who benefits from weak dollar?

[Winetalk.com]

there are clear winners of a weak dollar,
surprisingly enough,
the VAST majority of Coalition of the willing come up as clear winners from it.

Their debt to IMF and USA is in US dollars,
the weak dollar makes payments easier to them.

Weak dollar makes Europeans more nervous than the war in Iraq,
even though the majority of 'em still don't understand/ see the consequences of it,
there is no "anti-weak dollar" demonstration on the streets of Europe,
even though the weak $$ will affect them more than
all wars US government participated in the last 10 years.

Bush will go in history as the most UNDERESTIMATED President of the United States!

[Mike AI]

Serge, I agree with you 100% on this post....

I was trying to explain this to some people on GFY, they could not even contemplate it....

Of course most of the ones who are bitching were foreigners - Canadiens and such..... I guess for them it sucks....

Maybe next tmie they will support the US when we need it....

Also Serge what is making it tough on the French and Germans, is their central banks REFUSE to lower prime interest rates - so they are gettng a double wammy.... So in away Bush is trying to get them to change up their economy as well...


I love it....

[Vick]

Originally posted by Mike AI@May 24 2003, 10:01 AM

I was trying to explain this to some people on GFY, they could not even contemplate it....



and that is like

:headwall: :headwall: :headwall: :headwall: :headwall: :headwall: :headwall: :headwall: :headwall: :headwall:


Better to :stout: and :stout: until :hic:



Last edited by Vick at May 24 2003, 10:30 AM

[Mike AI]

Vick, while I was not successful in educating any of the GFYers, it was fun bashing and harassing them.... Those who are the America-haters on the board.

I had help from Certified Oprano Genuis .... Colin

[Winetalk.com]

Originally posted by Mike AI@May 24 2003, 10:01 AM
So in away Bush is trying to get them to change up their economy as well...


I love it....
yeap, and by doing that,
he is doing what THEY were asking us to do all along,
NON MILITARY resolution of the conflicts...
;-)))

not a single shot is fired and they are lead by the shepperd they never wanted into the "green pastures"
;-))

gotta LOVE Bush for that and the irony of the situation and follow up on the age old:
"Don't wish it too much or you might get it"
;-)))

[Rolo]

I´m affraid that if Bush do not find a stable value for the dollar, then foreign investors will soon find European bonds and stocks better than US... If I was a foreign investors and had $1000 worth of US bonds, then they would be 20-30% lower value today, then 1 year ago (if I was going to sell them that is). Now 20-30% might not create the panic in the stock market (lots of investors will probably wait for the markets to turn), but what if the dollar continue to decress in value, when will foreign investors start to think that their money are more safe elsewhere?

If foreign investors stops investing in the US or sell their US stocks/bonds etc. then it will have alot of consequences for both US economy, and also play a major role in the outcome on some international issues (ex. offshore tax plan from oecd, which the US have been fighting because of all the foreign investors investing in the US).

I have faith in Bush, and I do belive he knows what he is doing... but it is playing with fire - just like war you need good generals (and Bush do have some good ones ;-)))

[JR]

my observation based on everything i have seen and read has been that the EU ecomony is fucked. its double fucked. Germany is fucked. France is fucked... Italy is screwed. unemployment is through the roof. Germany has the highest unemployment in decades and its Europes largest economy. France just received their second official EU warning for budget deficits.

now France, in typical French style, is protesting because the Social Security system is a few years from being bankrupt.. but they (again) wont let the government raise taxes and they dont want to work longer and dont want to make any sacrifices. pretty funny coming from the people who one year ago were protesting for a 35hr work week.

fine with me. a chateau in the valley would be kinda cool. :)

I dont think the EU is going to be paying off much debt in dollars if they are broke like they are right now.

the US economy is currently growing at roughly twice the rate of the EU economy.

a weak dollar means that there are less EU exports to the States
a weak dollar means that less people are spending money in the EU and traveling to the EU.

their economic problems are be compounded on many levels.

the one thing i have not understood is how it will be a good thing to invite 10 post soviet basket case countries into the fold when the biggest and oldest economies cant get thier shit together and conform to the EU agreements for monetary policies.

my prediction is that the EU will become symbolic and it will exist on paper only in the end.

