NationStates Jolt Archive

http://www.canada.com/businesscentre/story.html?id=c045b988-5187-4f4d-880
http://www.forbes.com/business/businesstech/feeds/ap/2004/11/10/ap1646646.html3-adc2e0c21c69
So, whom does this benefit more? The US, or the Eurozone? I see it working both ways. In the short term, the US benefits greatly. While there is risk that this may scare away foreign investors, it makes manufacturing in the US cheaper. In fact, the trade deficit is shrinking, as exports are up, and imports are down. It may also be good for consumers globally, as many commodities are sold in dollars, thus making them cheaper.
But this doesn't mean doom and gloom for the Eurozone. They have to realize that this is creating significant capital for them. They can use it to invest more overseas. Besides, it might kick the Eurozone's long-quiet engine of rampant consumer spending. But those are just my thoughts. As always, I value your opinion on this matter (even if I do staunchly disagree with it).

I forgot to add, btw, that the dollar is actually at artificial highs. Asian central banks love buying the greenback, and that keeps the dollar high. But it they stop, then the Euro may go as high as $1.50, and less than a hundred yen could buy a dollar.

I forgot to add, btw, that the dollar is actually at artificial highs. Asian central banks love buying the greenback, and that keeps the dollar high. But it they stop, then the Euro may go as high as $1.50, and less than a hundred yen could buy a dollar.

If they stopped though, the interest rate would rise.

If they stopped though, the interest rate would rise.
It would, but I don't see that as being necessarily bad, so long as it doesn't rise too far. For one, they are historically low rates, and for another, they'd encourage saving. That's what I believe is most needed now. Even if it does slow the economy temporarily, it'll come back stronger with more dollars saved. Also, interest rates traditionally determine the value of the dollar. But there is little they can do in the short term to affect the dollar.

It would, but I don't see that as being necessarily bad, so long as it doesn't rise too far. For one, they are historically low rates, and for another, they'd encourage saving. That's what I believe is most needed now. Even if it does slow the economy temporarily, it'll come back stronger with more dollars saved. Also, interest rates traditionally determine the value of the dollar. But there is little they can do in the short term to affect the dollar.

This is what I was getting at:

The interest rate difference between the US and EU makes up for the loss in relative value of the dollar. A dollar invested over a year will not lose value against a Euro invested over a year. This, of course, counts on the rate changes being predictable and the forward exchange rate to be accurate.

This is what I was getting at:

The interest rate difference between the US and EU makes up for the loss in relative value of the dollar. A dollar invested over a year will not lose value against a Euro invested over a year. This, of course, counts on the rate changes being predictable and the forward exchange rate to be accurate.
Good point, but I'm still disturbed by the fact that this interferes with the economy's natural cycle. If there was less intereference, then this nation's productivity would soar, jobs would continue to be created, and eventually, the greenback would recover in strenght, creating capital in the US that can go to overseas investment. The Fed can continue with this measured pace hike if they feel it staves off inflation, but we must be practical. Quite a bit of what we depend on, such as oil, is traded in dollars anyhow. By not acting, we don't have as much to loose as many other nations.

Quite a bit of what we depend on, such as oil, is traded in dollars anyhow. By not acting, we don't have as much to loose as many other nations.

Well, it's traded in dollars in the US...

I don't get how people complain about the dollar's decline and the trade deficit and the movement of jobs overseas.

Well, it's traded in dollars in the US...

I don't get how people complain about the dollar's decline and the trade deficit and the movement of jobs overseas.
I always find it ironic when anti-Bush people list off his economic "Failures" and the declining dollar and trade deficit are right next to each other.

I always find it ironic when anti-Bush people list off his economic "Failures" and the declining dollar and trade deficit are right next to each other.

I'm thinking mandatory macro-econ and international finance courses

Well, it's traded in dollars in the US...
But even if the major Arab exporters switched to their own currencies, most of them are pegged to the dollar, anyhow. I also heard about something in the airline industry, where Airbus may loose over a stronger dollar. Why? Because airliners buy their planes in dollars. It is therefore cheaper for Boeing to produce airplaines than Airbus, at least judging from this.
I don't get how people complain about the dollar's decline and the trade deficit and the movement of jobs overseas.
Because most people have never taken an economics course, or don't care at all. Rather, this is populist anger. How nice it would be if smart people like us could actually exploit it, but unfortunatly, we can't.

