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#1
05-08-2007, 08:56 AM
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The Demise Of The Dollar And What To Do About It
NOTE: This is a econ post so it if you aren't into that sort of thing, it's not for you.
If your wallet feels a little light lately, you aren't alone. Nope 300 million of us have a currency that is decreasing and will continue to decrease over the course of the next few years. The dollar has dropped roughly 36% over the past 8 years against the EURO. Mind you the Euro includes "powerhouses" like France where their economy sputters along and unemployment is at 10%. So why is our money declining in value? Well the biggest reason is that Americans do nothing but spend and the big countries of the world finance our credit by buying dollars and trading with us. (In fact we have a -1% savings rate, the lowest in the world) Thus we run a current accounts deficit that is off the charts. Of course those of you with credit cards realize you can keep borrowing----until you can't anymore. That time is coming. The dollar is losing value b/c the realization among countries like China is that they need to diversify their holdings into other currencies and aren't buying them. Meanwhile the strong dollar policy that this country had for decades is gone as Bush became President. What does it mean for you? For one it means asset inflation which is what you are seeing right now in the Stock Market. The DOW has been up 24 of the past 27 days as I write this. That hasn't been seen since 1927. Ring a bell. Then as in now the liquidity of the money supply some 18% worldwide compounded year over year has to go somewhere. For a while it was housing which is now puking its guts up. Now it is in asset prices....Secondly if you haven't noticed the prices you pay for foreign goods are going up and will continue to do so. So putting off that vacation to Europe isn't a bad idea. So how can the FED reserve stop this? Easy by raising interest rates a lot and protecting the dollar. The problem is the economy is actually decreasing quarter over quarter and the housing market will get worse with a rate increase. So the FED is stuck.... What should you do. Well if inflation is going to get worse one of the main things you should do is lighten up on stock holdings for the foreseeable future. Contrary to the rah rah crowd on CNBC, they have a vested interest in seeing you fully invested...The best natural hedge against inflation is buying gold. Not easy to do but if you can buy the physical, 1 ounce Gold Eagles at 7 dollars over spot price(which currently is about 685$) you should do alright. Always buy in cash and find a safe place to store it...not in a safety deposit box. OR--if you do want to invest in the market, buy mining companines which mine precious metals. Tickers AU and GOLD are my two faves right now.....OR if you want to buy into gold but can't store it, its easy. They have a Gold ETF(exchange traded fund) which tracks the spot gold price in NY. Ticker is GLD. Either way, there are a bunch of bright people around here. Just realize what a declining dollar means and how its going to affect you. You'd think it was a great thing according to financial news b/c companies here selling overseas get a benefit.....But its a short lived benefit. And higher prices are on their way, from cars to the grocery store----just keep your eyes open. You will see it. Randall 
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#2
05-08-2007, 12:01 PM
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I'm way ahead of you. Good read.
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#3
05-08-2007, 12:38 PM
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Heavily invested in euro markets. Doing very well.
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#4
05-08-2007, 12:58 PM
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Don't forget to look at how you're planning, too. Since my stuff is almost entirely long-term retirement money, I'm a fan of dollar-cost averaging (putting in a fixed amount every month). When the market is doing poorly, at least I'm getting a better price on what I'm buying. I dread the idea of another huge depression, but since I'm still 30 years, minimum, away from retirement, the stock market taking a hit doesn't have me in a panic. Closer to retirement, yeah; I'd be worried.
And yeah, diversifying.  Apparently, the popularity of the President also affects the dollar's strength- check it out: http://www.slate.com/id/2165579/nav/tap2/ A loose correlation at best, but entertaining reading, anyway. Thanks for bringing this up, Randall. Short term things don't look good. Long term? Well, the Great Depression led to all kinds of changes in policy that created a strong middle class. Took a long time, but most worthwhile things do. Sometimes we need to get slapped pretty hard to start focusing on really changing things. Though I hope it won't come to that.