Why? i watched the UN fuck around with the Iraq thing. I realized some of the more fundamental flaws inherent in that system and why conflict resolution never happens and wars are never averted. I think its because every country has two primary obligations first... their own interests as a nation and the political interests of the politicians.... THEN... comes political alliances with common interests (arab/islamic countries, communists, dictatorships, western europe etc etc)... the actual problem cannot be dealt with unless it is in the direct interest of the majority of members to do so. That historically, does not happen. Its usually in the better interest of most that no action is taken.

the EU is headed right down that path in my opinion. The idea itself assumes common and even identical legal, political, national, security, cultural and economic interests. How does a politician make unpopular changes domestically to conform to the greater good (i.e. fiscal policy, taxes, trade etc)?

The larger it becomes... the more diverse the political, financial, economic, cultural and security and trade interests become. the more that happens, the possibility of consensus/agreement and a common view on every issue decreases dramatically.

I think the EU will fail as it is envisioned. I think England is right to keep everything at arms length and not to join the Euro.

i am probably wrong. but i think the UN offers a good example of how it cannot work.

[Winetalk.com]

Rolo,
from perspective of foreign investor,
selling US bonds now would fall into:
Buy High Sell Low,
and I don't see them taking trillion $$ loss.

Panic wise,
USA Economy, as bad as it is,
it still outperforms European/Asian economies,
panic just won't happen...not in the cards.

We can't nuke France/Germany,
but we can surely flex our financial muscle,
especially if it's in the intersts of the USA, and at this time it
IS in the interests of USA.

Would we do it, if they showed us support in the war?
I don't think so,
one hand washes another, and we wouldn't do anything to hurt our alies, but...they were NOT our allies,
Belize was and Belize is benefitting now from lower dollar

[Winetalk.com]

JR,
very keen observation,
I can';t agree more, and I like the way you pout it with historical analogies.

[JR]

Thanks Serge :)

I also used to think that the Euro would be a good thing and that the EU would better balance out world politics and political and economic interests. i also dont think that can or will happen now.

I realized later that 20 plus countries will never be swifter than 1. The US can turn on a dime. The EU cannot.

[Opti]

A low $ may be good in the short term, but it's a risky strategy if anything goes wrong and it can't be turned back around in the next 12 months or so

If foriegn investors pull out of bonds and use the added buying power to get into the US property market it could see inflation become an issue that keeps the dollar down for a long period of time.

Hard to make the scenario of a low dollar for the next 5 years or more sound good :(

I bet it's been years since inflation was an issue in the US? And after years of fairly stable currency strength it's very likely there is already a rush of foriegn property investors enticed by the sudden advantage they have over local buyers.

[el pres]

The 27% drop in the $/euro rate this last year has been great for me,
I work mainly with European sponsors, but my host, feeds and most of my content comes from the U.S.

Trouble is Spain's economy is steaming, but with interest rates so low because of the rest of the EU, inflation is starting to be a problem.

House prices are crazy, a $350k house four years ago now costs you $600k.

[Sharpie]

I sure would like to see it turned around in the next 2 weeks..................... The show expenses are going to cost us about 10% more :-( That is several thousand dollars......

[*KK*]

For US companies that make products which are competitive with European ones, the weakened dollar is fantastic for the moment. Some of these businesses will probably have profits like they haven't seen in years... and some Euro/etc businesses will probably go under since they won't be able to compete with the pricing against the dollar...

However, here at home a weakened dollar could mean the start of inflation... and higher interest rates... and while I think interest rates are going to start climbing at some point in the very near future, the housing market is one of the main reasons the US economy has remained stable while the dollar has nosedived, and if rates go up too much or too quickly then the market could take a big hit... causing major problems all the way around.

It's not a pretty picture if you look at it from some angles.

