9 thoughts on “FriendFeed: The declining dollar …”
Sandy Underpants
The dollar is going to collapse, whether Matt Drudge reports on it or not. I thought it would have happened before Bush left office, but as Bush has become a hero of sorts to me on showing that you can fall down for years (decades?) and still live a productive life, so is this US economy. Somehow when we crash out financially, we can still take $1.5 trillion from Tax-payer money and GIVE that money to corporations to prop them up for a little while longer. Maybe there will be a magic accountant who can bail us out by re-arranging numbers every 18 months or whatever it’s at right now, but eventually we’re going to have to face fixing the mess the dollar is in, and the President (whoever it is at that time) will forsake the dollar completely and make the Euro a world currency joined with the US dollar. With the collapse of the world economy as the emergency factor in rushing that through without suffering the consequences of scores of financial irresponsibility on our nations part.
But that’s cool with me.
Jazz
Sandy,
Although popular imagination would argue otherwise, no one really knows why one currency moves in a particular direction against another. Experts can point to component factors, but in reality there is no way to make confident predictions. If we could predict, those guys selling easy arbitrage of global currency markets would be advertising during The Office, not on after-hours cable between 1-900# ads.
I mean one obvious factor in the US is our low interest rates. As long as we have little inflation, what benefit is there to raising rates, just to arbitrarily prop up the dollar?
Another common cause is a corporate conspiracy to inflate paper profits. The thinking goes: since most conglomerates report in dollars, each unit of currency earned in other countries becomes more valuable when repatriated if the dollar declines.
However, if a corporate conspiracy were driving it, consider that the House announced its stimulus package on January 19th, a piece of legislation designed to kick start the economy and thus replace “currency machination” profits with the old-fashioned “selling stuff” kind. If there were a corporate conspiracy holding down the dollar, things should have improved for the greenback since January 19th, since the stimulus should replace the alleged conspiracy.
Jan 19th: Euro: Dollar = 1:1.32
Today: Euro: Dollar = 1:1.5
Not buying it.
Sandy Underpants
No one knows why one currency moves vs. another one? Massive debt, governmental instability and instability of infrastructure, lack of relevance worldwide, lack of industry. The main reason the US dollar is hanging on is becuase Oil is traded in dollars. When OPEC or whoever decides to start trading Oil in Euros instead of dollars, the drain stopper will be popped, and the value of our currency will fall faster than ever before.
Our economy has become a total and complete joke. We don’t make anything anymore, we can’t compete with any nation in terms of exporting goods. We import everything, hell we don’t even hire Americans for telemarketing anymore because they cost too much. Financial institutions don’t invest in America anymore, they gamble on paperwork and pass papers around and make money out of it.
The foundation of this country was rock solid from our beginning until the 60’s and now with the discovery of ways to create massive wealth without actually ever doing anything or creating anything, it’s liquified that foundation and we’re now sitting on a foundation of quicksand. Americans aren’t going to work for 15 cents a day, Americans aren’t going to compete in the manufacturing of industry or textiles exportation, Americans are done, they don’t want to work, they all expect a lifestyle built on taking advantage of others.
More than likely this applies to no one reading this, but there are more attorneys in this country than the whole world combined, because they can bleed clients dry because it’s just about money here. Nobody is getting sued in India, nobody is getting sued in the Phillipines. Nobody in other countries is making zillions of dollars selling fake mutual funds, writing in fake accounting numbers, re-aranging numbers.
It’s over for this country, like it was over for Notre Dame football when they fired Bob Davie, it’s just a matter of the formality of time passing and watching it all go down the toilet.
David K.
See, i’d like to take Sandy seriously, but he thinks the moon landing was faked, so it pretty much means he has no credibility. Poor Sandy.
Sandy Underpants
One day, DK…. One day.
When a man actually does land on the moon, Buzz and Neal will be long gone.
