credit markets. They don't care about foreign investors any more. They've decided to inflate their way out of this mess.

U.S. consumers are carrying huge debt burdens and will be in a dangerous position if interest rates rise significantly. Also, higher rates will cripple industries that are highly sensitive to interest rate increases, such as the housing and auto industries.

Widespread layoffs will occur.

The housing bust will make this one come true


The Fed has painted its self into a policy corner. To fix the credit crunch, they need to inject liquidity into the system. This creates a moral hazard and drives away foreign investors, who supply the money to unfreeze the credit markets. The subsequent inflation will raise te cost of imports, esp. oil, further reducing the discretionary spending of the debt ridden US economy. This will eventually kill the US dollar, and economy.

To attract foreign investors, and thus the money needed to finance America, the Fed needs to show that the dollar is a good investment, and that unwise lenders will be punished. That means rates need to rise. Doing so will reduce the discretionary spending of debt-ridden US economy, leading to a painful deflationary correction.

My guess is that the Fed is hoping a big drop in interest rates will get the economy moving again, so that they can quickly raise rates to restore confidence in the dollar. Can they pull it off? The one thing that they have going for them is that it is in everyone's economic interest to keep America afloat. So, maybe.
Link Posted: 9/19/2007 11:14:42 PM EST
[Last Edit: 9/19/2007 11:16:46 PM EST by HommieDaKlown]

Originally Posted By sherrick13:

Originally Posted By HommieDaKlown:
bush and crew purposely running the economy into the ground so we will be forced into a NAU with a new currency to pull us from economic depression ??


You didn't make the prediciton. When will our economy be considered "run into the ground"?


when this happens





truthfully i dont really know, i'm not an economist. i have no basis for my prediction however i did bump your thread :)
Link Posted: 9/19/2007 11:23:33 PM EST
I dont think anything is going to happen.
Link Posted: 9/19/2007 11:26:54 PM EST
Prediction: Sherrrick13 will be saying "Things are great!" while zombies are actively consuming his legs.
Link Posted: 9/19/2007 11:28:43 PM EST
What a loaded question.

If anyone could actually predict that I will hire them to handle my money.

Hell, I suppose some within the Fed would know the answer to that, but the numbers needed to reach that date will never be made public. I even know a Comptroller of the Currency that doesn't know that answer, (I'm sure he would like too)

So until then I guess you would just say those well practiced words you use in your everyday job...

"Move along people, nothing to see here. Go about you business, everything is fine"


Link Posted: 9/19/2007 11:35:10 PM EST
Rock bottom 2 years from today.
Link Posted: 9/19/2007 11:39:07 PM EST
Link Posted: 9/19/2007 11:48:59 PM EST

Originally Posted By NavajoGunOwner:
Nov. 26 ,2007



teh funny.
Link Posted: 9/19/2007 11:49:42 PM EST

Originally Posted By AROptics:
Prediction: Sherrrick13 will be saying "Things are great!" while zombies are actively consuming his legs.


No, I'm just not a "the sky is falling" type person. I've heard "wolf" cried a little too often.
Link Posted: 9/19/2007 11:50:44 PM EST
[Last Edit: 9/19/2007 11:52:03 PM EST by sherrick13]

Originally Posted By OperationWolf:
Rock bottom 2 years from today.


Thank you, finally a prediction.

BTW, the article I took those comments above, Written in 2004.

Fail.

The Falling Dollar and U.S. Workers (December 20, 2004)
www.workinglife.org/wiki/The+Falling+Dollar+and+U.S.+Workers+(December+20,+2004)
Link Posted: 9/19/2007 11:53:50 PM EST

Originally Posted By sherrick13:

Working Americans rarely have any reason to check the latest foreign exchange rates. Minor currency fluctuations simply don't have a visible impact on their lives. But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers.
2012

The dangers entailed in Bush's approach are two-fold. First, the damage done to the European and Canadian economies will eventually curtail their imports from all countries, including the U.S., and undercut global economic growth. Although some U.S. exporters have benefited from the lower dollar, these benefits will be short-lived.
2014

The second danger stems from the fact that a further decline in the dollar will force the U.S. Federal Reserve to jack up interest rates to hold on to the foreign investors who are financing the U.S. deficits.
2015

U.S. consumers are carrying huge debt burdens and will be in a dangerous position if interest rates rise significantly. Also, higher rates will cripple industries that are highly sensitive to interest rate increases, such as the housing and auto industries. Widespread layoffs will occur.
2015



I think some potentially aweful stuff is going to happen when the baby boomers start with their social security and other entitlements...

