There's No Shortage of Those Who Want to See the Dollar Go Lower 28 comments
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With all the talk about an alternate reserve currency, the dollar is taking a pounding (click to enlarge). 
There is no shortage of participants interested in a weaker dollar. Some use the alternate reserve currency issue to talk down the dollar, others are just happy it's happening. Here are some examples:
- Russia: With their economy in shambles and completely dependent on energy exports, Russia wants a weaker dollar in order to raise energy prices. Oil price is up $3.50 (5%) a barrel this morning on weak dollar.
- China: China's currency is pegged to the dollar, so a weaker dollar makes their goods cheaper in Europe, Japan, Australia, etc.
- OPEC nations: the same reason as Russia, recreating a 2008-style spike in oil prices. Oil prices tend to be momentum driven and if one can get the rally started, the price can overshoot the fundamentals.
- Australia and South Africa: Similar reasons but driven by industrial metals and gold (in the case of South Africa). Copper and gold have spiked this morning in response to weak dollar.
In the US, exporters large and small are interested in a weaker dollar to make their goods cheaper abroad. Some large US firms with significant earnings abroad want to inflate their non-USD earnings abroad (when translated into dollars.) Of course the US and international energy firms like the weak dollar as well to try to recreate the earnings bliss of 2008.
And as long as US rates stay near zero and all the government easing is injecting new dollars into the system, the dollar will keep taking a beating - in large part because so many want for it to happen.
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As for those that are rooting for a lower dollar, a lower dollar vs. the RMB and other currencies may be ok, but a lower dollar in the face of commodities is a recipe for disaster. This is especially true during an already fragile bottoming of the economic cycle. If this leads to inflation and higher rates a W economy becomes much more plausable. Only those hoping for a crash should be giddy about the continuing erosion of the dollar.
A weak USD simply fortifies the vicious circle of economic collapse for the USA. And if the USA continues this race to the bottom, the rest of the world will follow automatically, because the USA has been the consumer engine for all exporting countries.
Think of a country's currency as the stock of the country. The lower that currency sinks the lower the economy goes.
I agree with triplebalck and Haavline.
Actually it is surprising to read such an article, to say the least.
I guess blind patriotism affects the intellect...
Most of countries are actually vested in a strong dollar, and Central banks around the world have been doing their best to support it by buying $5trillion for the past 10/15 years. and still the Us dollar is lower by 20% to major currencies.
Without CB buying these trillions of $$, where would be euro/usd? 1.80? usd/yen? 70?
Now let's be realistic here, and let's take a likely scenario: when growth stabilizes, US consumption starts going up again, trade balance plunges again, and Debt service continues worsening, what do you expect will happen with the Usd?
Also, after foreign exporters have been buying so many Usd for the past 10 years, and continue losing money on it everyday, what do y think is their appetite to buy more? How much more paper can Central Banks print, in order to buy more Usd reserves, when their own inflation starts showing up?
What could happen to Us$$ ?
Well, possibly, among others:
a. depreciate.
b. strongly depreciate.
c. go to hell.
d. possibly stay within a wide range around 1.40 if fundamentals have improved and attract more capital inflow.
e. The US Dollar should appreciate, it is just the unfair victim of a international plot agaisnt the US.
check the error.
On Sep 08 05:14 PM HaavBline wrote:
> triplebalck is right. This article is all nonsense.
>
> It is the U.S. that benefits most from the lowered Dollar. The huge
> debts we owed to foreign goverments will be de-valued, plus exports
> will be more competitive against Japan and EU, hopefully creating
> more factory jobs.
>
> On Sep 08 04:32 PM tripleblack wrote:
What exports?
We make next to nothing. A weak dollar will mean China can buy out our natural resources for pennies on the dollar.
Leaving us barren and dependent.
We make nothing and our companies can't compete with China. Once we sell them what is under our feet, it is over.
And truly, when it comes to foreign debt holders, it does not matter how low the value goes, see how well Zimbabwe has dealt with their foreign debts.
And as the world population grows, they will need our food, and therefore, our dollars.
While I expect slow and steady inflation (like we've always had this for most of this century), the world's reliance on our massive food production will ensure that there will always be a healthy demand for the greenback.
On Sep 09 12:20 AM TeresaE wrote:
> To all that think a weak dollar will be good for the US, answer one
> question:
>
> What exports?
>
> We make next to nothing. A weak dollar will mean China can buy out
> our natural resources for pennies on the dollar.
>
> Leaving us barren and dependent.
>
> We make nothing and our companies can't compete with China. Once
> we sell them what is under our feet, it is over.