__________________
Gentlemen! We're burning daylight! Riders up! -Bill Murray
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#5
05-08-2007, 01:22 PM
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GRisk,
That's an interesting chart....Bascially from the end of Clinton on the dollar has weakened. A rally here and there, but the decline is staright down....Notice the high popularity of Bush was b/c of September 11th. It makes sense that a terroist event would lead to an increase in strength in the dollar. It is a "safe haven." But less so than ever before. Last month when tensions between Iran and Britain were high the dollar did nothing at all. Oil went up, but the dollar just sat there.... Even more interesting is that some countries are starting to buy oil off the open markets in Euros. That's unheard of. If the world moves away from the U.S. as its currency of choice for things such as oil pricing, the spillover effect is fewer dollars held in foreign banks....The point to this whole thing is that the rest of the world is tired of our collective shopping spree in this country and can put an end to it in a heartbeat if they want to. If China sold 10% of their U.S. reserves, the dollar would drop another 15%....Keep taming that tiger Fed Reserve. B/c the rest of the world has us by the balls when it comes holding our debt.
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#6
05-08-2007, 01:50 PM
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Quote:
Interesting points you make. Do you have any idea what each penny increase per gallon in gasoline prices really costs? Or what the cost of a 2 trillion deficit war policy costs? Or what the collapse of the housing market costs? Some do. Some don't. After seeing Queen Liz and the Smirker at last night's "white tie affair"...shucks...."Let them eat cake." We're screwed! So are our kids, and theirs, and theirs. Good luck!
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#7
05-08-2007, 02:00 PM
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From Minyanville Today: (an excerpt)
"1. Give the Consumer Credit You have to give the consumer some credit. No, seriously, you have to. Because that's apparently how they're paying their bills. Consumer borrowing increased in March by the most in four months according to the Federal Reserve's Consumer Credit figures. Consumer credit (non-mortgage loans) to individuals increased $13.5 billion, or 6.7% at an annual rate, to $2.425 trillion, the Fed said. Economists were expecting a more modest increase of $4 billion. Use of revolving credit, primarily credit cards, rose at a 9.2% pace in March. That was up from a 2.9% growth rate in February and was the biggest increase since November. Perversely, this is good news for the economy because it shows consumers are willing to do whatever it takes to keep on paying their bills and buying stuff, even if it means turning to higher interest credit cards. According to the Associated Press, consumer borrowing is a sign of "resilience." "Consumers boosted their borrowing in March at the fastest pace in four months, showing resilience in the face of rising energy prices and a painful housing slump," the Associated Press reported. While using the term "resilience" to describe a jump in consumer borrowing largely made up of credit card debt itself violates most tenets of logic, that was only the beginning. "Consumer spending is indispensable to a healthy economy," the AP rightly said. Then the article followed the "consumer showing resilience by borrowing at the fastest pace in four months" observation with this: "The economy grew at an anemic 1.3 percent pace in the January-to-March quarter, the weakest in four years." So consumers "showed resilience" by borrowing at the fastest pace in four months... while the economy grew at its slowest pace in four years? Huh? We don't think this is resilience at all. It's desperation. " http://www.minyanville.com/articles/print.php?a=12773
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#9
05-08-2007, 04:01 PM
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Sometimes the dollar weakens and it has nothing to do with domestic factors. It happened in the mid and late 90's mostly due to the very high growth of the Japan and European economies, especially Germany. It's a different part of the world these days, but the concept is the same.
And when the dollar is strong, it's not correct to generalize that's 100% positive. When the dollar is hot, it makes it more difficult for US corps to compete in foreign markets. With increased globalization of world economies, this tempers the effect of a weak dollar. A weaker, or weakening dollar also make US investment more attractive to foreign markets. It's hard to generalize. But I do agree that it makes a lot of sense to be increasingly invested in certain foreign markets and in securities of US firms with larger exposures to foreign markets. I have no idea why people save so little in the US. With all the bills people have to pay it's insane they do not pay themselves first (savings). I don't get it at all.