I looked into my crystal ball for the predictions . It's hard to make predictions when you don't know:

How long we'll be in Iraq
Outcome of 08' elections and the resulting policies of the new administration

There are tons of variables that enter into the picture, and I don wanna write an essay for arfcom class
Link Posted: 9/19/2007 11:54:21 PM EST


inflation & recession on the way


18-24months or less
Link Posted: 9/19/2007 11:55:09 PM EST
Ohh noes!
Link Posted: 9/19/2007 11:55:14 PM EST

Originally Posted By themagikbullet:

Originally Posted By sherrick13:

Working Americans rarely have any reason to check the latest foreign exchange rates. Minor currency fluctuations simply don't have a visible impact on their lives. But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers.
2012

The dangers entailed in Bush's approach are two-fold. First, the damage done to the European and Canadian economies will eventually curtail their imports from all countries, including the U.S., and undercut global economic growth. Although some U.S. exporters have benefited from the lower dollar, these benefits will be short-lived.
2014

The second danger stems from the fact that a further decline in the dollar will force the U.S. Federal Reserve to jack up interest rates to hold on to the foreign investors who are financing the U.S. deficits.
2015

U.S. consumers are carrying huge debt burdens and will be in a dangerous position if interest rates rise significantly. Also, higher rates will cripple industries that are highly sensitive to interest rate increases, such as the housing and auto industries. Widespread layoffs will occur.
2015



I think some potentially aweful stuff is going to happen when the baby boomers start with their social security and other entitlements...

I looked into my crystal ball for the predictions . It's hard to make predictions when you don't know:

How long we'll be in Iraq
Outcome of 08' elections and the resulting policies of the new administration

There are tons of variables that enter into the picture, and I don wanna write an essay for arfcom class



That could create problems, but that is another topic. Still won't destroy the United States however.
Link Posted: 9/20/2007 12:23:35 AM EST

Originally Posted By sherrick13:

Originally Posted By OperationWolf:
Rock bottom 2 years from today.


Thank you, finally a prediction.

BTW, the article I took those comments above, Written in 2004.

Fail.

The Falling Dollar and U.S. Workers (December 20, 2004)
www.workinglife.org/wiki/The+Falling+Dollar+and+U.S.+Workers+(December+20,+2004)


Well, that would explain why it read like the author hadn't read a newspaper lately
Link Posted: 9/20/2007 12:24:37 AM EST
[Last Edit: 9/20/2007 6:32:53 AM EST by cnatra]

happening now for the bottom 80% of households


But the decline in the value of the U.S. dollar is now so acute that the effects will soon
become apparent to all U.S. wage earners and consumers




Link Posted: 9/20/2007 12:38:51 AM EST
I also refuse to predict the future ! read the sig!...........but things for everyone in the middle class do look gloomy ahead, if your very poor or very wealthy not much matters.
Link Posted: 9/20/2007 12:52:04 AM EST

Originally Posted By cnatra:

happening now for the bottom 80% of households


But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers





Really? I don't think so. I bet most people wouldn't even know.
Link Posted: 9/20/2007 12:52:48 AM EST

Originally Posted By mags:
I also refuse to predict the future ! read the sig!...........but things for everyone in the middle class do look gloomy ahead, if your very poor or very wealthy not much matters.


Tell me, other then when the "hero" was President when have they NOT said that.
Link Posted: 9/20/2007 12:57:53 AM EST

Originally Posted By sherrick13:
Please make this prediction. How long do you think it will be before the red items come to pass? These were taken from an article about how the falling dollar is going to kill us all.


Working Americans rarely have any reason to check the latest foreign exchange rates. Minor currency fluctuations simply don't have a visible impact on their lives. But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers.

The dangers entailed in Bush's approach are two-fold. First, the damage done to the European and Canadian economies will eventually curtail their imports from all countries, including the U.S., and undercut global economic growth. Although some U.S. exporters have benefited from the lower dollar, these benefits will be short-lived.

The second danger stems from the fact that a further decline in the dollar will force the U.S. Federal Reserve to jack up interest rates to hold on to the foreign investors who are financing the U.S. deficits.

