The Fall of the US Dollar

[August1991]

This chart shows the euro price of one US dollar.

In the past 10 years or so, the US dollar has become cheaper around the world. Canadians, Europeans and most foreigners can now buy American dollars at a low price. US dollars are cheap; they're on sale.

The question is: Why? Why are US dollars so cheap now?

Edited March 8, 2008 by August1991

[eyeball]

They're not worth anything because their debt is never going to be paid and deep down lenders know it.

I'm surprised the US hasn't told the world to regard its debt as an invoice for taking the trouble and responsibility for policing it and start from scratch. I've seen more than a few bankruptees riding high on the hog a few years after going broke. No debt often makes it easy to borrow again.

[August1991]

They're not worth anything...

Not worth anything? If you want to go to Disneyland or hire Leonardo di Caprio, you need US dollars to buy the services. (di Caprio will use US money to buy what he wants.)

Is this a Walmart sale? Are Americans tricking the world?

Or does the world want what the US offers - originality, innovation?

Edited March 8, 2008 by August1991

[kuzadd]

This chart shows the euro price of one US dollar.

In the past 10 years or so, the US dollar has become cheaper around the world. Canadians, Europeans and most foreigners can now buy American dollars at a low price. US dollars are cheap; they're on sale.

The question is: Why? Why are US dollars so cheap now?

One reason: because there are soooo many of them.

Or does the world want what the US offers - originality, innovation?

LOL!

no other country offers those things eh?

Edited March 8, 2008 by kuzadd

[sharkman]

The US dollar is a reflection of many things: trade imbalance, debt, economy and interest rates, to name a few. I believe right now the bulk of the problem has to do with a recession and the strategy to treat that, lowering interest rates. International investors realize they can get better interest rates in Canada and other places, so they withdraw their millions from the US which then weakens the US dollar.

The trade imbalance and huge debt are also harmful to their dollar and even when the recession is over these two issues will not go away.

Edited to add: I forgot to mention the effects of $50/barrel oil. Now that it's over $100, the effects are dramatic.

Edited March 8, 2008 by sharkman

[socred]

The US dollar is a reflection of many things: trade imbalance, debt, economy and interest rates, to name a few. I believe right now the bulk of the problem has to do with a recession and the strategy to treat that, lowering interest rates. International investors realize they can get better interest rates in Canada and other places, so they withdraw their millions from the US which then weakens the US dollar.

The trade imbalance and huge debt are also harmful to their dollar and even when the recession is over these two issues will not go away.

A sober post.

I believe the bulk of the problem right now is the US government deficit, which has reached record levels because of the war in Iraq. I also believe that the current account trade deficit that the US continues to run with the rest of the world is a contributing factor.

[Topaz]

One could say that electing GW to President started the fall of the US as we know it. Bush has always loves to spend someone elses money and he'd done a good job here. Hasn't he tripled the debt? How much money would he would have saved if he stayed of out Iraq, $$ or in lives? I still its still a plan to get rid of the US$ and to replace with the Amero but I don't people in NA is going to allow. Thanks to the internet more people are aware of the possibilty of the SSP and don't want it. The one main thing that will hurt the US further,are the jobs that leave the country and people start to lose theirs and that 's starting to happen now with 46,000 loss. Europe also wants the world dollar in Euros instead the US$. What better way to get rid of the US$ than by the mortgage problems which started in Europe.

[jdobbin]

The question is: Why? Why are US dollars so cheap now?

CNN asks the question, Is the U.S. for sale? It is in reference to Canadians coming down and scooping up discounted U.S. homes.

I wish Canadian banks had had some balls back in the last U.S. downturn when Royal Bank had a higher value than Citibank and could have bought it. Now Citibank is a giant. And so it goes. Canadian banks seem to buy at market highs.

[August1991]

CNN asks the question, Is the U.S. for sale? It is in reference to Canadians coming down and scooping up discounted U.S. homes.

The US has been sale for the past 25 years or so and in fact, it's always been for sale. Foreigners are more or less free to go to the US and buy what they see. I am toild that most of Manhattan is owned by Japanese banks. That makes sense, Japanese (and many other foreigners) can achieve a much higher rate of return in the US than they can at home.

The US dollar is a reflection of many things: trade imbalance, debt, economy and interest rates, to name a few. I believe right now the bulk of the problem has to do with a recession and the strategy to treat that, lowering interest rates. International investors realize they can get better interest rates in Canada and other places, so they withdraw their millions from the US which then weakens the US dollar.