>
> And truly, when it comes to foreign debt holders, it does not matter
> how low the value goes, see how well Zimbabwe has dealt with their
> foreign debts.
While that's only a small piece of the pie, it's a clear illustration that we are still a leader when it comes to innovation, and that will continue to be the key to our position as the world's only super power.
Don't forget entertainment of all kinds, too. America is by far the world's biggest exporter of 'cultural' products like movies, music and books. Nobody likes to mention armaments but whose fighter jets and other high tech military hardware does much of the world buy? The US is the world's top arms exporter, and it's a big industry. Then there's oilfield technology and a host of other industries where America remains the world's leader or is among the top competitors. Because of a higher cost structure (wages, real estate, taxes) the US is not competitive in low value added, low tech manufacturing like clothing, toys and other consumer goods, but as Steve Hansen repeatedly points out the US still produces more value of manufactured goods than any other country.
Regarding the deficits, debts and recent dollar declines: First of all, how many of us have been marveling at seeing stocks keep rising for no apparent reason? Then dropping for no visible reason, then rising again? Most of the fundamentals "suck", but despite how cheerleaders or doomsayers see it the fundamentals have not been moving up and down. Clearly capital flows are required to make markets go up or down, but what invisible hand is driving the changes in direction of capital flows? Maybe we are reading too much into the recent dollar drops. Next week the dollar could rise again for no apparent reason, if this current "inscrutable" market is any indication of how things work right now.
That said, I think the US balance of trade deficits are the fundamental root of many of the current financial problems. So I think by fixing this we would eliminate the root cause of many of the other problems.
Oil imports are half or more of the total value of the trade deficits year after year. "Drill baby drill" is going to have to be part of the solution, along with fuel efficiency and other conservation efforts, and more intense exploitation of natural gas and other alternatives the US has lots of. And without veering off into fantasyland, eventually there will be 'the next big thing' in some kind of viable alternative energy technology, and odds are it will be discovered/invented in the US. Like the iPod, even if the manufacturing of the next-tech is done in lower cost countries, the lion's share of the profits still come home to the US.
The US obviously has some financial problems, and without some rebalancing of income distributions there could be ongoing problems of overconcentration of wealth in some hands and debt in other hands which diminishes the domestic consumer economy. These are fixable problems. Probably the US share of global wealth has to drop a bit as others rise a bit, and a weaker dollar would reflect this. But I don't see the US in serious danger of terminal decline just yet.
Uh, NO! Yet more flag waving propaganda from Duhmerican't exceptionalists! Read it and weep:
Top exporters of beef
Product group: 012 - MEAT NES,FRESH/CHLD/FROZ
Country..........US $$
USA...............3,52...
Denmark.........2,863,927
Brazil.............2,4...
Netherlands....2,425,703
France...........2,087...
www.intracen.org/trads...
Top exporters of vegetables
Product group: 054 - VEGETABLES,FRSH/CHLD/FRZ
Netherlands....4,187,130
Spain............3,875...
Mexico..........2,594,550
China............1,875...
USA..............1,769...
www.intracen.org/trads...
Top Exporters of Fish
Product group: 037 - FISH/SHELLFISH,PREP/PRES
Thailand.........2,144...
China.............1,92...
Denmark............532...
Spain................4...
Germany............468...
www.intracen.org/trads...
Top Exporters of Cereal Grains
Product group: 045 - CEREAL GRAINS NES
USA..................6...
Canada..............24...
Germany............124...
Argentina................
China....................
www.intracen.org/trads...
On Sep 09 12:39 AM Paul H. M. wrote:
> You all forget: The U.S. is still the number one source of FOOD for
> the world.
>
On Sep 08 03:51 PM danepol wrote:
> "...so many want for it to happen". When everybody is betting one
> way, be sure the opposite will happen.
On Sep 08 05:14 PM HaavBline wrote:
> triplebalck is right. This article is all nonsense.
>
> It is the U.S. that benefits most from the lowered Dollar. The huge
> debts we owed to foreign goverments will be de-valued, plus exports
> will be more competitive against Japan and EU, hopefully creating
> more factory jobs.
>
> On Sep 08 04:32 PM tripleblack wrote:
On Sep 08 05:14 PM HaavBline wrote:
> triplebalck is right. This article is all nonsense.
>
> It is the U.S. that benefits most from the lowered Dollar. The huge
> debts we owed to foreign goverments will be de-valued, plus exports
> will be more competitive against Japan and EU, hopefully creating
> more factory jobs.