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#10
05-08-2007, 04:21 PM
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Quote:
I also think the worst day's work Reagan ever did was deregulating the credit card industry. As soon as the credit industry no longer had a maximum amount of interest it was permitted to charge people, we got barraged with credit card offers galore with late payment rates comparable to that of loan sharks. I have a friend who got slapped with a 30 percent interest rate on her oustanding balance because she was late witih ONE payment. And of course, the Republican-led "Bankruptcy reform" of a few years' ago made it much harder for people to declare bankruptcy. Over half of people who declare bankruptcy do so because of a medical situation that, because of our f*cked up health system, drains them of any and all assets. So, we have a society told every day we have to spend spend spend (hell, it's what Giuliani told New Yorkers to do the day after 9/11. No kidding. "Go shopping" was his response to what we should do) and a credit industry that makes it just about impossible for people with limited financial resources to ever get themselves out of debt.
__________________
Gentlemen! We're burning daylight! Riders up! -Bill Murray
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#11
05-08-2007, 05:42 PM
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Quote:
It's not up to anyone other than each individual to choose their own course. If you get sucked in by every commercial on tv or radio then you should watch no tv or listen to no radio. I would never agree that aside from being born into poverty that someone's problems are of the cause of/can be solved by some other than themselves. Don't go blaming Reagan for deregulation of credit cards. It's not true! The bill -- "Depository InstitutionsDeregulatory Act" (or something like that) -- was passed during Carter's term and Carter signed it into law. It was not Reagan. PErsonally, I think Reagan's worst day was when he signed the Agricultural Adjustment Act, which birthed Agri-business as we know it at the expense of the family farm. Last edited by SentToStud : 05-08-2007 at 05:54 PM.
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#12
05-08-2007, 06:02 PM
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#13
05-08-2007, 07:42 PM
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Quote:
And you know that guy making $18,000 a year because he wasn't born to a rich family who could put him through school who gets cancer? It's his own damn fault for thinking negative thoughts that gave him cancer. His kid? Eh, it's her own damn fault for being born to a guy who's going to die and leave her. He had no business having children if he wasn't rich. Kids are only for rich people. B, I do believe in personal responsibility- if you have sex without a condom and you get someone pregnant who doesn't want to abort, you should pay child support, for example. But I also understand that life happens- people who aren't rich get sick, or get in accidents, or believe a government that tells them the air down at the WTC is perfectly safe two days after the buildings fall. And credit card companies are there to offer borrowed money to handle life's problems and then there to insure that you'll never, ever get out of debt once you start borrowing from them, because they make sure not to tell you what happens if you miss payments or are late, except in very, very small print. Over half of people who declare bankruptcy do so because of a MEDICAL SITUATION. Explain to me how leaving their survivors in debt the rest of their lives because they got cancer is fair because hey, it's their personal responsibility. What would you have them do? Kill themselves before they get too sick so their families don't have to go into the poorhouse? Do they deserve to live the remainder of their lives in agony because they can't afford medical care and it's their problem? Is this what you are saying? Rich people can get their illnesses treated and f*ck the poor and their families because they don't have money to pay for health care or for an emergency fund that's of any use? Is that what you're saying? B, I have a dear friend whose husband lost his job in fracking Buffalo, which is not known for its excellent employment opportunities, right after she had a child. Wasn't his fault; the business was failing and he was let go. Despite her being employed full time, they were $27,000 in debt within a year-and-a-half and I can tell you, they have NOTHING. They were using credit cards to buy food, not movie tickets. And their debt soared because of the g*d*mn fact that the credit card companies can change the interest rate they originally set up with you because you're late with a payment and they can jack that rate up to levels associated with loan sharks. And so people owe more in interest than the original purchase. And those people are the ones who can't afford a 30 percent interest rate. It's disgusting. And it's driving more and more Americans into poverty but hey, it's my friend's husband's own g*dd*mn fault for taking a job at a place that five years later was going to fail, right? And for having a baby, right?
__________________
Gentlemen! We're burning daylight! Riders up! -Bill Murray
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#14
05-08-2007, 09:12 PM
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goldismoney.info
lots of good info there.....ive read into ive been on physical silver the past few months
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#15
05-08-2007, 09:20 PM
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Quote:
Frankly, unless you get drug tested for work, I can't think of one good reason not to hemp. You are way out there. Just stop blaming Reagan for the Credit Card sh1t. Do your friends believe the sh1t you talk? If your friends are having a hard time, tell them to get a second job. I did it for years. I missed nearly every Saturday and most Sundays with my wife and two kids for YEARS. Life is neither always fair or easy. It's the tough times frankly that make it worth living.