[gigi]

Canadians and Europeans have to remember that although gross income is down...so are costs (ie: hosting, content etc...)....that is if you are paying in US dollars.

I hate global economics....but I'm aware of how it affects me personally. ;)

[cj]

Originally posted by gigi@May 24 2003, 04:12 PM
Canadians and Europeans have to remember that although gross income is down...so are costs (ie: hosting, content etc...)....that is if you are paying in US dollars.

not really ... we still pay our bills in us dollars ... us dollars comes in, us dollars goes straight out, with no conversion into our local currency ... its all relative ...

it would only be a saving if our dollars were earned in our own currency in the first place ...

i try to look at it your way too, it sounds like an advantage that way LOL

[Monk]

I think gig was just saying that it is incorrect to think of your exchange loss in terms of your gross revenues.

If you do want to think of it that way, then you need to back out a number for the exchange gain on your expenses

...or just think of it as an exchange loss on your net income.

[gigi]

Very true CJ....I really should get a US Visa....I pay everything through my Visa and it's a Canadian Visa so the exchange stands for me....so ultimately it has been cheaper in my case. But if you were paying by check or US draft that is a different story.

[gigi]

Originally posted by Monk@May 24 2003, 04:06 PM
I think gig was just saying that it is incorrect to think of your exchange loss in terms of your gross revenues.

If you do want to think of it that way, then you need to back out a number for the exchange gain on your expenses

...or just think of it as an exchange loss on your net income.
Yes, exactly Monk....but CJ is right in that if the USdollar is never exchanged in the first place (ie: it sits in a US account and US checks are written out of that acct) it wouldn't matter.

But because I do exchange the $ and stick it on my Visa I am definitely saving money on expenses.

When the US$ goes back up, I'll definitely have to look into a US Visa dammit! Not sure why I didn't think of it before now...lol.

Geez, I HATE economics!!!! haha

[Rolo]

In the time we have been in the adult internet business I have seen the dollar even lower vs. european currencies - that was before the dotcom boom etc. We didn´t think much about it then, but we were happy when the dollar got stronger and stronger, year after year.

Now its getting lower and lower, year after year, but we are just adjusting our business, as I expect most companies are doing. When (if) the dollar gets stronger again, then we will be happy, but until then its just a matter of lowering costs in Europe, and start making more Euros (and ofcourse also dollars - money is money ;-)))

I wonder if any European adult companies are looking to buy some US companies in todays market? With all the "possible" processing, goverment, and tax problems + a lower dollar value, there would be some interesting US companies, which could be bought for a "good price".

[cj]

Originally posted by gigi@May 24 2003, 07:13 PM
But because I do exchange the $ and stick it on my Visa I am definitely saving money on expenses.

not really ...

if you do convert your dollars, you are going to get less canadian dollars for the same amount of us dollars, plus you have the fees associated with working in 2 currencies ... so even though the money you pay out is less canadian dollars, its still the same amount of us dollars with extra costs ...

there is no possible scenario where you can say you are 'saving' money because your bills cost less in your currency ... it is still a loss, because you have less canadian dollars coming in to cover those expenses ...

Monk, i don't really understand what you mean ... any way you work the numbers its still a loss at the end, even when it appears to be a gain ...

suddenly rob mac's program of paying in australian dollars doesn't look so bad :biglaugh:

[Mike AI]

I realized later that 20 plus countries will never be swifter than 1. The US can turn on a dime. The EU cannot.


This is a PEARL, that can be apllied to almost everything.

Great dicussion, much better then the other one I was having...

[Almighty Colin]

Here's a great image. This shows the "US Dollar Index" over time which is the dollar vs. a weighted average of 6 currencies.

http://www.linkification.com/linked/DX.gif

What is easily noted is that the rate today is about the same as in 1999. This means the exchange rate is the worst most non-US webmasters have seen because they have been in the business less than 4 years. Those that have been around since, say 1996, can remember rates 15% lower than today (on average).