Jazz
Sandy,
My compliments on having the courage to take up the cause of the dispossessed working man in an audience of young, mostly economic libertarians, possessing in many cases advanced degrees in service-ish professions. You of course ran the risk of long lectures about the beauty of competition, the expense of American manufacturing, the allegation that Ayn Rand was vilely malorodous being just a nasty rumor. I digress….communist.
To the specific point at hand, I actually agree that American manufacturing would have defended the dollar. Without the outsourcing revolution, stuff would have been more expensive, inflation would have been similar to historic levels, interest rates wouldn’t have been zero, and dollars would consequently have been more valuable globally.
There’s a bigger issue though that has been ignored for years, and especially the last twelve months. Seems like a good place to bring it up. Every time a working class US job is outsourced to the developing world, two things happen:
1) Average schmucks like you and I become wealthier. This is because the company that employed the US working class person lowers their labor cost by moving the job to China, which is reflected in greater profits, higher stock prices, and more money in our 401Ks or pensions. Sweet!
2) The working class guy’s consumption pattern goes from ‘UAW levels’ to ‘Wal-Mart levels’. This effect has been mitigated for a couple decades by excessive borrowing to close the gap in the consumption of working class Joe Schmo.
Net of the difference between the China labor wage and the US Wal-Mart wage, the increase in our own wealth is roughly equivalent to the decline in consumption capacity for Joe Schmo. When you watch pretty much any cable news channel, the topic of outsourcing is inevitably discussed in the context of the increased wealth effect. Even the liberal channels. Even the American Democratic party has abandoned labor, celebrating the beauty of increased national wealth from outsourcing these jobs.
To be honest, I celebrate that too, cause I know my 401K a lot better than people who used to work in factories. But somewhere deep in my would-be liberal’s heart, I worry that the decline in working class consumption capacity associated with outsourcing our manufacturing base is a very very bad thing for the economy – and not only bad but also unsolvable, because the manufacturing class is an unattractive interest group, and no one ever discusses them.
In summary, ours is essentially a consumption economy, and trading the consumption capacity of a UAW job for a Wal-Mart job is definitionally a bad thing.
gahrie
Actually, I’d like to know if George Soros is making any plays on the dollar, he made his reputation and fortune by killing currencies…….
Sandy Underpants
I don’t know much about ForEx, but I don’t think Soros is buying US Dollars, and I don’t think he has the power or interest to kill the dollar off either.
To Jazz, I’m not smart enough to have this conversation. I’m not taking up for anybody, I’m just stating some contributory factors in why the dollar ultimately will cease to exist (absent Matt Drudge). I’m not a factory worker, I don’t want to be a factory worker, I don’t speak for teamsters, that era is dead in America replaced with day-traders and house flippers. I don’t know what get rich easy scheme is next for Americans to avoid real labor with, but eventually we will run out of them.
Running the risk of slanting my take into a disccussion of economics, which I truly don’t want, The 401K is another great example of Americans creating money while contributing nothing to anybody. Wall Street today is just a game of pushing paper around and creating money where nothing exists, and having the people on top bonus out leftover money to themselves, and this type of economy is unsustainable. The government just took $1.5 trillion tax-payer dollars and GAVE it to Wall Street firms, and what’s the issue with funding Health Care again? Something that will literally benefit ALL Americans rather than a completely irrelevant super rich minority.
I don’t have a 401k, but I have an IRA and I would have had more money today if I just took the money I was putting in it 10 years ago and stuck it under my pillow instead. Don’t get me wrong, I love the money for nothing American wealth building structure, but when you’ve got people taking and never giving anything back, we all end up in an ultimately doomed cycle.
And don’t forget, when Oil is traded in Euro’s there will be a sign on the front lawn of the US Treasurey that says, “Dead Currency Storage” on it.
Jazz
Sandy, it was a bit presumptious of me to assume that you were taking up anyone’s cause. I sort of apologize for that, but with the caveat that I enjoy this forum as a place to let the ol’ stream of consciousness do what it will, with the typing leading me to thoughts never before considered. Post #6 is a pretty good example of that, so I disavow anything untoward in that post, as I pretty much was just going with the flow and not thinking about what I was writing til after the fact. (BTW – this caveat applies a lot with me. Just so you know).