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#16
05-09-2007, 12:04 AM
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goldbugs.
it's not legal to hunt and kill them so you just have to listen to their nonsense. someones been paying a little too much time on the am dial. all those who missed the big run up in gold the last 30 years still have a chance to get on board. i love the idea that a higher stock market always means it's 1929 again and a lower stock market always means the slide has just started. willian jennings bryant would have loved this. Last edited by hi_im_god : 05-09-2007 at 01:04 AM.
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#17
05-09-2007, 09:01 AM
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B-
No, my sense of personal responsibility is not limited to the male of the species, it's just easier in the case of pregnancy, for him to avoid it, as a woman dumb enough to let a guy stick an unrubbered penis into her when she doesn't want to get pregnant is going to be stuck with addressing the consequences one way or another whether she wants to be or not. I was limiting my example to fiscal responsibility. Lots of people don't know the first thing about how the credit card industry works. Because at no point in their lives are they taught how to handle money. We focus obsessively on 'readin' ritin' and 'rithmatic (all well and good) but I see a real dearth in education's attempts to teach things kids will really need as grownups. Those of us who were fortunate enough to grow up in middle-class households with parents who had middle-class parents who had the time to explain these things to us had a leg up, but it had nothing to do with personal responsibility and everything to do with being a member of the Lucky Sperm Club, as it were (a name I usually reserve for the hereditary wealthy, but face it, as Americans most of us are members of the Lucky Sperm Club compared to the majority of the world, especially if we're Caucasian, too). I've had to explain the difference between a savings and a money market account to friends with Master's Degrees. It's not easy, especially if you didn't learn it young. When it comes to the credit card industry, I have nothing but unkind feelings for the business- I see those tables out at college campuses every fall, nabbing every kid who stops for more than ten seconds, none of whom have any idea how to manage their credit because A) they're 18 and B) no one has taught them this. Then they run up debt and spend the rest of their lives trying to dig out from under it. I read about how they target the elderly, whose comprehension skills are already declining, due to age. They are bad news, as most loan sharks are. Hell, I pay off my balance every single month. You know what the credit card industry's term for people like me is? "Deadbeat." Thanks. Thanks a lot. But do you think the credit card industry would support educating its consumers? The same industry that targets people who have declared bankruptcy with credit card offers (the other fun story my friend has to tell about her experience with debt- getting bombarded by offers from Visa, etc., AFTER they filed). Please. They want people not to understand because then people will continue to give them record profits. It's deceptive and it's wrong. Personal responsibility is well and good, but it needs to start from a level playing field, at least where information is concerned. This industry is doing everything it can to keep Americans dumb and indebted. Apologies- yes, deregulation did start under Carter's administration (he has to work with a Republican Senate, yes?  ) and continued through Reagan's culminating in the lovely Savings and Loan scandal (remember that one?) which resulted in all of us paying for rich people's taking advantage of an idealogical belief in unregulated capitalism. Reagan presided over the largest tax hike in the last years of his Presidency, remember?