For most of the past decade the dollar was weaker

The dollar is hitting new lows vs. the euro but the euro is only four years old. If the Euro had been around for a few decades we'd be able to compare and say that we're 15% above the rates of 1992. We can estimate that because we can compare to the Deutschmark, Franc, and other european currencies of the time.

We just had a run-up in the dollar. So far it's gone back a little and is at 1999 rates again. Significant?

[Winetalk.com]

the thing is,
US wants "some inflation" as it's a cure of the current DEFLATION...

[wig]

I love this thread!

Gold benefits from a weak dollar. :rokk:

Colin, the secondary peak around 120 looks like it unfolded around MARCH 2002. Gotta love that witchcraft! :yowsa:

2 more predictions:

The housing market and prices will crash
The dollar will continue to erode for another 1-2 years

1 observation:

Bush has absolutely NO control over the value of the dollar in any lasting way. The market does.

[Winetalk.com]

Originally posted by wig@May 25 2003, 07:43 AM


Bush has absolutely NO control over the value of the dollar in any lasting way. The market does.
wig,
and you won't argue with me...markets can and ARE manipulated all the time,
the "shepperd" just takes "sheep" where the "shepperd" wants and right now, Bush's administration
"talks the dollar down"...and market just follow the nod of the "shepperd"

[Winetalk.com]

P.S. let me know if you need the proof, and I'll proive that to you beyond the reasonable doubt, using Soros as an example,
he IS a BIG chunk of the m,arket

[cj]

Colin ... i remember in 1999 our dollar was about the same as it is now, but i don't think it bothered anyone back then as we were excited that we got more than $1=$1 ... & so much cash was flowing that I don't think anyone would really have noticed 15% as much as today.

Us foreigners have just been spoilt by a strong us economy, & will have to ride the wave & see what happens ... so far for me the dollar has been equal years high & equal years low. apart from being a pain in the ass, it is interesting to watch the cause & effect from world events in an industry as global as online porn.

You can tell a lot about the state of the world in porn site logs :biglaugh:

[Monk]

mmmmm.....gooooooold!!!!

dalaynay[de][p][i][j7939474,y]&listNum=37http://stockcharts.com/def/servlet/SC.web?c=$gold,uu[w,a]dalaynay[de][p][i][j7939474,y]&listNum=37]http://stockcharts.com/def/servlet/SC.web?...4,y]&listNum=37 (http://stockcharts.com/def/servlet/SC.web?c=$gold,uu[w,a)

[Almighty Colin]

CJ,

I think there's another factor too. Psychological. In 1999 the US dollar had been rising from a lesser exchange rate against most currencies. Since rates are relative what seems "strong" or "weak" is often in reference to where it has been recently. On this date in 1999, the US dollar to Australian dollar conversion rate was the same as it is today within a penny.

$1.51 per dollar today seems poor when compared to $1.80 a year ago. The $1.59 exchange rate of 1998 seemed good compared to the $1.30 rate in 1997.

If I were a non-US webmaster getting paid in dollars I'd want a strong dollar. No doubt about it.

[Mike AI]

2 more predictions:

The housing market and prices will crash
The dollar will continue to erode for another 1-2 years


Housing will stay strong ( except in those areas that have created huge bubbles - west coast, and east coast large cities) or at least stable as long as interest rates stay low.




1 observation:

Bush has absolutely NO control over the value of the dollar in any lasting way. The market does.

He has more control then most think, he can start printing money left and right....

[*KK*]

Originally posted by Mike AI@May 25 2003, 08:47 AM
2 more predictions:

The housing market and prices will crash
The dollar will continue to erode for another 1-2 years


Housing will stay strong ( except in those areas that have created huge bubbles - west coast, and east coast large cities) or at least stable as long as interest rates stay low.




1 observation:

Bush has absolutely NO control over the value of the dollar in any lasting way. The market does.

He has more control then most think, he can start printing money left and right....
Interestingly enough Michael, I'm not sure those huge bubbles you reference are going to pop... we've been sitting here in Phx waiting for nearly 2 years for houses to come back down to earth as far as pricing and it's not only not happening, the prices are going up.

