Discussion in 'Economics' started by nitro, Aug 12, 2011.

Is a stronger dollar through higher interest rates a good thing for US Economy?

  1. Yes. It may be paradoxical, but it is true.

    4 vote(s)
  2. No. This will lead to a worsening of the economy even long term.

    1 vote(s)
  3. I don't know.

    1 vote(s)
  4. I don't care.

    0 vote(s)
  1. nitro


    I am begining to believe that the good intentions (or so it seems) of keeping IRs low may actually be hurting rather than helping. Granted, if IRs are allowed to rise naturally to market induced levels instead of being kept artificially low by the FED, the stock market will probably initially be hit. There are theories that in fact it would not, not even immediately, as bond holders that have doubled on bonds to keep their utility constant, wouldn't need as many bonds yields to live on, and in fact may sell bonds to enter the stock market once their incomes from less bonds can pay bills. Interestingly, inflation would also come down on higher IRs->Stronger dollar, making those dollars go a longer way to buying necessities. This is the right positive feedback loop to get into, and once ignited it becomes self-sustaining.

    Not only that, but if US companies will not hire US workers, one way around that is to strengthen the dollar. That means more investment from overseas, where those companies [may] have a very different outlook [can it be worse than our corporations?] on hiring, and it will also force US companies to try to get their profits at home, probably requiring hiring here. It also [may] solves the repatriation of the $1T in overseas accounts by US corporations since it is naturally attractive to them. I am really beginning to like this idea.

    So, at first, it may appear that allowing IRs to rise may be a poison pill, but paradoxically, over the intermediate to longer term it may be exactly the solution to what appears to be an impossible task of getting people back to work, with the side effect of higher taxable-income for the government. A domino of good side-effects may follow suit.

    A weak dollar is only in the interest of a very few titanic corporations that have sold the idea of a weak dollar is "good" to the unsuspecting public.
  2. nitro


  3. nitro


    The more money corporations make, the worse it is for the regular joe bond holder:

    "Why Did Treasury Bonds Rally?"

    It is a vicious cycle. The only thing that will get corporations to invest the money and flee the bond market is inflation. But they know that fighting inflation is imperative #1 at the worlds most powerful organization, the FED. Unemployment as an imperative may be a cover story, like criminals that run a business under a storefront to add credibility to the real and illegal business behind the scenes.

    Too bad we have to buy food and gas and basic materials. :(
  4. Argent


    Old folks with marginal savings will have to draw down their meagre nesteggs to survive on no interest. They will eventually eat less, stop heating and cooling their residences, stop buying their meds, and sicken and die. Thus reducing their nonproductive drain on the economy. Or not. They may also decide to draw down their ammo stocks before they get too weak and take a few of the uncaring bastards with them. Either way, we get a declining population and less stress on our fragile ecosystem.
  5. A stronger dollar would send the trade deficit to the moon, creating more imbalances.
  6. Wow and I thought I was bad. What you are reffering to is generational eugenics. You forget one thing they control the wealth and will do anything to hold onto it.

  7. 377OHMS


    Japan tried the 0% interest game for 20 years. Didn't work. Why would it work here?
  8. Argent


    Their wealth is ephemeral. It is denominated in inflated fiat currencies and promised unearned retirement benefits and bloated securities valuations and sinking home prices. Compared to the potential of youth, they have no wealth. In extremis the streets will be the arbiters of value.
  9. zdreg


    are you talking about London?