NationStates Jolt Archive

The dollar just dropped in value.Not good news.But some say in some wierd way its good for the economy because of how people buy and sell. I don't know I just don't thinks it's good.Anyone care to comment?

http://www.abcnews.go.com/Business/MarketTalk/story?id=3630951&page=1

http://news.yahoo.com/s/ap/20070912/ap_on_bi_ge/dollar_q_a
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Not to mention the new $5 bill looks like crap.That's enough to weaken it's value.Honostly look at this thing!!(a real,shame-- http://www.abcnews.go.com/Business/wireStory?id=3628755)

So... £0.49

Well, anyway, I think it basically affects importing/exporting. People will want to buy American stuff if its cheaper but Americans will be less interesting in buying stuff from overseas? I don't really remember how it works.

Didn't the Canadian dollar reach parity too?

It is good for the economy in the sense that our exports will be cheaper to other nations. That in turn should create or maintain jobs. Boeing's planes for example become cheaper in theory vs Airbus.

So... £0.49

Well, anyway, I think it basically affects importing/exporting. People will want to buy American stuff if its cheaper but Americans will be less interesting in buying stuff from overseas? I don't really remember how it works.

Which in turn will probably strengthen the dollar. It is a pendulum swinging.

I don't know.I seem to remember that figure from ABC World News on Thursday...anyone know a good conversion site?

The one I used just now to get that figure: http://www.xe.com/ucc/

So... £0.49


I don't know.I seem to remember that figure from ABC World News on Thursday...anyone know a good conversion site?

I don't know.I seem to remember that figure from ABC World News on Thursday...anyone know a good conversion site?

http://www.xe.com/ucc/

haha! the dollar is a worthless piece of shite.

Personally, I hate it. The HK$ is pegged* to the US$ which means I'm earning way less in NZ$ than I was a year ago, even though I've had 3 pay rises since then. This is important for me, as I'm wanting to buy some property back in NZ and over the last year house prices have, comparatively speaking, risen more then 30% just from the US$ devaluation alone (so ~40+% when you factor in house price rises as well).
*A very appropriate use of this word, now that 'pegged' has another meaning.


I'm also kicking myself because I could see this coming (the US$ drop) and was thinking a fortnight ago and changing all my savings into NZ$. I didn't. If I had I would have made around $2500US. Do'h!



An article in yesterday's WSJ says that the US$ could continue to fall, especially if there's a major readjustment of the current-account deficit. 2005 it was 6.8% of GDP. This year it's down to 5.5% and still dropping. If it drops quickly (say by 1.5% points within the next 12 months) this would put immense pressure on the US$, drive up interest rates and cause an economic recession. Generally speaking, a 20% drop in the US$ reduces income by 3-5%.

This fall in the US$ will also drive oil prices up. We'll prob see crude at $85-90 a barrel within the next 6 months. That's certainly going to put pressure on the world economies which are already starting to waver a bit.


I can't help but feel that a major correction is on it's way. This has been brewing for 8 years now. The US economy grew faster than other European countries, as well as Japan, during that time. This led to more imports, creating the huge current-account deficit. The growing economy also made the US stockmarket more attractive to overseas investors (it's better to invest in a growing economy than a slowing or shrinking one).
Along with this, the housing boom + subprime lending in the US made homeowners feel more financially secure and prodded them into borrowing more to continue their lavish spending habits.
All this was then compounded by the US govt grossly overspending it's budget and issuing Treasury securities to cover the shortfall. Overseas banks (especially China and Japan) have trillions of $ in US notes.
This meant fewer US$ around, driving the price up which led round to cheaper imports, comparatively more expensive exports and a bigger c-a deficit.

But there always come a time when the party has to stop. With the subprime crisis, the housing bubble popping and the US economic growth rate now lagging behind the other big economies, foreign investors going after the Asian markets* over US, it's only a matter of time before the big correction hits.

*which, if you do have some money to invest it's a very good idea to go for these markets.
In the last 6 months alone:
The Shanghai Index has risen 53%
The HK Hang Seng has risen 26%
The Bombay Sensex has risen 19%
Taiwan TSEC has risen 14%

Compared to the DowJones which has risen 4% over the same time period.

They're at the start of their bubble so they'll continue to grow for a while yet.

Which in turn will probably strengthen the dollar. It is a pendulum swinging.

The US $ never really recovered after the Saudi Arabians traded their US $ for €uro's about 2002 or 2003, it didn't help when the US government were laughing at the €uro, stating that it would never acquire the stability of the US dollar. Hmmmm

It's good for the US exporters because it means our products are more competitive overseas, which in turn means more investment and growth for US manufacturers. However, it's also a bad thing because it makes imports, especially raw materials, more costly, which drives inflation and erodes some of the gains on the export side.