The trade imbalance and huge debt are also harmful to their dollar and even when the recession is over these two issues will not go away.

Edited to add: I forgot to mention the effects of $50/barrel oil. Now that it's over $100, the effects are dramatic.

The trade imbalance has existed for almost 30 years and as I pointed out to Dobbin, it's a reflection of the fact that foreigners prefer to own assets in the US because they generate more reliable profits there than anywhere else.

The federal debt has existed for many decades and has been higher before. You mention the nominal interest rate: in the long run, how can the US Fed magically wave its wand and change the real rate of return on investments in the US? No force on earth can do that, any more than it can change the desire of people to save.

As to the high price of oil, Europe imports all of its oil. Why is the euro relatively high? Or will it fall soon too?

One reason: because there are soooo many of them.

US inflation is still low. Edited March 8, 2008 by August1991

[jdobbin]

The US has been sale for the past 25 years or so and in fact, it's always been for sale. Foreigners are more or less free to go to the US and buy what they see. I am toild that most of Manhattan is owned by Japanese banks. That makes sense, Japanese (and many other foreigners) can achieve a much higher rate of return in the US than they can at home.

Latest study in the last weeks said that Canada was the country with the fewest impediments to takeovers.

However, the CNN question didn't refer to commercial properties or companies but housing real estate. Many top Florida and Arizona real estate companies are setting up offices in Canada so that Canadians can buy houses severely discounted.

Too bad Florida has a charge for non-residents when buying houses. Snowbird associations are recommending not to buy until that is remedied.

[socred]

"The basic facts

The U.S. current account deficit:

• Large and getting larger: -5.7% in 2004, -6.2% in 2005?

• Unprecedented historically. The Reagan deficits peaked at 3.5%.

• Large absolutely. $670 billion in 2004. About 12% of non–US gross

saving, about 50% of non–US net saving.

The appreciation and depreciation of the dollar:

• Appreciation against major currencies by 34% from december 95 to

february 02, then depreciation by 31% from february 02 to april 05.

• Against the euro by 40% from december 95 to march 02, then depreciation

by 39% from march 02 to april 05"

The U.S. Current Account Deficit and The Dollar

[bush_cheney2004]

The US has been sale for the past 25 years or so and in fact, it's always been for sale. Foreigners are more or less free to go to the US and buy what they see. I am toild that most of Manhattan is owned by Japanese banks. That makes sense, Japanese (and many other foreigners) can achieve a much higher rate of return in the US than they can at home.

The trade imbalance has existed for almost 30 years and as I pointed out to Dobbin, it's a reflection of the fact that foreigners prefer to own assets in the US because they generate more reliable profits there than anywhere else.

The federal debt has existed for many decades and has been higher before. You mention the nominal interest rate: in the long run, how can the US Fed magically wave its wand and change the real rate of return on investments in the US? No force on earth can do that, any more than it can change the desire of people to save.

As to the high price of oil, Europe imports all of its oil. Why is the euro relatively high? Or will it fall soon too?

Why is it that others do not have your balanced perspective on US dollar valuations and the economy? The usual anti-American jabs from the usual suspects is to be expected, but weren't they alive when other currencies (including their own) reached record lows compared to the US dollar?

A weak dollar policy has been going on for years...it is not an accident. There are advantages and disadvantages to such a policy, and the US dollar will test new lows for a while. Dollar hegemony will be eroded, but it won't disappear anytime soon.

As to imported oil, the Americans provide more muscle to keep the flow going than all of Europe or Asia combined.

[Leafless]

As to the high price of oil, Europe imports all of its oil. Why is the euro relatively high? Or will it fall soon too?

US inflation is still low.

Another major consideration relating to the euro is you cannot have so many countries using the same interest rate at the same time without major problems cropping up.

Give the euro a little more time along with the bickering European countries will cause the euro to drop dramatically along with the probable end of the European Union itself.

[UShaditComing]

Why is it that others do not have your balanced perspective on US dollar valuations and the economy? The usual anti-American jabs from the usual suspects is to be expected, but weren't they alive when other currencies (including their own) reached record lows compared to the US dollar?

A weak dollar policy has been going on for years...it is not an accident. There are advantages and disadvantages to such a policy, and the US dollar will test new lows for a while. Dollar hegemony will be eroded, but it won't disappear anytime soon.

As to imported oil, the Americans provide more muscle to keep the flow going than all of Europe or Asia combined.