I'm thinking mandatory macro-econ and international finance courses
I'm currently at a high school in New York state. It's mandatory for graduation here. And believe it or not, so is a civics course.

:eek: Egad! That means my daily Euro habit will cost more than ever! I'll have to cut back on the munchies. :(

Means an increase in tourism in America.

But even if the major Arab exporters switched to their own currencies, most of them are pegged to the dollar, anyhow. I also heard about something in the airline industry, where Airbus may loose over a stronger dollar. Why? Because airliners buy their planes in dollars. It is therefore cheaper for Boeing to produce airplaines than Airbus, at least judging from this.


Surely, but the US isn't the only consumer of oil, and the Middle East is not the only producer.


How nice it would be if smart people like us could actually exploit it, but unfortunatly, we can't.

Why can't we?

:eek: Egad! That means my daily Euro habit will cost more than ever! I'll have to cut back on the munchies. :(
And this type of thinking will cause the dollar to naturally rise, with no real harm to the world economy.

I'm currently at a high school in New York state. It's mandatory for graduation here. And believe it or not, so is a civics course.

Good to hear.

You thinking about finance or econ in college?

Surely, but the US isn't the only consumer of oil, and the Middle East is not the only producer.
No, but the US is the largest consumer, and the Middle East is becoming an increasinly large producer, as reserves elsewhere in the world run dry.


Why can't we?
Because it is against logic. If we tried a more populist strategy in politics, then we'd surrender logic to be trampled on by a mob.

Good to hear.

You thinking about finance or econ in college?
Actually, political science. I'm a political nut, if you can't tell. I was even told a few times before that I'd make a good professor. Maybe I might.
However, I've been thinking about a minor in economics. The only problem, however, is that I suck at math.

Actually, political science. I'm a political nut, if you can't tell. I was even told a few times before that I'd make a good professor. Maybe I might.
However, I've been thinking about a minor in economics. The only problem, however, is that I suck at math.

There really isn't a whole lot of math. At least not complicated math. You just need a good teacher to explain the concepts, then the equations will make sense. Math teachers are pretty terrible in my experience - they teach you how to memorize forumlas instead of understanding them.

I'm a second year grad student in corporate and investment finance myself. If you don't know this stuff, you will be exploited.

Anyway, good luck. Now back to topic.

No, but the US is the largest consumer, and the Middle East is becoming an increasinly large producer, as reserves elsewhere in the world run dry.


What about companies like Shell and BP? As their currencies become stronger, they will be able to buy more than US companies. Of course, they all participate in hedging, so I don't know how much it would affect them.




Because it is against logic. If we tried a more populist strategy in politics, then we'd surrender logic to be trampled on by a mob.

Ah, I thought you were talking about exploiting the populace, not populist anger, per se.

I don't think it's really the level of the exchange rate that's problematic, but rather the amount of change in it. lately the dollar seems to be in a roller coaster, which investors probably don't like (right, force majeur?). A stable high or low exchange rate will eventually become the new 'normal' rate.

btw, i just started a minor economics and, at least for a human geography student, the math is not too hard.

Means an increase in tourism in America.

Yup! We'll all be over revelling in the incredible cheapness of everything!
I came over in October and shopping was fab!

What about companies like Shell and BP? As their currencies become stronger, they will be able to buy more than US companies. Of course, they all participate in hedging, so I don't know how much it would affect them.
However, US companies are insulated, as they don't have to pay more for oil, or at least not due to currency fluctuations. But I wonder if some OPEC nations will sell their oil in Euro if there is a price collapse.




Ah, I thought you were talking about exploiting the populace, not populist anger, per se.
Pretty much.

A weak dollar is a good thing at times. It makes US made products cheaper to buy and that increases exports and thus creates jobs.

I don't think it's really the level of the exchange rate that's problematic, but rather the amount of change in it. lately the dollar seems to be in a roller coaster, which investors probably don't like (right, force majeur?). A stable high or low exchange rate will eventually become the new 'normal' rate.



Yes, but for the most part, investors only invest in foreign currencies if their company does business in said country.