U.S. consumers are carrying huge debt burdens and will be in a dangerous position if interest rates rise significantly. Also, higher rates will cripple industries that are highly sensitive to interest rate increases, such as the housing and auto industries. Widespread layoffs will occur.


June 6, 2006.

Oh..wait...nevermind.
Link Posted: 9/20/2007 1:20:45 AM EST
My prediction...

A devalued dollar will continue to actuate inflation.
I would expect it to become evident in the consumer market first, with the price of goods and services increasing. As that happens, slowly, wages will need to rise to meet the need. Assuming they do, this might actually work to the advantage of those with any significant long term debt (mortgages, college loans, large cc balances) Their debt load would remain un-adjusted yet their earnings could increase. In this case, the intrinsic value of the dollar is a non factor (frankly, it has no intrinsic value to begin with - hasnt since the end of the gold standard)

How long will this all take....as with most things, it depends.
If the labor market adjusts in reaction to inflation, the pace would largely be up to the unions in this country...non-union labor would probably follow the trend.

Whether this happens or not, there is a disturbing pattern of expecting the 'wealthy' to foot the bill for the lion share of the operating costs of this country. As the government becomes more dependant upon industrialist funding, this economies underlying foundation will erode until the entire thing collapses...not just the value of the dollar but the true infrastructure along with it.

Long term prediction...if we continue to run the tax system as we do at present, this country has maybe 50 years left....maybe 100.
Link Posted: 9/20/2007 1:26:38 AM EST
It's the end of the world all over again, which makes it a very good time to invest.
Link Posted: 9/20/2007 1:28:09 AM EST
In the long run (5 years), the falling dollar will bring jobs to the US, lower the trade deficit and cause an economic boom.

Link Posted: 9/20/2007 1:38:34 AM EST

Originally Posted By America-first:
It's the end of the world all over again, which makes it a very good time to invest.


Buy when there is blood in the streets, I dont think we are there yet.
Link Posted: 9/20/2007 2:01:07 AM EST

Originally Posted By sherrick13:

Originally Posted By cnatra:

happening now for the bottom 80% of households


But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers





Really? I don't think so. I bet most people wouldn't even know.


The falling dollar affects the price of oil, which impacts the price of gasoline, which is felt acutely by consumers.
Link Posted: 9/20/2007 2:12:13 AM EST

Originally Posted By swiseuf:
In the long run (5 years), the falling dollar will bring jobs to the US, lower the trade deficit and cause an economic boom.



Yes, the US hasn't changed. We are still have the most productive workforce in the world and that isn't changing either.

Right now US services are the best in the world and as the dollar falls it makes them also very attractive pricewise. If the dollar falls a little more it will make US manufactured goods that much more attractive also. And that is what you manufacturing-centric people want, isn't it?
Link Posted: 9/20/2007 2:13:11 AM EST

Originally Posted By azmjs:

Originally Posted By sherrick13:

Originally Posted By cnatra:

happening now for the bottom 80% of households


But the decline in the value of the U.S. dollar is now so acute that the effects will soon become apparent to all U.S. wage earners and consumers





Really? I don't think so. I bet most people wouldn't even know.


The falling dollar affects the price of oil, which impacts the price of gasoline, which is felt acutely by consumers.


Which is, at most, 20% of the consumers budget. And some of that has been offset by wage increases.
Link Posted: 9/20/2007 2:51:48 AM EST
You are so misinformed, I am almost at a loss where to start.

1. The US dollar index, which is an index that measures the strength of the US dollar against some foreign currencies has fallen to 79 from a high of 120 in 2001. This means that our dollar has lost roughly a third of its purchasing power against those currencies in that time.

2. The price of gold has increased roughly 250% in that time period when measured in dollars.

3. Inflation, when measured by the US government, has been between 1-4% since 2001. However, the government has modified the way in which it tracks inflation over the last 15 years. If inflation is measured using the old standards, it has been 3-4% higher during that time period, giving an annual inflation rate of between 4-8%.

4. Over the last year, 157 mortgage origionators have gone out of business or left the mortgage broker business, laying off all or most of their employees. ( see here )

5. As far as wage growth picking up the slack for rising prices, median wages have risen roughly 2% annually from 2001-2005, according to the SSA . I would hardly say that has made up for the 4-8% inflation we have experienced annually during that time.