We have basically a 3 tier situation here I think -- over 3 million, 1-3 million and under 1 million (I realize that this group has a lot of little subgroups but for practical purposes I'm lumping them all together) --

Over the last couple of years we've seen the 1-3 million market bounce up and down a bit, especially on the low end -- I think a million for a house is a psychological barrier to a lot of people, even those that will spend 950K on a house... the 3+ market is pretty much always the same, since the percentage of the population that is spending that kind of money stays pretty stable as a percentage, even though the individuals may fluctuate.

In the under a million market here, things seem to be just as hot as ever... new home builders keep forging along and selling their lots like hotcakes, especially in certain areas that are still perceived as good values for the tier above starter homes (of course starter homes here aren't cheap either).

Heck my neighborhood is an older one, which is currently going thru what I call the 'tear down' stage and instead of houses being priced according to the market for living in them, they are priced according to the value of tearing them down and rebuilding on the same footprint... especially since my neighborhood is not a zero lot line area, and you still can actually get some yard in the front and back, unlike most new construction.

[wig]

Originally posted by Serge_Oprano@May 25 2003, 07:54 AM
P.S. let me know if you need the proof, and I'll proive that to you beyond the reasonable doubt, using Soros as an example,
he IS a BIG chunk of the m,arket
Soros would have been the example I would have used. Despite all efforts of Central Bank of UK to prop up British Pound, Soros and market won. :)

But, I agree in the fact that Gov't's endeavor to control the markets, they just cannot keep it.

[wig]

Originally posted by Mike AI@May 25 2003, 11:47 AM
2 more predictions:

The housing market and prices will crash
The dollar will continue to erode for another 1-2 years


Housing will stay strong ( except in those areas that have created huge bubbles - west coast, and east coast large cities) or at least stable as long as interest rates stay low.




1 observation:

Bush has absolutely NO control over the value of the dollar in any lasting way. The market does.

He has more control then most think, he can start printing money left and right....
Mike,

Printing money has consequences, so does contracting the money supply. It is not a question of whether these tools are available (to the FED not Bush).

It is a question of do the markets have to follow the stimulus (or lack thereof)?

In the end, the market always wins. If your attempt is to do anything more than institute balance; if it is control and direction one is after, only futility lies ahead.

There is only one thing that can happen if the FED, policy makers, etc. try and exert too much influence... and that is to fuck it up. :D

We have been living in a disinflationary world since 1980. This is a very supportive environment for growth without inflation. Sooner or later, the cycle ends. Personally, I believe it ended in 1999.





Last edited by wig at May 25 2003, 04:15 PM

[JR]

Originally posted by *KK*@May 25 2003, 12:44 PM

Interestingly enough Michael, I'm not sure those huge bubbles you reference are going to pop... we've been sitting here in Phx waiting for nearly 2 years for houses to come back down to earth as far as pricing and it's not only not happening, the prices are going up.

i agree. i dont think they will "pop" either in many of the hot spots in the US. Pheonix is certainly one of them.

Seattle is already starting to recover right now and property there went right off the charts as well in the last several years.

[Mike AI]

WIG I agree with you overall MARKET is dominate, and that is the way it should be.... or else we can all start calling each other comrade!

[*KK*]

Originally posted by JR@May 25 2003, 01:16 PM
i agree. i dont think they will "pop" either in many of the hot spots in the US. Pheonix is certainly one of them.

Seattle is already starting to recover right now and property there went right off the charts as well in the last several years.
The things that Phoenix, SoCal, S Fla all have in common are excellent weather, accessibility, a population with a decent disposable income, and they are all areas that for one reason or another people want to move to -- Vegas is another one that does well --

As the population ages more people tend to buy second homes or retirement homes in areas where they will be comfortable during most of the year -- and there are also alot of recreational things like golfing to do in all these areas... the accessibility factor is huge as well -- with America West and Southwest doing so well currently (relative to United, AA, etc) the cheap fares to Vegas, Phx, and SoCal areas also help when people are making decisions on where to live... for instance if your mother moved out here, or your kids moved out here, and you could come and visit for next to nothing roundtrip with only a weeks notice, it's somewhere that becomes even more convenient.

