Is the dollar playing with fire?

[Rolo]

I´m thinking it is clear by now - politicians around the world are sending messages to the whitehouse - they want to see a stable dollar - question will be if Bush will gamble and ignore them, or if he will react. The next months could become VERY interesting.


Alexei Ulyukayev, first deputy chairman of the Russian central bank, hinted that Moscow would step up its ongoing policy of shifting more of its $113.1bn of foreign exchange reserves from dollars into euros. This in turn raised the spectre of Asian central banks with higher reserves still following suit.

"A move to say 40 per cent euro from possibly around 30 per cent is a notable amount and highlights the support the euro may be deriving at present when you consider other central banks may also be diversifying out of the dollar," said Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi.

Neil Mellor, currency strategist at Bank of New York, raised the prospect of a potential domino effect: "Talk of central banks readjusting their reserves to encompass a greater euro weighting has been rife in the foreign exchange markets for quite some time, along with speculation that OPEC members may shift to euro-denominated oil sales.

"A dam can only take so much pressure. Russia's stated intent to review its reserve weightings, in favour of the euro once again, could well lead to similar announcements by its counterparts across the world."

Even comments from Purnomo Yusgiantoro, the president of OPEC, that the dollar is still "the best" currency in which to denominate oil failed to offer much support for the greenback.

http://news.yahoo.com/news?tmpl=story&u=/f...c4500000e2511c8 (http://news.yahoo.com/news?tmpl=story&u=/ft/20041124/bs_ft/a8b954a23e0b11d99c4500000e2511c8)

[Forest]

The Dollar sucks over here right now

:angry:

[RawAlex]

The US dollar is just short of being in a free fall now, some economists are thinking that the bottom could drop out at any time, leading to some very serious issues. Today versus the Canadian dollar, we are at a 13 year high... 2 years ago we were at an all time low. That sort of a swing makes it very hard for businesses on both sides of the border to plan ahead and remain profitable.

Americans will start to see the pain soon, as this swing will start to drive import prices up dramatically, which will lead to the potential of core inflation. Already September's inflation numbers were the highest since 1990, from one report I read.

Inflation can push the prime rate up, which pushes up the bond, which pushes up the costs of borrowing for the government, which in turn pushes harder on the deficit, which in turn pushes the dollar down, that in turn forces the prime rate up... you know how it goes.

Too many tax gifts, too many tax breaks, too much uncontrolled government spending... the vultures are circling the dollar...

Alex

[Naughty]

Originally posted by Forest@Nov 24 2004, 09:53 AM
The Dollar sucks over here right now

:angry:
Welcome to our world;)


You best offer your sexual activities in Euro's about now:))

[Rolo]

Originally posted by RawAlex@Nov 24 2004, 10:35 AM
Americans will start to see the pain soon
EU, and Asian countries (and maybe Canada ;-) ) will probably be worse off than the US, if something drastic happens....

"Why The Dollar Is Giving Way - The problem: America's yawning deficits -- and foreign investors' waning interest in financing them"

http://www.businessweek.com/magazine/conte...11032_mz011.htm (http://www.businessweek.com/magazine/content/04_49/b3911032_mz011.htm)

[RawAlex]

Rolo, that only happens for a while. At a certain point, the shift in "cost" in each of the countries makes many things that use to be worth buying from the other less of a bargain. You can get to a point where trade effectivesly shifts direction, with what was the high price producer suddenly becoming the low price producer.

Cross border shopping between Montreal and Plattsburg NY is up 50% in two months, according to a report on TV today.

In the short run, it can create a mini-boom in the US economy, as real estate and other assets priced in US dollars suddenly become much cheaper to foriegners, which brings in outside money. The downside, as happened about 15 years ago is that this creates inflation pressures, as people outside can afford to pay more than the people inside the economy.

It hurts everyone in some way when the balance is shifted, and when it is shifted so rapidly, it can really leave whole industries, existing trade partners, and potential future trade partners in trouble.

It really isn't good for anyone... worse for those suffering inside the economy in question.

Alex

[Rolo]

Originally posted by RawAlex@Nov 24 2004, 07:29 PM
It really isn't good for anyone...
I agree... actual I think I said it best 1 year ago in this thread:

http://www.oprano.com/msgboard/index.php?showtopic=7754


IMHO, The dollar will continue to loose value, because of numbers like this.