6. As far as the falling dollar giving a boost to US manufacturing, that is correct, but very little is manufactured in this country anymore. We currently import 70% of what we consume in this country, the rising dollar will have a much more negative effect than the slight boost to exports will provide.


Link Posted: 9/20/2007 3:00:01 AM EST
I'd like to go ahead and say 'Heh' to the questions and their original source.

And I would like take this moment to cheer for Ron Paul!

Yay! Ron Paul! Yay!
Link Posted: 9/20/2007 3:04:06 AM EST
Geeze, I hope not. I'm getting ready to open a restaurant. People need money to buy my food.

Link Posted: 9/20/2007 3:09:51 AM EST
Here's a good article.

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=BYRFMD0QYRQTVQFIQMFSFF4AVCBQ0IV0?xml=/money/2007/09/19/bcnsaudi119.xml

Pretty scary.
A situation is developing where at some point, someone (Bernacke) is going to miscalculate and then we'll really be in the shit.
Link Posted: 9/20/2007 3:12:26 AM EST

Originally Posted By cnatra:

inflation & recession on the way


18-24months or less


6-12 if I had to guess we'll start to really see the effects of it. After that it'll just get worse and worse.
Link Posted: 9/20/2007 3:16:20 AM EST
The scary thing is, IMHO is that this is just the tip of the iceberg. Wait until all of the baby boomers retire and overdraw on all of the social security money. For years people have warned about running huge federal debt. Now it will come home to roost.

I believe this mess is more due to the government overspending on pork and social projects than private mortgage companies making bad loans.
Link Posted: 9/20/2007 3:29:01 AM EST
[Last Edit: 9/20/2007 3:31:05 AM EST by sherrick13]

Originally Posted By igorthesmall:
You are so misinformed, I am almost at a loss where to start.

1. The US dollar index, which is an index that measures the strength of the US dollar against some foreign currencies has fallen to 79 from a high of 120 in 2001. This means that our dollar has lost roughly a third of its purchasing power against those currencies in that time.

2. The price of gold has increased roughly 250% in that time period when measured in dollars.

3. Inflation, when measured by the US government, has been between 1-4% since 2001. However, the government has modified the way in which it tracks inflation over the last 15 years. If inflation is measured using the old standards, it has been 3-4% higher during that time period, giving an annual inflation rate of between 4-8%.

4. Over the last year, 157 mortgage origionators have gone out of business or left the mortgage broker business, laying off all or most of their employees. ( see here )

5. As far as wage growth picking up the slack for rising prices, median wages have risen roughly 2% annually from 2001-2005, according to the SSA . I would hardly say that has made up for the 4-8% inflation we have experienced annually during that time.

6. As far as the falling dollar giving a boost to US manufacturing, that is correct, but very little is manufactured in this country anymore. We currently import 70% of what we consume in this country, the rising dollar will have a much more negative effect than the slight boost to exports will provide.




So are we worse off than 1980?

And if you think we manufacture very little in this country you need to do a little research.

This should help.

www.nam.org/s_nam/bin.asp?CID=202325&DID=233605&DOC=FILE.PDF

And did you know our manufacturing GDP alone is 1,497,000,000,000 (2005) which is more than the WHOLE GDP of every country in the world except Italy, France, UK, China, Germany and Japan. So don't tell me that I've got so much wrong you don't know where to start and we don't make much of anything here in the US anymore.

And as far as importing stuff? Well mercantilism is bad. 1600's England wants their economic policy back.
Link Posted: 9/20/2007 3:47:41 AM EST
Here's another REALLY good one.

http://www.financialsense.com/fsu/editorials/2007/0919.html

Link Posted: 9/20/2007 4:02:18 AM EST
We are now in that window of time when the rot is rampant within the core, but there is almost no *external* visible sign of the irreversible death.

Picture a fruit -- an orange perhaps -- glowing with color and goodness on the outside, and yet you bite into it, and irreversible rot permeates all inside the rind.

We are at that moment.

People have their cookie-cutter mini-mansions. They just can't make the mortgage payments.

People have their extravagant new vehicles -- They just can't make the payments.

They have their big screen televisions -- They can only pay the minimum amount due on their revolving credit cards.

*Never* before has a functioning civilisation had its productive middle class at a *negative* rate of savings.

It cannot continue.