For example, if Airbus was worried that a falling dollar would hurt business (via cheaper planes in the US), they could have sold dollar futures. This would mitigate the risk.

Purely speculating in the currency market is no different than betting on football, in my opinion.

However, US companies are insulated, as they don't have to pay more for oil, or at least not due to currency fluctuations. But I wonder if some OPEC nations will sell their oil in Euro if there is a price collapse.



Either that, or change their peg to the Euro.

Either that, or change their peg to the Euro.
But if the dollar does collapse, the conversion rate will be high. Not only that, but many countries rely on the dollar, which is regarded as a stable currency. The euro may be one, but it hasn't been around long enough to prove it. Anyhow, many countries use the dollar, so they'd all take a hit, and the gllobal economy would go with it.

But if the dollar does collapse, the conversion rate will be high. Not only that, but many countries rely on the dollar, which is regarded as a stable currency. The euro may be one, but it hasn't been around long enough to prove it. Anyhow, many countries use the dollar, so they'd all take a hit, and the gllobal economy would go with it.

This is true.

With so many countries holding onto and trading in dollars, I doubt it will ever go into a free-fall resulting in a global meltdown.

Of course, the countries in debt to the US might not mind too much.

This is true.

With so many countries holding onto and trading in dollars, I doubt it will ever go into a free-fall resulting in a global meltdown.

Of course, the countries in debt to the US might not mind too much.
We can never say that the dollar can't go into freefall. Once upon a time, I think the yen was actually stronger than the dollar. It has obviously never recovered, despite years of economic success.

We can never say that the dollar can't go into freefall. Once upon a time, I think the yen was actually stronger than the dollar. It has obviously never recovered, despite years of economic success.


Rates are relative. No one is trying to make 1 yen = 1 dollar. It doesn't mean the yen is stronger or weaker than the dollar.

If you think it is going to fall, I suggest you invest in precious metals or the like.

Here's an article from the Economist about the yen...

http://www.economist.com/research/backgrounders/displaystory.cfm?story_id=2083288

Rates are relative. No one is trying to make 1 yen = 1 dollar. It doesn't mean the yen is stronger or weaker than the dollar.

If you think it is going to fall, I suggest you invest in precious metals or the like.

Here's an article from the Economist about the yen...

http://www.economist.com/research/backgrounders/displaystory.cfm?story_id=2083288
I'm not saying anything will fall. I'm just saying that it might. The worst part about being top dog is worrying you'll fall off. The dollar has already lost much of its premier status from the 1970s (even if that gold dollar system was crap).

I read somewhere that the dollar is expected to sink to 98 yen sometime in January. 100 yen is an obvious psychological barrier, and if it is crossed, it'll probably set off a panic in Japan. And I'm loving every minute of it.

This really blows for those of us who want to go live for several months in the land of euros off a bank account in dollars.

This really blows for those of us who want to go live for several months in the land of euros off a bank account in dollars.
I'm not pretending it'll be good for everyone. But in terms of American citizens, a falling dollar is utilitarian.
But the good news for you guys is that the dollar won't depreciate far enough that living abroad is unbearable.

But the good news for you guys is that the dollar won't depreciate far enough that living abroad is unbearable.
On my bank account, it's pretty darn close ;)

I haven't quite cancelled my plans, yet... I don't leave until February. Here's hoping things at least stabilize somewhat before then. :(

On my bank account, it's pretty darn close ;)

I haven't quite cancelled my plans, yet... I don't leave until February. Here's hoping things at least stabilize somewhat before then. :(
Oh, so you're going there. Well, don't worry. The currency exchange rate is hits hardest those that buy from Europe in bulk. Travelling there is pretty expensive, but as my mom always said, if you aren't willing to spend a lot, don't go on vacation.

Oh, so you're going there. Well, don't worry. The currency exchange rate is hits hardest those that buy from Europe in bulk. Travelling there is pretty expensive, but as my mom always said, if you aren't willing to spend a lot, don't go on vacation.
It's not vacation, I'll be taking a few classes abroad for half a year. I'm not planning on spending recklessly, but one must eat and sleep.