However, it's the main reason why the trade deficit has improved and is the only real way the trade deficit will ever balance (that and the Chinese yuan floating on the market, but the yuan's not ready for that by a long shot). For now, the market has to correct its imbalances through the depreciation of the dollar.

Haha, your currency is shite.

Which in turn will probably strengthen the dollar. It is a pendulum swinging.
Oh, that would need to be a pretty mighty swing.

I'm just not sure I like Bernanke's decision on this. Yes, if necessary an interest cut could be a good idea. But half a percent? That's overkill for the sake of sending a message - I'm not so sure you should use the economy to send messages.

haha! the dollar is a worthless piece of shite.

Haha, your currency is shite.

I have around $909, I suddenly feel wealthy :p

edit: of course our government has made the recent switch to monopoly money so I don't know what to think (http://newsimg.bbc.co.uk/media/images/42672000/jpg/_42672909_new_20note_416x440.jpg)

I have around $909, I suddenly feel wealthy :p

edit: of course our government has made the recent switch to monopoly money so I don't know what to think (http://newsimg.bbc.co.uk/media/images/42672000/jpg/_42672909_new_20note_416x440.jpg)
Yeah. The new 20s are ridiculous.

yeah. it kind of sucks that how good an economy is doing or not is judged by the stock market, and the dollar i guess. don't know if you can buy shares in a dollar or not. seems kind of a warped concept to me, but if it is the case...
the above,

but even if the "economy", stock market & dollar are good,
there can still be lot of people a) out of work, b) employed but at crap paying jobs below a living wage, maybe a pay check away from being homeless or something, c) anable to afford other necessities of getting by in US society - ie vehicle to get to & from work, health insurance, etc...


so what the dollar is doing,
i don't think i really care.
"tinkle down the leg" theory of voo-doo-nomics does not "lift all life boats".
never did.

*which, if you do have some money to invest it's a very good idea to go for these markets.
In the last 6 months alone:
The Shanghai Index has risen 53%
The HK Hang Seng has risen 26%
The Bombay Sensex has risen 19%
Taiwan TSEC has risen 14%

Compared to the DowJones which has risen 4% over the same time period.

They're at the start of their bubble so they'll continue to grow for a while yet.Isn't China slowly trying to get the Dollar/Yuan exchange rate to a position where the Yuan can be safely unpegged from the Dollar? Mean that the Yuan is going be worth more anyway. Meaning investing in the Shanghai Index is a very good bet?

yeah. it kind of sucks that how good an economy is doing or not is judged by the stock market, and the dollar i guess. don't know if you can buy shares in a dollar or not. seems kind of a warped concept to me, but if it is the case...
the above,

but even if the "economy", stock market & dollar are good,
there can still be lot of people a) out of work, b) employed but at crap paying jobs below a living wage, maybe a pay check away from being homeless or something, c) anable to afford other necessities of getting by in US society - ie vehicle to get to & from work, health insurance, etc...


so what the dollar is doing,
i don't think i really care.
"tinkle down the leg" theory of voo-doo-nomics does not "lift all life boats".
never did.
You don't buy "shares in a dollar", you simply buy dollars (and, ideally, sell them again once they have regained value).

As for the rest, there's a difference between "the stock market doing fine", which I take to mean the by now so familiar picture of companies making record profits and still laying off thousands of employees, and what's going on with currencies.
Right now, the weak dollar helps US companies that export their products while at the same time the strong Euro and strong Canadian dollar are starting to (or already have) hurt the export sector in Europe and Canada, because of course their wares are suddenly much more expensive to foreign buyers while those of their US competitors are comparatively cheaper.
All of which can very much effect (un)employment in the respective countries.

Here's a New York Times article (http://www.nytimes.com/2007/09/21/business/worldbusiness/21dollar.html?th&emc=th) on it that sums it up pretty well, posted in its entirety because otherwise you'd have to register (I bolded one sentence that directly refers to your question):

September 21, 2007
Dollar Falls to New Low Against the Euro
By VIKAS BAJAJ and IAN AUSTEN

Investors dumped dollars yesterday, sending the euro to a record high and putting the American currency at par with the Canadian dollar for the first time in more than 30 years.

In practical terms, the recent drop in the dollar’s value is making Boeing jetliners and Manhattan pieds-à-terre a lot cheaper for Europeans and Canadians, while Americans will have to pay more while on vacation in Paris or when buying snowmobiles made in Quebec.