Why not try to be a little realistic about the issue for a change. The oil has only a little more than doubled on the Euro and it has gone from around $25-$30 to $106 against the USD. This is not just a weak dollar policy of course because the USD is constantly being propped up by the US Fed. Get serious. Dollar hegemony is being eroded and if oil being now sold more and more throughout the world in other currencies is not the beginning of the end of the hegemony which you think is not disappearing then what is?

Several good explanations have already been put forward by people who are not afraid to be objective and honest and among them is the huge trade deficit the US is managing to build up for itself. If you take away the US sales of WMD to other countries there's not much left that the US exports in trade for what it requires. And so it makes loans which will never be repaid and other countries are coming to accept that reality. And of course oil which the US needs to the tune of over 20 million barrels a day and which is has a rapidly diminishing supply of it's own.

Canada's tarsands development is bailing out the US at this time and it's forecast to double yet again if nothing intrerferes with it. It has already close to quadrupled in the last 8 years due to US needs and the problems arising in the ME. If it was reduced or curtailed in any way because of environmental concerns then the US is toast. This is why the US is only dependent on ME oil to a smaller degree now than it was before Canada became the largest supplier to the US market. And the US government knows very well it's walking a tightrope and so is intent on winning it's war in Iraq and then consolidating control over as much ME oil as it can. This is why your Iraq war will not end before it is brought to fruition.

Oil will remain high because there is a constant and rising demand regardless of the stupid electioneering rhetoric of the hopefuls who say that US dependency on foreign oil will be reduced. Why would they say such things if they weren't already fully aware that the US demand for oil is at the root of all the problems.

And we're supposed to believe the political right goofs who keep claiming that the US has lots of oil but the left won't permit development? What a sick joke. And the Iraq war was becasue of Saddam's WMD's and here's nice bridge for sale.

[UShaditComing]

Here's a really easy to use foreign exchange chart and it includes oil (Brent crude) along with the three precious metals. You can look at the Euro/USD or any other comparisons going back 4 years. Note that the USD has steadily declined against the Euro until it sits at a little better than 65 cents when it closed yesterday. The rapid rise of the CAD against the USD is also interesting to look at to see how recent attempts to prop up the USD has caused the recent (2 months) flucuatons where we were up to about $1.10

http://fx.sauder.ubc.ca/data.html

[bush_cheney2004]

Several good explanations have already been put forward by people who are not afraid to be objective and honest and among them is the huge trade deficit the US is managing to build up for itself. If you take away the US sales of WMD to other countries there's not much left that the US exports in trade for what it requires. And so it makes loans which will never be repaid and other countries are coming to accept that reality. And of course oil which the US needs to the tune of over 20 million barrels a day and which is has a rapidly diminishing supply of it's own.

"WMD" sales are as legitimate as any other....your politics are showing. The US exports more wheat than any other nation, including Canada. Canada imports about 1,000,000 bpd.

Canada's tarsands development is bailing out the US at this time and it's forecast to double yet again if nothing intrerferes with it. It has already close to quadrupled in the last 8 years due to US needs and the problems arising in the ME. If it was reduced or curtailed in any way because of environmental concerns then the US is toast. This is why the US is only dependent on ME oil to a smaller degree now than it was before Canada became the largest supplier to the US market. And the US government knows very well it's walking a tightrope and so is intent on winning it's war in Iraq and then consolidating control over as much ME oil as it can. This is why your Iraq war will not end before it is brought to fruition.

Canada's tarsands development would not exist were it not for US and other foreign investment, as well as a US market. The Americans could have purchased Saddam's oil for far less cost than the Iraq war.....far more is at stake than just oil.

Oil will remain high because there is a constant and rising demand regardless of the stupid electioneering rhetoric of the hopefuls who say that US dependency on foreign oil will be reduced. Why would they say such things if they weren't already fully aware that the US demand for oil is at the root of all the problems.

The USA had far greater "problems" before oil was ever "discovered". The root problem is "freedom", so get used to it.

And we're supposed to believe the political right goofs who keep claiming that the US has lots of oil but the left won't permit development? What a sick joke. And the Iraq war was becasue of Saddam's WMD's and here's nice bridge for sale.

See ANWR.

[UShaditComing]

"WMD" sales are as legitimate as any other....your politics are showing. The US exports more wheat than any other nation, including Canada. Canada imports about 1,000,000 bpd.

You only want to deny the reality of the situation because the exports are not nearly enough and it is reflected in the US trade deficit. Stop trying to use examples like that to paint a false picture.