It's not vacation, I'll be taking a few classes abroad for half a year. I'm not planning on spending recklessly, but one must eat and sleep.
Oh, good for you. I'd love to study in Europe one of these days. Where exactly are you going?
And yes, one must eat and sleep, but even with a strong dollar, prices in Europe are extremely high. I'd reccomend getting a job there that pays in euros. Nothing time-consuming, but just like a grocery store clerk.

Oh, good for you. I'd love to study in Europe one of these days. Where exactly are you going?
And yes, one must eat and sleep, but even with a strong dollar, prices in Europe are extremely high. I'd reccomend getting a job there that pays in euros. Nothing time-consuming, but just like a grocery store clerk.
To France, for 5 months. And I won't be getting a work visa, I don't think they're easy to get unless you've got some kind of job lined up over there already.

To France, for 5 months. And I won't be getting a work visa, I don't think they're easy to get unless you've got some kind of job lined up over there already.
That's too bad. But in any case, good luck on your studies.

On my bank account, it's pretty darn close ;)

I haven't quite cancelled my plans, yet... I don't leave until February. Here's hoping things at least stabilize somewhat before then. :(


You should have invested in currency futures.

You should have invested in currency futures.
Since I have no idea what you're talking about, that's kind of hard.

I hated economics class with a passion.

No, everybody should have bought M$ stock on the 9th, hehe.

This is more attributable to the massive weakness of the U.S. dollar than anything else, though. Almost all currencies are rising versus it. The Canadian dollar, for instance, reaches levels unknown for the past 13 or 14 years most every day, it seems.

Since I have no idea what you're talking about, that's kind of hard.

I hated economics class with a passion.

The forward price of a currency is the best indicator of how it is going to change in the future.

To hedge against instability, you can agree to purchase a currency at some pre-determined price.

Economics kicks ass

Since I have no idea what you're talking about, that's kind of hard.

I hated economics class with a passion.
I think that currency investing is easy, especially if you don't mind waiting. Just look up that country's current account balance, and you have a good idea where that currency will go.

To France, for 5 months. And I won't be getting a work visa, I don't think they're easy to get unless you've got some kind of job lined up over there already.

No, it is wicked easy to work in Europe, you just tell them at the airport and they give you a special stamp in your passport or something. I studied in London a few years ago and before I left I just told the guy at customs I wanted to work while I went to school and they were like "no problem sir".

Just look up that country's current account balance, and you have a good idea where that currency will go.

Not really - it's a bit more complicated. Otherwise we would all be doing that. You would have been waiting quite a long time for the dollar to drop.

Good article on the strengthening of the euro

http://www.economist.com/agenda/displayStory.cfm?story_id=3394596

Not really - it's a bit more complicated. Otherwise we would all be doing that. You would have been waiting quite a long time for the dollar to drop.
Obviously, it is more complex, but that does provide a pretty good idea. BTW, I love that article. I wonder where France would be today if they didn't try resorting to their price-fixing policies.

http://www.iht.com/articles/2004/11/15/business/dollar.html
Well it looks like the Treasury Secretary, John Snow, is on the right track about the dollar. Unfortunatly, this may result in diplomatic actions similar to those silly steel tarriffs after 9/11.

http://www.iht.com/articles/2004/11/15/business/dollar.html
Well it looks like the Treasury Secretary, John Snow, is on the right track about the dollar. Unfortunatly, this may result in diplomatic actions similar to those silly steel tarriffs after 9/11.

You mean using tarriffs to reduce the trade deficit and keep the dollar inflated?

Yeah, those steel tarriffs were a disaster. Not a good idea to put extra costs on something you consume much more than you produce.

No, it is wicked easy to work in Europe, you just tell them at the airport and they give you a special stamp in your passport or something. I studied in London a few years ago and before I left I just told the guy at customs I wanted to work while I went to school and they were like "no problem sir".
Hmm, interesting, definitely not what my advisor told me here. Although I really can't deny it would be more than worth it, even if I was only earning a little.

How did you find a job?

Wow, everyone in here knows way more about economics than I do. I voted "Eurozone", though it has become apparent to me that you can make th argument for just about anyone really.

Wow, everyone in here knows way more about economics than I do. I voted "Eurozone", though it has become apparent to me that you can make th argument for just about anyone really.
There's a chance Europe may benefit. They may become a consumer market on par with the US's. However, the general climate in Europe is not exactly consumerism, so I don't know what'll happen there.