[*KK*]

One other thing of note too -- Fla has no personal income tax, Phx has some of the lowest property tax I have ever seen, and Nevada has many corporate benefits -- which only add to the reason for their growth --

[Rolo]

I once saw a report written about the property sector - title:

"Buy Land, They Don't Make it Anymore"

:D

[slavdogg]

"Economists point out that a weaker U.S. dollar can help fight deflation "

[JR]

i am too lazy to look at some credible numbers but on all financial channels, i keep seeing remarks to the effect that for each X% increase in the Euro, the EU loses X Billions in revenue

pretty interesting. ironic i guess to take the plunge, watch the Euro fall, worry, have doubts etc... then when it strengthens, it causes more harm than when it was weak.

hopefully, it will balance out for them in the end.

[wig]

I may be completely wrong in my assessments, but using history as a guide it is a liquidity crisis that will wreak havoc in the near future and further compound the economic problems we face today.

I believe that this will cause a falling equity market (falling further that is), a falling bond market (in price or rising rates) and a falling housing market at the same time, with the equity market bottoming first.

The bottom in the stock market will be as apparent to the participants as the top was -- in other words, it won't be. The true bottom is when everyone is convinced that the stock market is not the right place to invest for the long haul and fundamentally change their belief.

Just like the true top is where everyone is convinced that only upside lies ahead. This is real close to where the real estate market is IMO.

Sure, some areas will be hit harder than others and there will even be SOME winners, but I think the general trend will be sellers. There will just be little liquidity to support further gains. Real estate is the last to go in any cycle. It is the most illiquid, there is no fixed increments and it is the last thing one considers selling in a crisis.

How and why any market does what it does is difficult to see in advance, but easy to see in retrospect. It is difficult for people to see in advance because they want to apply reason and rationales. Market action very seldom seems reasoned or rational at the turning points.

The bottom line is that when mass psychology ebbs (or flows) to the extreme in one direction, it invariably goes to the other extreme. The question only becomes the timing.

Hope everyone has a great Memorial Day!

[Almighty Colin]

"U.S. President George W. Bush told Japanese Prime Minister Junichiro Koizumi on Friday that the United States supports a strong dollar, a senior U.S. official said. "The president once again noted that U.S. policy is to support a strong dollar," the official told reporters at a White House briefing on the meeting between the two leaders. A Japanese government official said Koizumi told Bush a strong dollar was "in the interests of both our economies". The official said Bush made his remarks after Koizumi raised the issue of the yen's recent strengthening against the dollar. "


Link (http://www.fxstreet.com/nou/content/102880/content.asp?menu=market&dia=2652003)

[Monk]

Yup, there needs to be a MAJOR rush to the exits for a major bottom to occur. One number that is thrown around says that panic selling needs to occur, with at least one day (usually more) that result in 90% of the total volume for the day being down volume. People can't sell their stocks fast enough.

Frankly, the way the Dow charts look... we have only seen less than half of the decline in store for it.

Re: real estate - its a bubble waiting to pop also. Its gone up too far, too fast.... and nothing goes up forever.... everything has its cycle.

[Rolo]

Originally posted by Colin@May 26 2003, 05:13 AM
"The president once again noted that U.S. policy is to support a strong dollar," the official told reporters at a White House briefing on the meeting between the two leaders.
I guess it depends, which currency it needs to be strong against. The biggest fall I have seen is against the Euro, while the Yen have been more modest. Don´t think its because the Yen and USD are strong at the moment, would rather say they are equally weak.

The panic might not happen on a global scale, but I bet there are alot of export business in Europe, which are getting ready to laying off % of its workforce, because of the low dollar value. But thats not a US problem, that something Europe have to deal with.



Last edited by Rolo at May 26 2003, 07:34 AM

[Ironhorse]

Serge I do agree that Bush will go down as severely underestimated but I am also nervous about this tightrope he is walking, especially how it relates to foreign relations. Time will tell.