Having spewed out new ideas, I was of course worried that there was some obvious glaring flaw in my argument that the libertarians around here would take down. The worst part of #6 is the suggestion that the Chinese peasant’s labor is roughly as expensive as the displaced UAW worker stocking shelves at Wal-Mart. This is probably not true, meaning that outsourcing is still a net benefit to America.
Here’s what I mean. Suppose the UAW worker was making $50/hr, benefits included. His job is shipped overseas and now he works at Wal-Mart, making $12/hr, benefits included. This is a $38/hr loss to the worker. We own Ford stock, so our cost of the guy’s labor has dropped from the fully loaded $50/hr to maybe something like $4/hour for the Chinese peasant. So the UAW guy is out $38/hour, but we the owners are up $46/hour, so net the society is better off by $8/hour. Hurray.
But then I thought about it some more, cause that’s what I do, and I realized that the $4/hr for the Chinese peasant is misleading. To get a measure of what we the Ford stockholders are saving, you have to allocate back a portion of all the additional logistics costs from Chinese manufacture, including more expensive shipping costs, greater inventory to manage an unresponsive supply chain, bribing local officials, insurance, etc. The relevant labor cost of Chinese manufacture is not $4 (or whatever they make)/hour, its something higher, maybe not quite the $12/hour the UAW guy is making at Wal-Mart, but closer than it appears at first glance.
Leading, I think, to a strong suggestion: the increase in wealth that came from outsourcing the American manufacture was achieved almost entirely at the expense of the consumption capacity of American labor.
I’m also not the guy to take up the cause of American labor. For one, because labor seems pretty partisan, which I generally reject, but more because they’re pretty unpopular these days, and I am personally way too insecure to stand up for the rights of the unpopular. Maybe I’m the only one to feel this way, but it seems quite troubling that the consumption capacity of the poor was stripped away to achieve added wealth for the rich. Troubling, sort of, but see the part early in this paragraph about insecurity…I’ll just leave it at that.
The dollar is going to collapse, whether Matt Drudge reports on it or not. I thought it would have happened before Bush left office, but as Bush has become a hero of sorts to me on showing that you can fall down for years (decades?) and still live a productive life, so is this US economy. Somehow when we crash out financially, we can still take $1.5 trillion from Tax-payer money and GIVE that money to corporations to prop them up for a little while longer. Maybe there will be a magic accountant who can bail us out by re-arranging numbers every 18 months or whatever it’s at right now, but eventually we’re going to have to face fixing the mess the dollar is in, and the President (whoever it is at that time) will forsake the dollar completely and make the Euro a world currency joined with the US dollar. With the collapse of the world economy as the emergency factor in rushing that through without suffering the consequences of scores of financial irresponsibility on our nations part.
But that’s cool with me.
Sandy,
Although popular imagination would argue otherwise, no one really knows why one currency moves in a particular direction against another. Experts can point to component factors, but in reality there is no way to make confident predictions. If we could predict, those guys selling easy arbitrage of global currency markets would be advertising during The Office, not on after-hours cable between 1-900# ads.
I mean one obvious factor in the US is our low interest rates. As long as we have little inflation, what benefit is there to raising rates, just to arbitrarily prop up the dollar?
Another common cause is a corporate conspiracy to inflate paper profits. The thinking goes: since most conglomerates report in dollars, each unit of currency earned in other countries becomes more valuable when repatriated if the dollar declines.
However, if a corporate conspiracy were driving it, consider that the House announced its stimulus package on January 19th, a piece of legislation designed to kick start the economy and thus replace “currency machination” profits with the old-fashioned “selling stuff” kind. If there were a corporate conspiracy holding down the dollar, things should have improved for the greenback since January 19th, since the stimulus should replace the alleged conspiracy.
Jan 19th: Euro: Dollar = 1:1.32
Today: Euro: Dollar = 1:1.5
Not buying it.