I just hope "GW Bush, Inc." know what they are doing... it could end up like pissing in your pants. First a nice warm feeling, but as you go on, then it will get cold, and your crocth will start to itch until you have to take your pants off and use baby powder :unsure:


I just didn´t listen to myself, so whatever I had in dollars 1 year ago is now 10.6% down in world market value.... but its only money, and I have learned a valuable lesson from it.

Now for the future, then the dollar will probably take another hit... UNLESS politicians outside the US start to use their tools, but I do not think today´s politician have the guts to change things - so I´m preparing for worst case scenario :ph34r: but will be hoping for a happy ending :)

[Winetalk.com]

so far,
the falling dollar has NOT caused the inflation in USA because...
Europe/Asia economies are NOT in the shape where they can afford to increase the prices to US customers and risk losing sales.
Therefore, they keep prices at bay and just decrease their PROFITS,
something the Americans can live with.

[RawAlex]

Serge, that only works in the short run. When companies cut their margins to the bone, sooner or later they end up cutting bone too. They won't stay in business long if they ain't making the money. When the guys willing to work for nothing run out of space, the higher prices come in.

More importantly, the price of raw goods from all over the world goes up. The wood used to build houses, a good part of which comes form Canada, basically just went up by 35-50% in the last year. That translates to higher home costs. Just as we head into the "switch to HDTV" christmas, the costs of electronics in US dollars in up for the first time in years. Increased expenses like that move money OUT of the US economy, and move it to other countries. That leads to inflation. it isn't as instant or as direct as , say, popping a balloon, but it is more like the slow and constant loss of heluim in a balloon.

Apparently China dumped about 60% of it's US dollar holdings in the last 24 hours, which could lead to ANOTHER big drop in the US dollar on the short trading day Friday. I think that Bush is going to be faced with having to take some serious action on this in the next few weeks, otherwise this coudl go from decline to pure free fall.

If nothing else, this might be the once and for all proof that "voodoo economics", the old trickle down theory, ain't worth shit.

Alex

[RawAlex]

...and it isn't stopping...

http://apnews.myway.com/article/20041126/D86JI6AG0.html

When does it start to actually worry Bush?

Alex

[Winetalk.com]

Originally posted by RawAlex@Nov 26 2004, 01:14 AM


Apparently China dumped about 60% of it's US dollar holdings in the last 24 hours, which could lead to ANOTHER big drop in the US dollar on the short trading day Friday.
aparently to you only, China denyed this RUMOR
;-)))

[Winetalk.com]

Originally posted by RawAlex@Nov 26 2004, 10:46 AM
...and it isn't stopping...

http://apnews.myway.com/article/20041126/D86JI6AG0.html

When does it start to actually worry Bush?

Alex
2009 when he is ready to go to Europe on vacation?
;-)))

[grimm]

Originally posted by RawAlex@Nov 24 2004, 07:29 PM
Rolo, that only happens for a while. At a certain point, the shift in "cost" in each of the countries makes many things that use to be worth buying from the other less of a bargain. You can get to a point where trade effectivesly shifts direction, with what was the high price producer suddenly becoming the low price producer.

Cross border shopping between Montreal and Plattsburg NY is up 50% in two months, according to a report on TV today.

In the short run, it can create a mini-boom in the US economy, as real estate and other assets priced in US dollars suddenly become much cheaper to foriegners, which brings in outside money. The downside, as happened about 15 years ago is that this creates inflation pressures, as people outside can afford to pay more than the people inside the economy.

It hurts everyone in some way when the balance is shifted, and when it is shifted so rapidly, it can really leave whole industries, existing trade partners, and potential future trade partners in trouble.

It really isn't good for anyone... worse for those suffering inside the economy in question.

Alex
CNN had a story on the negative effects of the weak us dollar. most european countries are looking at the worst shopping and tourism seasons in decades. foreigners sinmply dont want to pay 50 bucks for A 10 buck pair of gloves, so the dollars stay in the wallets, the hotels stay empty, etc.

[grimm]

Originally posted by Serge_Oprano@Nov 25 2004, 05:28 AM
so far,
the falling dollar has NOT caused the inflation in USA because...
Europe/Asia economies are NOT in the shape where they can afford to increase the prices to US customers and risk losing sales.
Therefore, they keep prices at bay and just decrease their PROFITS,
something the Americans can live with.
bingo. no foreign economy can afford the lack of stability which would be caused by a massive decrease in spending of us dollars