__________________
Gentlemen! We're burning daylight! Riders up! -Bill Murray
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#18
05-09-2007, 09:34 AM
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As for the spending thing (and then I'm off the soapbox for the day, I promise)-
Yes, I agree there is a huge amount of PR (personal responsibility) involved in spending habits. But I think it's easy to dismiss the pervasiveness of advertising and the thousands of small and large ways we're pressured to buy buy buy as having no effect, when in fact, I think they are hugely influential on our natures, especially when we're young. I was a (pardon the pun) a huge fattist for quite a while- I considered obesity the height of personal weakness. As a small female, I got fed up with fat people spotting the empty seat next to me on the bus, plane, whatever and taking advantage of the extra space my small frame afforded them, so I spent many a ride jammed up against someone else's sweaty, smelly excess abdomen. I feel the trade-off for me not being able to reach things on high shelves is that I don't fill up the entire seat on a bus and I never have problems with "leg room," whatever that is. And so I found it unfair to be squished because someone else can't keep her hands out of the Ding-Dong box.But you know what? Obesity ain't that simple. Admittedly, I don't buy the "genetics' argument because obesity rates have tripled in the past 30 years and we just don't evolve that quickly. But we are surrounded by food. Surrounded. And it's pushed at us relentlessly. And we don't evolve that fast and our bodies and brains are, I think, hard-wired to remember a time when we spent most of our lives starving (heck, obesity was once the height of beauty because it was rare). And I think advertising, etc., takes advantage of that and eventually most people give in. And once fat, I think it's really hard, a lifelong struggle, in fact, to address it. I think losing a large amount of weight is harder than quitting smoking (you still have to eat, after all) and props to those who manage to take off a large amount of weight and keep it off- that's a war they never stop fighting, and in a society where they are surrounded by images and messages saying "eat this! eat this! eat this!" So yes, body health is a personal responsibility, but I think our culture makes it as difficult as possible to stay healthy- little access to exercise in our car-dominated culture, sedentary jobs and endless push push push of foods that have little nutritional value. Hell, I just had chocolate and wheat thins for breakfast. Mmm! Healthy! Well, I did have a glass of milk, too... And that carries over to our consumerism. It's a high to buy something. I remember sitting in front of the TV as a kid, listing the things I wanted for Christmas-- in June. I lost that acquisitiveness somewhere in the wake of my mom's death, since you can't buy anything to make THAT feel better, but you know, a lot of kids aren't as lucky as I was to have their mom die. (said with sarcasm. I can't believe I feel it necesary to explain that, but again, people can surprise you with what they don't understand) Personal responsibility is all well and good and essential, but it's not the entire answer when your entire society is built on a system (advertising) designed to keep you spending more than you have. Is there an easy solution? Gads, no. I'm a believer in regulated capitalism, and a business has to advertise a product. But I think now, in our negative-savings society, we're seeing the effects of unregulated advertising and the thing is, when it comes crashing down, all of us, even those who are saving what they can, will feel it. Just as we had to be the ones to bail out the Savings & Loan crooks. And I think, in a society dominated with a command to buybuybuy it's wrong to permit unregulated lending. It's wrong. It allows wealthy corporations to take advantage of the weak and the poor and that's as close to evil as I can find. Oh- I forgot- my friends didn't move from Buffalo because my friend's husband's mother was (still is, I think) quite ill and he is her entire support system. Though I imagine your response would be that he shouldn't have had a mom who got sick, right? Or she should have been tough enough to take life without any family around her, right?I'm also not sure where they would have found the money to move. It's expensive, moving! Done, promise. I have a play to get written today (not on economics; on aging. With zombies! And cupcakes!) and actors to rehearse. Carry on with your unkind comments without me, hi_Im_god. My heart breaks to think of your low opinion. I'm cut. Really I am. You too, STS. Can you see the virtual tears spilling on my keyboard? And STS- I worked three jobs in college, along with full-time classes. Nothing like an 8:30AM to 11PM day five days a week and an 8:30-6PM on the other two to really make a girl depressed. So yeah, I know from hard work. Did your wife work, too, while you were working two jobs? What did she do? In my friends' case, he had to limit his search to a night job, because she worked full-time (which was six days' a week, by the way) during the day and they had no money for day care, duh). What did you do with your kids while your wife was (I assume from your tone) working, too? Or wasn't she? It was a happy ending at the end, though- she was able to switch jobs and found one that also included health insurance, but it took a few years of looking. He's working now, too. But it took time; it's not a magic solution. You have to find the d*mn job.
__________________
Gentlemen! We're burning daylight! Riders up! -Bill Murray
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#19
05-09-2007, 10:47 AM
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I am hardly a gold bug and currently own no physical gold whatsoever so get your facts straight. I'm not comparing this to 1929 at all. The comparison was to the market being up for X number of days in a time period and that time happens to be 1927. Just a fact....Now most of my post deals with the dollar, nothing else...Our economy isn't going to fall into collapse at all....But if you don't think it has a major effect on inflation you need to look again.
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#20
05-09-2007, 11:42 AM
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great read Randall I just got around to it, it will be only a matter of time til the dollar roars back as markets in Asia start a downturn as investments start to tumble, alot of Austrailian backers in those sectors will start to see a sharp decline.
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