It is the gorilla in the living room -- the secret shame and horror that people cover up and ignore. Much like mental illness or alcoholism were to previous generations, middle class debt is the hidden shame of today.

And so now -- in its infinite wisdom -- the fed cuts lending rates to keep the fragile house of cards aloft a little longer -- thus penalising investors while keeping Joe Sixpack and Sally Soccermom propped up in their overblown more-than-they-can-rightfully-afford lifestyle a little while longer.

It is though the current bank runs in England, and subprime mortgage fiasco here are but *rumors* of the pervasive rot beneath the shiny exterior.

And who can tell when it will become "readily apparent"? It is already here.

Almost no one *actually owns* their luxury goods these days. They may think they own their houses, vehickles and credit card purchases -- but they *do not own them*.

If, in the twinkling of an eye -- *poof* every tangivle thing had to return to its rightful, legal owner -- most modern Americans would be standing around homeless and without transportation.

"It" is already here -- we are just living in an illusion.

Those of us who pay cash as we go, and make outright purchases of homes and vehicles within our means are considered bizarre and eccentric.

This nation has irreversibly both slipped its mooring AND lost its bearing.
Link Posted: 9/20/2007 4:08:34 AM EST

Originally Posted By psyops4fun:
We are now in that window of time when the rot is rampant within the core, but there is almost no *external* visible sign of the irreversible death.

Picture a fruit -- an orange perhaps -- glowing with color and goodness on the outside, and yet you bite into it, and irreversible rot permeates all inside the rind.

We are at that moment.

People have their cookie-cutter mini-mansions. They just can't make the mortgage payments.

People have their extravagant new vehicles -- They just can't make the payments.

They have their big screen televisions -- They can only pay the minimum amount due on their revolving credit cards.

*Never* before has a functioning civilisation had its productive middle class at a *negative* rate of savings.

It cannot continue.

It is the gorilla in the living room -- the secret shame and horror that people cover up and ignore. Much like mental illness or alcoholism were to previous generations, middle class debt is the hidden shame of today.

And so now -- in its infinite wisdom -- the fed cuts lending rates to keep the fragile house of cards aloft a little longer -- thus penalising investors while keeping Joe Sixpack and Sally Soccermom propped up in their overblown more-than-they-can-rightfully-afford lifestyle a little while longer.

It is though the current bank runs in England, and subprime mortgage fiasco here are but *rumors* of the pervasive rot beneath the shiny exterior.

And who can tell when it will become "readily apparent"? It is already here.

Almost no one *actually owns* their luxury goods these days. They may think they own their houses, vehickles and credit card purchases -- but they *do not own them*.

If, in the twinkling of an eye -- *poof* every tangivle thing had to return to its rightful, legal owner -- most modern Americans would be standing around homeless and without transportation.

"It" is already here -- we are just living in an illusion.

Those of us who pay cash as we go, and make outright purchases of homes and vehicles within our means are considered bizarre and eccentric.

This nation has irreversibly both slipped its mooring AND lost its bearing.


Have you read the above article yet?
It explains how even those of us with a strongly positive accounts balance are going to end up in the crapper.

Link Posted: 9/20/2007 5:22:13 AM EST

Originally Posted By Coolio:

Originally Posted By psyops4fun:


"It" is already here -- we are just living in an illusion.

Those of us who pay cash as we go, and make outright purchases of homes and vehicles within our means are considered bizarre and eccentric.

This nation has irreversibly both slipped its mooring AND lost its bearing.


Have you read the above article yet?
It explains how even those of us with a strongly positive accounts balance are going to end up in the crapper.


Oh yes.

All too well I know it.

The small private investor who saves up money by prudently living under his means is bent over without so much as a kiss or the offer of lube.



The thrifty among us get to "bail out" the wanton spendthrifts again and again, left and right, because THEY are now the majority -- the "entitlement folks" aren't just welfare parasites - "they" are now the "self-esteem"-indoctrinated middle class who spend more than they make because they "deserve" the finer things of life.

People with investments -- even a meager savings account -- are the vast *minority* these days.

Sure, we're easy to hate. I've put away assets, but I've done it by driving old junkers and living in way less square footage than I could afford -- the old fashioned prudent way.

Yeah, Joe Sixpack with his new big screen tv, and Sally Soccermom with her big SUV -- all bought ON CREDIT really "deserve" for you and me to bail them out. They "deserve" for folks like us to subsidize their no-tomorrow lives of fat self-indulgent credit spending just like housing project thugs *deserve* it.