Canada's tarsands development would not exist were it not for US and other foreign investment, as well as a US market.

I note that you needed to add 'other foreign' as you were writing and thinking at the same time. In fact it is nearly all US investment but you are right that it wouldn't have been developed nearly as quickly if it hadn't been for US demands. Now you're starting to get it!

The Americans could have purchased Saddam's oil for far less cost than the Iraq war.....far more is at stake than just oil.

Yes, this is the standard argument and it has some validity. But the demand for oil has been foreseen and hence the development of the tarsands by US interests. Therefore without that 5 million a day the shortage would have driven the price up even further and Saddam had nationalized his oil resources and was not doling out development work to the US because it favoured others. Hence no trade for oil and the US pays the full price. As opposed to Saudi where the cost is offset with WMD sales and some dollars off for the US. And of course the Iraq war was never supposed to cost anywhre near it's current cost. Yet even so, when the war is brough to fruition, the oil is no longer nationalized, and the US companies are doing the development and are getting it in trade exchange, it will still be a deal. Production will rise to an estimated 5 mbd or more and the US will be out of the woods for at least a while longer. Perhaps even until alternatives can be developed. And the price may decrease to somewhere around $70 according to some experts but in reality it will be more like $90 according to experts who aren't in denial.

When you say there is far more at stake than the oil you don't specify what. That is because you are alluding to national security and you know that's now a dead horse being flogged and it embarrasses you to repeat it.

The USA had far greater "problems" before oil was ever "discovered". The root problem is "freedom", so get used to it.

See ANWR.

Is that one of your pathetic attempts to say something clever? See ANWR yourself and learn how long it will last if it was developed. It's a smokescreen to make American righties feel secure and nothing more. Furthermore, the high cost oil development currently going on makes it very obvious that the easy to get stuff they claim to have is not there anymore.

Edited March 8, 2008 by UShaditComing

[bush_cheney2004]

You only want to deny the reality of the situation because the exports are not nearly enough and it is reflected in the US trade deficit. Stop trying to use examples like that to paint a false picture.

Wrong....the hallmark of my membership here is to deny nothing, but in fact revel in the pure amorality of economics. Let's see...Canada just ordered 4 new Globemaster III's, with air and cruise control. The US has been in trade deficit mode for a very long time.....still, our export market is growing because of a lower dollar.

I note that you needed to add 'other foreign' as you were writing and thinking at the same time. In fact it is nearly all US investment but you are right that it wouldn't have been developed nearly as quickly if it hadn't been for US demands. Now you're starting to get it!

No..it wouldn't exist at all, especially after the Canadian government dicked things up with the NEP.

Yes, this is the standard argument and it has some validity....

That's why I posted it...next.

When you say there is far more at stake than the oil you don't specify what. That is because you are alluding to national security and you know that's now a dead horse being flogged and it embarrasses you to repeat it.

See provious threads and posts for a full discussion...you just got here.

Is that one of your pathetic attempts to say something clever? See ANWR yourself and learn how long it will last if it was developed. It's a smokescreen to make American righties feel secure and nothing more. Furthermore, the high cost oil development currently going on makes it very obvious that the easy to get stuff they claim to have is not there anymore.

There is more recoverable oil in ANWR than all of current production in the lower 48 states, which is about 3rd in the world. The world's is a hydrocarbon economy, and the USA is both producer and consumer.

[kuzadd]

CNN asks the question, Is the U.S. for sale? It is in reference to Canadians coming down and scooping up discounted U.S. homes.

I wish Canadian banks had had some balls back in the last U.S. downturn when Royal Bank had a higher value than Citibank and could have bought it. Now Citibank is a giant. And so it goes. Canadian banks seem to buy at market highs.

citibank is in quite a mess, thanks to the subprime crisis, will they still be a giant after this fiasco? time will tell

[kuzadd]

US inflation is still low.

so you claim?

how "low' is it?

Inflation is a problem, and it's being acknowledged, too many dollars is a good part of the problem.

Edited March 8, 2008 by kuzadd

[UShaditComing]

There is more recoverable oil in ANWR than all of current production in the lower 48 states, which is about 3rd in the world. The world's is a hydrocarbon economy, and the USA is both producer and consumer.

There is possibly that much but that comment goes to prove even more that the 48 has little and it's declining. And you fail to mention that the 48 has much less than half of what the US requires for it's current rate of consumption. You also prefer to take each development in isolation which helps to hide the plain fact that ANWR couldn't supply more than about 10% of demand for x number of years. Good, you understand that the world is a hydrocarbon economy! Telling me that the US produces and consumes is just a waste of valuable cyberspace but you probably knew that and just needed something else to say.