No one knows why one currency moves vs. another one? Massive debt, governmental instability and instability of infrastructure, lack of relevance worldwide, lack of industry. The main reason the US dollar is hanging on is becuase Oil is traded in dollars. When OPEC or whoever decides to start trading Oil in Euros instead of dollars, the drain stopper will be popped, and the value of our currency will fall faster than ever before.
Our economy has become a total and complete joke. We don’t make anything anymore, we can’t compete with any nation in terms of exporting goods. We import everything, hell we don’t even hire Americans for telemarketing anymore because they cost too much. Financial institutions don’t invest in America anymore, they gamble on paperwork and pass papers around and make money out of it.
The foundation of this country was rock solid from our beginning until the 60’s and now with the discovery of ways to create massive wealth without actually ever doing anything or creating anything, it’s liquified that foundation and we’re now sitting on a foundation of quicksand. Americans aren’t going to work for 15 cents a day, Americans aren’t going to compete in the manufacturing of industry or textiles exportation, Americans are done, they don’t want to work, they all expect a lifestyle built on taking advantage of others.
More than likely this applies to no one reading this, but there are more attorneys in this country than the whole world combined, because they can bleed clients dry because it’s just about money here. Nobody is getting sued in India, nobody is getting sued in the Phillipines. Nobody in other countries is making zillions of dollars selling fake mutual funds, writing in fake accounting numbers, re-aranging numbers.
It’s over for this country, like it was over for Notre Dame football when they fired Bob Davie, it’s just a matter of the formality of time passing and watching it all go down the toilet.
See, i’d like to take Sandy seriously, but he thinks the moon landing was faked, so it pretty much means he has no credibility. Poor Sandy.
One day, DK…. One day.
When a man actually does land on the moon, Buzz and Neal will be long gone.
Sandy,
My compliments on having the courage to take up the cause of the dispossessed working man in an audience of young, mostly economic libertarians, possessing in many cases advanced degrees in service-ish professions. You of course ran the risk of long lectures about the beauty of competition, the expense of American manufacturing, the allegation that Ayn Rand was vilely malorodous being just a nasty rumor. I digress….communist.
To the specific point at hand, I actually agree that American manufacturing would have defended the dollar. Without the outsourcing revolution, stuff would have been more expensive, inflation would have been similar to historic levels, interest rates wouldn’t have been zero, and dollars would consequently have been more valuable globally.
There’s a bigger issue though that has been ignored for years, and especially the last twelve months. Seems like a good place to bring it up. Every time a working class US job is outsourced to the developing world, two things happen:
1) Average schmucks like you and I become wealthier. This is because the company that employed the US working class person lowers their labor cost by moving the job to China, which is reflected in greater profits, higher stock prices, and more money in our 401Ks or pensions. Sweet!
2) The working class guy’s consumption pattern goes from ‘UAW levels’ to ‘Wal-Mart levels’. This effect has been mitigated for a couple decades by excessive borrowing to close the gap in the consumption of working class Joe Schmo.
Net of the difference between the China labor wage and the US Wal-Mart wage, the increase in our own wealth is roughly equivalent to the decline in consumption capacity for Joe Schmo. When you watch pretty much any cable news channel, the topic of outsourcing is inevitably discussed in the context of the increased wealth effect. Even the liberal channels. Even the American Democratic party has abandoned labor, celebrating the beauty of increased national wealth from outsourcing these jobs.
To be honest, I celebrate that too, cause I know my 401K a lot better than people who used to work in factories. But somewhere deep in my would-be liberal’s heart, I worry that the decline in working class consumption capacity associated with outsourcing our manufacturing base is a very very bad thing for the economy – and not only bad but also unsolvable, because the manufacturing class is an unattractive interest group, and no one ever discusses them.
In summary, ours is essentially a consumption economy, and trading the consumption capacity of a UAW job for a Wal-Mart job is definitionally a bad thing.
Actually, I’d like to know if George Soros is making any plays on the dollar, he made his reputation and fortune by killing currencies…….