Link Posted: 9/20/2007 5:47:13 AM EST
What happens and how soon will depend on what the Federal Reserve and the Government do to try and curtail what they may see as a coming economic collapse. Markets correct themselves every so often as part of their natural life cycle. Recessions happen. Their severity and length is usually dependent on what the government does to interfere. If nature is allowed to take it's course then the long term benefits will be substantial. We will see an end to unsound business practices in the credit industry, and if the value of the dollar plummets then we will see increase domestic manufacturing (due to the rising cost of imports and the fact that things will be cheaper if they are made here). The end result would be increased domestic manufacturing, increased American exports (since American products would become cheaper in foreign markets), a rise in wages (due to higher demand for workers) and a rebuilding of the dollar's value on a solid foundation.

However, my hopes of seeing the government and the Fed allow nature to take it's course are low. The Fed is already going out of their way to save stupid lenders who financed people who were bad credit risks and the government's track record of bailing out bad decisions by big business is well known. This will only encourage more bad behavior and eventually turn what would have been a downturn into a crash.

Link Posted: 9/20/2007 6:59:43 AM EST
[Last Edit: 9/20/2007 7:03:15 AM EST by cnatra]
The Trade Deficit and Exchange Rates

From Mike Moffatt,
Your Guide to Economics.


The Trade Deficit and Exchange Rates

[Q:] Since the U.S. Dollar is weak, shouldn't that imply we export more than we import (i.e., foreigners get a good exchange rate making US goods relatively cheap). So why does the U.S. have an enormous trade deficit?

[A:] Great question! Let's take a look.

Parkin and Bade's Economics Second Edition defines trade balance as:

The value of all the goods and services we sell to other countries (exports) minus the value of all the goods and services we buy from foreigners (imports) is called our trade balance

If the value of the trade balance is positive, we have a trade surplus and we export more than we import (in dollar terms). A trade deficit is just the opposite; it occurs when the trade balance is negative and the value of what we import is more than the value of what we export. The United States has had a trade deficit for over the last ten years, though the size of the deficit has varied during that period.

We know from "A Beginner's Guide to Exchange Rates and the Foreign Exchange Market" that changes in exchange rates can greatly impact various parts of the economy. This was later confirmed in "A Beginner's Guide to Purchasing Power Parity Theory" where we saw that a fall in the exchange rates will cause foreigners to buy more of our goods and us to buy less foreign goods. So theory tells us that when the value of the U.S. Dollar falls relative to other currencies, the U.S. should enjoy a trade surplus, or at least a smaller trade deficit.

If we look at the U.S. Balance of trade data, this doesn't seem to be happening. The U.S. Census Bureau keeps extensive data on U.S. trade. The trade deficit does not appear to be getting smaller, as shown by their data. Here is the size of the trade deficit for the twelve months from November 2002 to October 2003.


Nov. 2002 (38,629)
Dec. 2002 (42,332)
Jan. 2003 (40,035)
Feb. 2003 (38,617)
Mar. 2003 (42,979)
Apr. 2003 (41,998)
May. 2003 (41,800)
Jun. 2003 (40,386)
Jul. 2003 (40,467)
Aug. 2003 (39,605)
Sep. 2003 (41,341)
Oct. 2003 (41,773)

Is there any way we can reconcile the fact that the trade deficit is not decreasing with the fact that the U.S. Dollar has been greatly devalued? A good first step would be to identify who the U.S. is trading with. U.S. Census Bureau data gives the following trade figures (imports + exports) for the year 2002:

Canada ($371 B)
Mexico ($232 B)
Japan ($173 B)
China ($147 B)
Germany ($89 B)
U.K. ($74 B)
South Korea ($58 B)
Taiwan ($36 B)
France ($34 B)
Malaysia ($26 B)

The United States has a few key trading partners such as Canada, Mexico and Japan. If we look at the exchange rates between the United States and these countries, perhaps we will have a better idea of why the United States continues to have a large trade deficit despite a rapidly declining dollar. We examine American trade with four major trading partners and see if those trading relationships can explain the trade deficit:

economics.about.com/cs/analysis/a/trade_deficit.htm?p=1
Link Posted: 9/20/2007 7:02:49 AM EST

Originally Posted By sherrick13:

Originally Posted By swiseuf:
In the long run (5 years), the falling dollar will bring jobs to the US, lower the trade deficit and cause an economic boom.



