Weak Dollar.....What Is Wrong With It ?

Discussion in 'Economics' started by libertad, Jul 2, 2008.

  1. http://www.cnbc.com/id/25486214

    There is a case.....a weak dollar may be the only solution to keep US wages from falling to very low levels....

    Perhaps one would call it a form of equilibrating to other countries who have been beating the US labor with an axe handle for years...

    Perhaps two can place this game....

    A country offers low labor costs....ok...the US Dollar equilibrates wages.....

    Or is Wilbur Smith.....a US billionaire....going through flawed thinking ? Perhaps a lower dollar is a solution for keeping high US domestic wages possible.....

    Perhaps it is best for the middle class to get really domestic....
     
  2. What's the point of keeping wages from going lower if weak dollar makes everything more expensive anyways?

    We could all be dollar millionaires and it wouldn't matter if a gallon of milk is $100. Slight exagerration but you know where I'm coming from.

     
  3. To the OP: I'll be blunt, the fact that you posted a link from CNBC and your writing style do not really impress your arguments upon me.

    However, the weakness in the dollar is a subject that has peaked my interest right now so I'd like to weigh in. Just tonight (4 a.m. CST) the Euro failed to react positively to a higher than expected PPI (1.2% actual vs. 0.9% MoM). I've read articles attributing this upside surprise to higher energy costs (duh). The logical conclusion as to why this happened is that leading into the announcement, the Euro was overshot and the data wasn't enough to drive it any higher (If there are some technical aspects about the effect of producer price indexes on market action I'm not understanding here, I'd love to hear about them). Overshot? The Euro? Hmm...

    Now, the Euro is about 2 cents away from its all-time high against the dollar. It is not a stretch to say the Euro is looking very strong against the dollar, and that many other currencies are looking strong against the dollar relative to the past 10 years. But why? Because the spread between the interest rates of the ECB and the Fed is going to be 2.25% by the end of the week? That doesn't seem like enough to put it at all time highs.

    Maybe the dollar is weak is simply because oil is strong. The United States, as of 2006, consumes about 20 million barrels of oil a day, and produces only a quarter of that. Clearly the greenback is vulnerable to an increase in oil prices. Can anyone give me a figure on the EU's crude oil consumption statistics? I think my answer may lie here.

    If it doesn't, then there is always the explanation that the dollar is simply massively undervalued right now. Being somewhat patriotic I like to think this is the case, but in my opinion the United States' economy is going through a structural rather than cyclic adjustment. Oil is drying up, and the gas guzzling days of the past are over. It's time for us to look for more hi-tech, oil-independent sources of energy for our lives. As long as we Americans can do that, I think the dollar will regain some of its previous luster.

    P.S. I'm also aware that if you are personally wealthy, the high price of gas doesn't matter and you can still afford to drive vehicles that get under 10 MPG. But, if the state of the economy gets so bad that all the dollars you've amassed become worthless, how many hummers are you going to be able to afford then??
     
  4. Excellent Commentary All
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    Excuse the typo....Wilbur Ross....not Smith....

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    Wilbur Ross is normally level headed, and has made himself quite wealthy by being so, and it seemed rather odd to me that he would be making these statements or having this point of view.

    It would seem to me that a weak currency is just that, weak, and how can this be good.

    He says....

    But there are those who disagree. Wilbur Ross, chairman and CEO of WL Ross & Co told CNBC Wednesday, "I'm one of the few people as an American, who likes the weak dollar. I believe that the only way that we can compete with our high wages and high standard of living is by a weaker dollar, so I'm actually an advocate of the weaker dollar."

    Ross added that the rate of growth in U.S. exports had exceeded the rate of imports ever since the dollar started its descent. "I believe one of the few things that's helping to bolster the economy now is the growth in exports. Not that we have unbalanced a favorable trade balance -- we have not -- but there has been pretty good growth in exports driven by the weak dollar," Ross told CNBC.

    When asked whether increased productivity would be preferable to a weak dollar, Ross said, " Productivity growth has been pretty good in America, and continues to be. Wage inflation hasn't been much of a problem either ... but in productivity, you're talking about a few percentage points a year. That doesn't close the gap between $5 an hour and $40 an hour.

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    Productivity does not close the gap between $5 an hour and $40 per hour....was the interesting point of curiousness....
     
  5. Anyone who advocates a weak dollar is just selfishly looking out for his own book.. whether that book be investment instruments, business or political.

    A weak currency usually means a government either trying to get away with something or covering up past misdeeds. The US is no exception.

    Our "leaders" (cough, cough) are trying to sell us on the merits of a weak dollar... more lies, of course.

    The USD is trading about 72. When it gets down to 25 or 10 (long before it gets this low, actually), you'll hear bitching from the hoi polloi that will make the squawk about high gasoline prices seem like party gossip.
     
  6. Excllent Commentary, Gnome

    Gnome wrote....

    Anyone who advocates a weak dollar is just selfishly looking out for his own book.. whether that book be investment instruments, business or political.

    A weak currency usually means a government either trying to get away with something or covering up past misdeeds. The US is no exception.

    Our "leaders" (cough, cough) are trying to sell us on the merits of a weak dollar... more lies, of course.

    The USD is trading about 72. When it gets down to 25 or 10 (long before it gets this low, actually), you'll hear bitching from the hoi polloi that will make the squawk about high gasoline prices seem like party gossip.
    ..................................................................................................

    This is when the US Government offers 12% 3 year T Bonds....ranked CCC+....that is if you want to believe Moodys
    fair system of ranking.....to try to gain back the dollars audience ?

    After the Bushey/Bernanke affair ?

    Overseen by Obama -rama or McBush?
     
  7. the weak dollar has been caused by the fed.i also believe our fed has lost some credibility and that is also weighing on the dollar.a weak dollar causes a spike in oil,not the other way around.
     
  8. Yes, the Fed is part of the problem... with its artificially low interest rates and money pump.

    However, the are some very large structural issues...

    1. Constant overspending by US Gummint... deficits really DO matter!

    2. Inflationary money-pump buy the Fed

    3. US consumers overspending, too.... living on credit.

    4. Social Security and Medicare obligations woefully underfunded.

    5. Americans are sending $600B per year to oil producers... transferring our wealth to theirs. (And some of those folks ain't exactly our friends. Concerns me a great deal... putting all the money into the hands of many who wish to do us harm..)

    The rest of the world sees all of this and deduces the US Gummint is going to choose to INFLATE LIKE GANGBUSTERS rather than reign-in spending and credit.
     
  9. Yes, something like that. It would, of course, be painful.... politicians like to avoid pain or postpone it for someone else to take the blame if possible, you know.

    But The Other Alternative is worse.. MUCH WORSE in the long run... and that is to continue on the same path of inflation and currency debasement... with the end result that nearly all US citizens go bankrupt and foreigners swoop in and buy US assets on the cheap.

    Historically, political regimes have opted for "the other alternative"... likely no different for the US this time.

    Where's the next Andrew Jackson? We need you NOW...
     
    #10     Jul 2, 2008