I don’t know much about ForEx, but I don’t think Soros is buying US Dollars, and I don’t think he has the power or interest to kill the dollar off either.
To Jazz, I’m not smart enough to have this conversation. I’m not taking up for anybody, I’m just stating some contributory factors in why the dollar ultimately will cease to exist (absent Matt Drudge). I’m not a factory worker, I don’t want to be a factory worker, I don’t speak for teamsters, that era is dead in America replaced with day-traders and house flippers. I don’t know what get rich easy scheme is next for Americans to avoid real labor with, but eventually we will run out of them.
Running the risk of slanting my take into a disccussion of economics, which I truly don’t want, The 401K is another great example of Americans creating money while contributing nothing to anybody. Wall Street today is just a game of pushing paper around and creating money where nothing exists, and having the people on top bonus out leftover money to themselves, and this type of economy is unsustainable. The government just took $1.5 trillion tax-payer dollars and GAVE it to Wall Street firms, and what’s the issue with funding Health Care again? Something that will literally benefit ALL Americans rather than a completely irrelevant super rich minority.
I don’t have a 401k, but I have an IRA and I would have had more money today if I just took the money I was putting in it 10 years ago and stuck it under my pillow instead. Don’t get me wrong, I love the money for nothing American wealth building structure, but when you’ve got people taking and never giving anything back, we all end up in an ultimately doomed cycle.
And don’t forget, when Oil is traded in Euro’s there will be a sign on the front lawn of the US Treasurey that says, “Dead Currency Storage” on it.
Sandy, it was a bit presumptious of me to assume that you were taking up anyone’s cause. I sort of apologize for that, but with the caveat that I enjoy this forum as a place to let the ol’ stream of consciousness do what it will, with the typing leading me to thoughts never before considered. Post #6 is a pretty good example of that, so I disavow anything untoward in that post, as I pretty much was just going with the flow and not thinking about what I was writing til after the fact. (BTW – this caveat applies a lot with me. Just so you know).
Having spewed out new ideas, I was of course worried that there was some obvious glaring flaw in my argument that the libertarians around here would take down. The worst part of #6 is the suggestion that the Chinese peasant’s labor is roughly as expensive as the displaced UAW worker stocking shelves at Wal-Mart. This is probably not true, meaning that outsourcing is still a net benefit to America.
Here’s what I mean. Suppose the UAW worker was making $50/hr, benefits included. His job is shipped overseas and now he works at Wal-Mart, making $12/hr, benefits included. This is a $38/hr loss to the worker. We own Ford stock, so our cost of the guy’s labor has dropped from the fully loaded $50/hr to maybe something like $4/hour for the Chinese peasant. So the UAW guy is out $38/hour, but we the owners are up $46/hour, so net the society is better off by $8/hour. Hurray.
But then I thought about it some more, cause that’s what I do, and I realized that the $4/hr for the Chinese peasant is misleading. To get a measure of what we the Ford stockholders are saving, you have to allocate back a portion of all the additional logistics costs from Chinese manufacture, including more expensive shipping costs, greater inventory to manage an unresponsive supply chain, bribing local officials, insurance, etc. The relevant labor cost of Chinese manufacture is not $4 (or whatever they make)/hour, its something higher, maybe not quite the $12/hour the UAW guy is making at Wal-Mart, but closer than it appears at first glance.
Leading, I think, to a strong suggestion: the increase in wealth that came from outsourcing the American manufacture was achieved almost entirely at the expense of the consumption capacity of American labor.
I’m also not the guy to take up the cause of American labor. For one, because labor seems pretty partisan, which I generally reject, but more because they’re pretty unpopular these days, and I am personally way too insecure to stand up for the rights of the unpopular. Maybe I’m the only one to feel this way, but it seems quite troubling that the consumption capacity of the poor was stripped away to achieve added wealth for the rich. Troubling, sort of, but see the part early in this paragraph about insecurity…I’ll just leave it at that.