Yes, the US hasn't changed. We are still have the most productive workforce in the world and that isn't changing either.

Right now US services are the best in the world and as the dollar falls it makes them also very attractive pricewise. If the dollar falls a little more it will make US manufactured goods that much more attractive also. And that is what you manufacturing-centric people want, isn't it?



so you think this is going to make a significant dent in the $700-800 billion trade deficit ?


some good basic stats here

www.census.gov/foreign-trade/statistics/highlights/annual.html
Link Posted: 9/20/2007 7:07:26 AM EST

Originally Posted By cnatra:

Originally Posted By sherrick13:

Originally Posted By swiseuf:
In the long run (5 years), the falling dollar will bring jobs to the US, lower the trade deficit and cause an economic boom.



Yes, the US hasn't changed. We are still have the most productive workforce in the world and that isn't changing either.

Right now US services are the best in the world and as the dollar falls it makes them also very attractive pricewise. If the dollar falls a little more it will make US manufactured goods that much more attractive also. And that is what you manufacturing-centric people want, isn't it?



so you think this is going to make a significant dent in the $700-800 billion trade deficit ?


some good basic stats here

www.census.gov/foreign-trade/statistics/highlights/annual.html


If it goes low enough yes. But no I don't think it will. There is nothing wrong with haven't a trade defict as long as it doesn't go wild. And I don't believe ours is.
Link Posted: 9/20/2007 7:52:00 AM EST
[Last Edit: 9/20/2007 7:54:30 AM EST by elkmontarms]
"So where is the best place to convert USD to Euros?

I was planning on a trip to Europe at some point. I don't want to end up feeling like an illegal alien on the streets of Beverly Hills."

I would not worry about converting to euros unless you are traveling in the next month or two.

I would take some of your funny money or savings and get a little silver or gold at this point as a hedge.

There is some gold/silver experts that predict if things go real sour gold would be around $2000+ and ounce and silver would be in the $200 range real quick. Silver is running about $13 an ounce right now. I feel that is a bargin. I wish I would have picked up a bunch around 2000 when it was in the $4.00 range.

I hear a lot of people saying it is crazy to buy gold and silver at these prices. Well, I remember just a little over a year ago when I had a full can of Radway Green at my door for about $140. I am sure it is around $400 today if you can even get it. Gas was .79 in 1999 when I lived in Louisiana now it is closing in on $3.00 again and is on its way up. Last time I checked oil was $82 a bbl!!!! with oil industry experts saying it will go to over $100 a bbl next year that equals about $4.00 at the pump.

Our 401k funds and IRA could be worth zero I don't think that will happen but, Gold and Silver will always have some value and measure of trade. It is very wise to have some metal on hand and I am not talking about lead...LOL

Link Posted: 9/20/2007 11:33:26 AM EST
[Last Edit: 9/20/2007 11:43:12 AM EST by Neotopia]
height=8
Originally Posted By sherrick13:
I love how everybody is posting tinfoil articles, but very few are actually giving me their opinion on when our economy will collapse.


The people here love them because they indirectly play into their fantasies of running around in the woods screaming "Wolverines!".

The People who write them love them because it is an opportunity to jab at the evil capitalist US.

As for me, in the short term the dollar may go down more, but pretty soon I think it is going to begin to go up, because of the overwhelming bearish sentiment (when "everybody" agrees the direction of a price is only one way that usually means everybody is already bought in and will be looking to sell.). Also, If the financial world really has SHTF US companies will begin to repatriate the overseas holdings and we have more of that than all the foreign held treasury bonds, FOREX reserves, etc. Makes them look like peanuts. US portfolios diversifying to the rest of the world can probably be the culprit of the dollar's fall in 2002-2005...

Right now it is mostly the European currencies that have been gaining, The Yen has actually lost even more value than the dollar and the other Asian currencies haven't had too much action(compared to the European ones, at least.).

meanwhile... My Prediction?