You should never have gotten yourself into this because when the facts and figures are presented and you have no decent rebuttal your halfassed claims of oil not being the reason for US presence on the Arabian peninsula are shot down in flames. Your usefulness is in the fact that you have provided the perfect sounding board for an exposure of the real facts. Most likely all you will ever be much good for. Now I'll sit back and wait to see if there are any other deniers who have the brains or the balls to climb on your train as it clatters and clanks down the rails with some wheels missing.

You really have conceded all my other points and although you continue to act like a smart guy now, it should be obvious to most other posters here that your short, rude, and terse replies just demonstrate that you are in over your head.

[bush_cheney2004]

There is possibly that much but that comment goes to prove even more that the 48 has little and it's declining. And you fail to mention that the 48 has much less than half of what the US requires for it's current rate of consumption. You also prefer to take each development in isolation which helps to hide the plain fact that ANWR couldn't supply more than about 10% of demand for x number of years. Good, you understand that the world is a hydrocarbon economy! Telling me that the US produces and consumes is just a waste of valuable cyberspace but you probably knew that and just needed something else to say.

Gibberish...please sort this out and report with clarity. US production and consumption has been incremental in the past as well.

You should never have gotten yourself into this because when the facts and figures are presented and you have no decent rebuttal your halfassed claims of oil not being the reason for US presence on the Arabian peninsula are shot down in flames. Your usefulness is in the fact that you have provided the perfect sounding board for an exposure of the real facts. Most likely all you will ever be much good for. Now I'll sit back and wait to see if there are any other deniers who have the brains or the balls to climb on your train as it clatters and clanks down the rails with some wheels missing.

More gibberish.....the facts are plain to see....you are not only late to this game, but hardly original.

You really have conceded all my other points and although you continue to act like a smart guy now, it should be obvious to most other posters here that your short, rude, and terse replies just demonstrate that you are in over your head.

No...you will find that I am the Ugly American that some (not all) love to hate. You, on the other hand, are just a new member with a hate speech name.

[bush_cheney2004]

Hey USHadIt....I remember this exchange from long ago.....

“The U.S. is a huge exporter of intellectual property,” he writes, “but good luck finding it in government stats — it’s practically invisible.” In an interview, Kessler told me “We are already moving low margin jobs overseas,” (remember the debates over outsourcing during the campaign?). “A weak dollar won't bring back manufacturing jobs. Twenty dollar an hour jobs in the U.S. vs. two dollars in China? The dollar would have to drop by 90 percent to make a difference.

But fortunately, we are left with high margin, high profit intellectual property jobs. We don't make stuff anymore, we design it." He exaggerates a bit – the U.S. is still a manufacturing giant. But he’s correct about long-term trends. To illustrate how this all works, he offers a helpful example in his book:

“A $300 Intel microprocessor and a $50 Microsoft operating system are exported from the U.S.; a $1000 [Toshiba laptop made in Japan] is imported, for a net trade deficit of $650. Yet on a profit basis, the U.S. clears 300 bucks, and the rest of the world maybe 50. Which economic system would you invest in? Yeah, me too.”

http://www.foxnews.com/story/0,2933,139726,00.html

What, Me Worry?

Edited March 9, 2008 by bush_cheney2004

[UShaditComing]

You might not be worried Alfred E. Neuman but your country is definitlely worried.

Just yesterday it was stated on the news that the average American owns only 50% of his house clear and that house prices have actually dropped 50% in some areas. Your country could be in a lot deeper trouble than you appreciate my friend. If things don't improve substantially by the election then the Repubs are going to get the licking of their lives. About time because the American way is very sick now and this is the message I have attempted to get through your thick heads. Remember me mentiioning Will Hutton's, Declaration of Interdepence'?

You should get a copy and read it and then you will understand.

[August1991]

Several good explanations have already been put forward by people who are not afraid to be objective and honest and among them is the huge trade deficit the US is managing to build up for itself.

The US current account deficit has existed since the early 1980s. It has an identical capital account surplus.

One reason for the capital account surplus is that US has offerred reliable and high rates of return on investment compared to other places. Foreigners like to invest in America.

The US dollar may have been overvalued in the past and it appears to have overshot in its decline. This may be a good thing. I don't know. On this question, my crystal ball is still foggy.