>
> On Sep 08 04:32 PM tripleblack wrote:
And yes, the U.S. exports large quantities of foodstuffs, ESPECIALLY in those years when populous nations experience crop failures or famine (acting as the supplier of last resort for even our most virulent enemies is nothing new to Americans).
Then you have the large number of politically uncorrect items like aircraft, military gear, armaments and copyrighted media materials, which we ship by the billions each year.
The much-maligned "Duhmericans" are also the world's most productive workforce.
On Sep 09 01:34 AM derryl wrote:
> Paul H. M.,
> Don't forget entertainment of all kinds, too. America is by far the
> world's biggest exporter of 'cultural' products like movies, music
> and books. Nobody likes to mention armaments but whose fighter jets
> and other high tech military hardware does much of the world buy?
> The US is the world's top arms exporter, and it's a big industry.
> Then there's oilfield technology and a host of other industries where
> America remains the world's leader or is among the top competitors.
> Because of a higher cost structure (wages, real estate, taxes) the
> US is not competitive in low value added, low tech manufacturing
> like clothing, toys and other consumer goods, but as Steve Hansen
> repeatedly points out the US still produces more value of manufactured
> goods than any other country.
>
> Regarding the deficits, debts and recent dollar declines: First of
> all, how many of us have been marveling at seeing stocks keep rising
> for no apparent reason? Then dropping for no visible reason, then
> rising again? Most of the fundamentals "suck", but despite how cheerleaders
> or doomsayers see it the fundamentals have not been moving up and
> down. Clearly capital flows are required to make markets go up or
> down, but what invisible hand is driving the changes in direction
> of capital flows? Maybe we are reading too much into the recent dollar
> drops. Next week the dollar could rise again for no apparent reason,
> if this current "inscrutable" market is any indication of how things
> work right now.
>
> That said, I think the US balance of trade deficits are the fundamental
> root of many of the current financial problems. So I think by fixing
> this we would eliminate the root cause of many of the other problems.
>
>
> Oil imports are half or more of the total value of the trade deficits
> year after year. "Drill baby drill" is going to have to be part of
> the solution, along with fuel efficiency and other conservation efforts,
> and more intense exploitation of natural gas and other alternatives
> the US has lots of. And without veering off into fantasyland, eventually
> there will be 'the next big thing' in some kind of viable alternative
> energy technology, and odds are it will be discovered/invented in
> the US. Like the iPod, even if the manufacturing of the next-tech
> is done in lower cost countries, the lion's share of the profits
> still come home to the US.
>
> The US obviously has some financial problems, and without some rebalancing
> of income distributions there could be ongoing problems of overconcentration
> of wealth in some hands and debt in other hands which diminishes
> the domestic consumer economy. These are fixable problems. Probably
> the US share of global wealth has to drop a bit as others rise a
> bit, and a weaker dollar would reflect this. But I don't see the
> US in serious danger of terminal decline just yet.
As for innovation, I feel you are blinkered in view of America, go to India & you see innovation everywhere.
On Sep 09 12:41 AM Paul H. M. wrote:
> Also, don't forget: there's a waiting list to get IPhones in most
> of the world.
>
> While that's only a small piece of the pie, it's a clear illustration
> that we are still a leader when it comes to innovation, and that
> will continue to be the key to our position as the world's only super
> power.
This is where, I think many Americans do not understand EU, it is very simple to move to countries within the Union & take advantage of lower costs, especially regards highly skilled workforce. So jobs are not offshored, they stay within the EU & benefit both parties.
I am not apologist for Germany here, as I think it is shameful how our governments have cooperated with German super-companies to sell off assets, telecoms being one of the bigger areas. Deutsche Telekom has a huge hold on this market, there are no national telecom carriers left.
On Sep 09 12:04 PM Franklin Bird wrote:
> How long will European companies be able to tolerate a rising euro
> before they ship all of the manufacturing jobs offshore? And how
> much longer will the rest of the world tolerate the mercantilist/parasite
> nation of Germany, the world's largest exporter by absolute size
> (larger than China!) and by percentage of GDP?
There's no need to be jealous of America, I'm sure you nation does some cool stuff as well.
On Sep 11 05:23 PM Paul H. M. wrote:
> Sounds like some people are just desperate to see the world's most
> productive economy, strong military force, and greatest source of
> innovation falter.
>
> There's no need to be jealous of America, I'm sure you nation does
> some cool stuff as well.
Not exactly a way to have an intelligent dialogue.
Also, America is still the most productive economy in the world. And it seems like people are discounting that fact.
On Sep 12 01:58 AM Peter Medved wrote:
> No jealousy here I can assure you. But would seem you are not open
> to balanced view.