While the dollar has generally been drifting down against both currencies, along with the British pound, for much of this decade, its fall has gathered pace in recent weeks as traders foresee a slowing American economy while expecting more robust growth overseas.

The Federal Reserve’s decision this week to cut interest rates put further pressure on the dollar by making investment returns in other countries comparatively more lucrative.

As American assets become cheaper to buyers overseas, foreigners may step up their purchase of businesses and land here, creating political and cultural tensions. Yesterday, a stock exchange from Dubai, on the Persian Gulf, announced plans to take a sizable stake in Nasdaq, drawing a mixed response in Washington. And a prominent private equity firm, the Carlyle Group, sold a minority stake to the Abu Dhabi government.

The impact of the falling dollar is rippling through the world and American economies in numerous ways. It will give an edge to American manufacturers and has already helped lift exports by more than 11 percent in the first eight months of the year. Businesses with large foreign operations can expect a lift in profits when they convert their overseas earnings into dollars.

On the other side of the equation, the decline in the American currency is helping push up commodity prices, most of which are denominated in dollars, and kindling fears that inflation could rise. Crude oil futures surged to $83.32 a barrel yesterday, up 2 percent from the day before and up 37 percent for the year. Long-term bonds fell sharply in value and gold prices were up 1.4 percent, to $733.26 a troy ounce.

One euro now buys $1.4065, the first time in the common European currency’s nine-year history that it has crossed the $1.40 mark. And one dollar now buys $1.0008 Canadian dollars, the first time that the two currencies have traded that closely since late 1976.

The American currency fell nearly 1 percent against a basket of six major world currencies yesterday, and is down 8.4 percent in the last 12 months. The American stock market fell modestly yesterday after posting two days of gains.

Many traders and economists predict that the dollar will weaken further because the American economy is expected to underperform its biggest trading partners for some time. “The market is pricing in a shift in Fed policy downward, and the rest of the world is not matching,” said Carl B. Weinberg, chief global economist at High Frequency Economics. “That can only mean a cheaper dollar.”

In Washington, the administration and Congress were preoccupied with the problems in the housing economy and there was little talk of the dollar. President Bush expressed confidence in the economy. “The fundamentals of our nation’s economy are strong,” he said at a news conference. “There is no question that there is some unsettling times in the housing market.”

Senator Charles E. Schumer, Democrat of New York, did call on the Bush administration to review the Nasdaq deal closely, but other Democratic leaders, including House Speaker Nancy Pelosi of California and Representative Barney Frank of Massachusetts, chairman of the Financial Services Committee, said they were not alarmed by the transaction.

More than a year ago, opposition from lawmakers forced another Dubai-owned company to back out of a plan to manage port operations around the United States and a Chinese firm gave up on a plan to acquire Unocal, an American oil company.

For Canadians, the newfound parity with the American currency has proved to be as much a source of anxiety as pride in a country with an export-dependent economy.

For decades, the Canadian dollar’s anemic state lent it little respect. Although the currency’s popular name, the loonie, comes from the bird depicted on the one-dollar coin, its alternate meaning was not lost on Canadians. In an episode of “The Simpsons” about the animated family’s trip to Toronto shortly after the Canadian currency’s collapse in 2002, Homer Simpson won over a recalcitrant security guard by waving a single American dollar bill in his face.

The Canadian dollar’s ascent is a result of the nation’s strong economy, experts say. Demand, much of it from Asia, has bolstered prices for exports like minerals, oil and wheat. The development of huge oil sands projects in Alberta has created a labor shortage throughout Western Canada.

Still, the rise in the country’s currency has hit the manufacturing sector. Douglas Porter, an economist with BMO Nesbitt Burns, a brokerage firm, estimates that 250,000 industrial jobs have already disappeared because of the rise of the Canadian currency.

As the chief economist of the Canadian Manufacturers and Exporters, a trade group, Jayson Myers, finds little professional joy in the Canadian dollar’s ascent. But he readily acknowledged that achieving parity would lift Canadians’ spirits.

“It makes a lot of people feel pretty good,” he said. “They can go on trips to the States again; they can go on trips to Europe. After 16 years of always seeing their currency in an inferior position, Canadians now have strong buying power.”

In Europe, there was at least one call for a Continentwide effort to reverse the course of the euro, which is used as the official currency in 13 countries. “Let’s say that it’s a change in level that concerns all of us Europeans, and it’s clearly a point we must address together among Europeans,” the French finance minister, Christine Lagarde, said during a trip to China, according to Reuters.

Evidence is starting to emerge that the euro’s strength is chipping away at sales. Ralf Wiechers, chief economist for VDMA, an association of German machine-tool makers whose performance has been the backbone of the country’s boom, said that the currency values are starting to hurt earnings despite continued gains in sales.