China's bubble will collapse sometime around the Olympics games, and it will take much of the other emerging economies with it. Commodities prices will be hard hit as well, and the Yen carry trade will unwind futher. The dollar will rally as US companies feverishly repatriate their capital and as simultaneously asian investors fly to safety. It will be like 1997 all over again except worse. In Europe, the subprime contagion will spread and pop the UK and Spain (property bubbles there that make ours look like nothing). Germany will be the only one not really hit as a lower currency drives it's export-based economy and it's the only country in Europe basically without a property bubble worse than ours. Deflation is a high possibilty there from years of a rising currency a la Mid-90s Japan. In the US we will grow through trade and investment, not necessarily through export growth but from a shrinking of the trade deficit as commodities and China deflate(Imports). Consumers would cut back as home prices fall but begin to bottom sometime next year. The repatriation of assets and lowering of rates makes it likely another bubble could occur in the US(maybe in stock market) probably apexing in 2010-2011. When this bubble bursts the giant vat of liquidity that was opened in the last decade or two will have been expended, and The US has a high chance of going deflationary. Multiple global bubble will have been burst.

The 2010s, IMHO will not good times(not just for us though, the whole world...) As global demographic trends and the eventual credit crunch combine for bad juju. it also seems to happen every 40 years. I dont think we will collapse either but maybe a decade of misery is what this spoiled country needs.

I could be wrong, but hey, thats economics (aka voodoo with money)
Link Posted: 9/20/2007 11:36:04 AM EST
[Last Edit: 9/20/2007 11:39:07 AM EST by Neotopia]
height=8
Originally Posted By AROptics:
So where is the best place to convert USD to Euros?

I was planning on a trip to Europe at some point. I don't want to end up feeling like an illegal alien on the streets of Beverly Hills.


I wouldn't bet on Europe too much, If you think our baby boomer problem is bad Europe's will be many magnitudes worse, in every imaginable way... and even though Europe's growth is at a post-recovery peak and ours is in a slow patch, we are *still* growing faster....
Link Posted: 9/20/2007 11:59:29 AM EST
DUPE
Link Posted: 9/20/2007 12:04:37 PM EST
[Last Edit: 9/20/2007 7:37:10 PM EST by AROptics]

Originally Posted By Neotopia:

Originally Posted By AROptics:
So where is the best place to convert USD to Euros?

I was planning on a trip to Europe at some point. I don't want to end up feeling like an illegal alien on the streets of Beverly Hills.


I wouldn't bet on Europe too much, If you think our baby boomer problem is bad Europe's will be many magnitudes worse, in every imaginable way... and even though Europe's growth is at a post-recovery peak and ours is in a slow patch, we are *still* growing faster....


Already did it.

Moved my Vanguard S&P 500 Index in to Vanguard's European Fund. Use the "compare" feature and Europe has done better over the past 10 years, and that's before all the recent news. With the Saudi's and others moving away from the dollar I don't want to fail to diversify in the face of clearly bad news. I already get paid in the new American Peso, that will hurt badly enough.

S&P 500 Index Fund Inv/ European Stock Index
Year To Date 5.13%/ 9.24%
1 Year 15.01/ 22.42%
3 Year 12.03%/ 24.26%
5 Year 11.86%/ 20.76%
10 Year 6.67%/ 10.18%

No claims made as to my acumen. We'll see.
Link Posted: 9/20/2007 12:19:44 PM EST

Originally Posted By jnojr:

Originally Posted By VTHOKIESHOOTER:
The scary thing is, IMHO is that this is just the tip of the iceberg. Wait until all of the baby boomers retire and overdraw on all of the social security money.


That's going to happen over years and decades, not in some sudden cataclysm.

The boomers "oficially" start retiring Jan 1, 2008 That's when the first of them turn 62. But many of those boomers will continue working. We'll see an increasing number of retirements for 20 years going forward. 2017 is when the SS payouts are projected to exceed income (current payroll taxes). The trust fund is expected to be exhausted by 2042. Those figures are assuming that nothing changes. My guess is, they will slooowwwly raise the retirement age, maybe 6 months at a time, and try to edge up payroll taxes.

Medicare is a much, much bigger problem though. Socialist inSecurity only accounts for, IIRC, $8-10 trillion of our future deficit. Medicare is $20-someodd+ trillion. That's going to be the tough nut to crack.


The only problem with that arguement is that we're already spending the payroll tax surplus and then some and there's nothing in the trust fund but claims on the taxpayers income, claims for which there is currently no means of collecting.

Your scenario assumes there will be tax increases sufficient to compensate for that fact, and when medicare is taken into account there's no way that can be done. There's only so much revenue that can be squeezed out of the populace.
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