“The world economy is creating the volume,” Mr. Wiechers said. “The exchange rate is starting to decide what the profit margin is.”

In the American Midwest, manufacturers say they are seeing more business, in part, because the weaker dollar has made them more competitive on the world market.

Kendig Kneen, chief executive of Al-Jon Manufacturing in Ottumwa, Iowa, said his scrap recycling and waste management equipment business had been growing up to 30 percent annually and that he had expanded his payroll to 150 from 100 workers a year ago. He estimates that about half the growth is a result of the weaker dollar, with the rest coming from stronger global demand for scrap recycling.

“We are in a world market,” he said. “People have heard that phrase global economy for the last 10 to 15 years. It’s just now that they are starting to believe it.”

yeah. it kind of sucks that how good an economy is doing or not is judged by the stock market, and the dollar i guess. don't know if you can buy shares in a dollar or not.
Erm you can't really but shares in a currency, but currency speculation is a massive international area for trade.

Hell, on a low level, I bought 20 pounds' worth of Roubles when they were really weak and sold them back to make 50 in the end. Well worth it.
but even if the "economy", stock market & dollar are good, there can still be lot of people a) out of work, b) employed but at crap paying jobs below a living wage, maybe a pay check away from being homeless or something, c) anable to afford other necessities of getting by in US society - ie vehicle to get to & from work, health insurance, etc...
Ok, here's why that's not true :

If you have lots of people out of work, in work but with 'crap paying jobs' as you put it, or unable to afford other necessities, then your currency becomes weak, because the only people using it are the very rich.

And keep in mind that people who are already very rich don't actually need to buy anything much that the rest of us don't (food, paying the bills etc.), so their money just kind of stacks up pointlessly.

However if the average man on the street can't afford to buy a loaf of bread and buy consumer goods, then your currency stops working and starts to devalue very quickly, which then leads to a lack of confidence, so people start cashing in their shares, which then breaks the whole economy.

Yeah. The new 20s are ridiculous.

as will the new $5 grr.

Isn't China slowly trying to get the Dollar/Yuan exchange rate to a position where the Yuan can be safely unpegged from the Dollar? Mean that the Yuan is going be worth more anyway. Meaning investing in the Shanghai Index is a very good bet?
I think so. The PRC is slowly relaxing the Yuan but doing it at a pace which benefits them.
With the rapid growth in China - their attempts at cooling it aren't working too well, with growth still hovering around 10% annually - and a fairly uncontrolled stock market, I figure it'll keep going up for a while yet.
The Shanghai SSE Composite Index has risen 477.5% in the last two years alone.

Speaking of pegging (oh er!), the Saudis (whose Riyal is pegged to the US$) haven't dropped their interest rate along with the US, for possibly the first time ever. This could mean they're thinking of unpegging and maybe - just maybe - setting it against the Euro.
If that happened, the US will really screwed.

Oh, that would need to be a pretty mighty swing.

I'm just not sure I like Bernanke's decision on this. Yes, if necessary an interest cut could be a good idea. But half a percent? That's overkill for the sake of sending a message - I'm not so sure you should use the economy to send messages.


The half point cut in my mind was crazy for a one time cut. When I talk of the swing in the currency I am talking in the context of years.

The dollar just dropped in value.Not good news.But some say in some wierd way its good for the economy because of how people buy and sell. I don't know I just don't thinks it's good.Anyone care to comment?


When Reagan was first president the dollar was high and he said 'that's good it means people have faith in the US' then the dollar began to drop so he was asked about it. He said 'that's good it means Americans can sell more overseas'.

If you have a smile like Reagan everything is good.

If you have a smile like Reagan everything is good.

I thought he was smiling cause he had a raygun in his pocket.

Curse you region encoding!!!

I thought he was smiling cause he had a raygun in his pocket.

I thought he was smiling because he had a hole in his pocket....

The one I used just now to get that figure: http://www.xe.com/ucc/

Live rates at 2007.09.23 17:54:21 UTC
1.00 EUR = 1.40890 USD
Euro United States Dollars
1 EUR = 1.40890 USD 1 USD = 0.709774 EUR


Thanks for the site.These were the results.

Didn't the Canadian dollar reach parity too?

Yep! And not even while Dief was the Chief!

Lol so the US dollar is worth as much compared to the euro as the Turkish YTL is to the dollar....

I just find that funny.

Lol so the US dollar is worth as much compared to the euro as the Turkish YTL is to the dollar....

I just find that funny.

We could make it "worth" a lot "more" if we lop off a couple zeros...