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Is a collapse of US dollar imminant?

In the meantime, U.S. exports and affliated sales are booming, exports alone account for ~13% of US GDP. Exports reached records in each of the past five months as Boeing Co., General Electric Co. and Deere & Co. shipped more airplanes, engines and tractors overseas.
True, but countries with relatively low value currencies will have trouble on imports. Anything imported from the UK, for example will cost a lot more than it used to (and yes, I realise the USA doesn't import much from the UK). Exports get easier because they're paying you, not the other way around.
 
You know your currency is in trouble when its on par with something called a 'loonie'.

Water fowl they can accept. and worship. what they will have more trouble with is this:

loonie.jpg


GUESS WHAT! The loonie has no 'spy cameras'

unlike this:
2_61_coin_canada_poppy_1.jpg
I'm still shaking my head at this stupidity. :lol: All they had to do was ask anybody on the street what it was.

And I find it completely unfair that ignorant, unappreciative, PARANOID American government whatevers got poppy quarters, and I've never been able to find one! :mad:
 
Why or why not? If you believe it is, where is your money?

Safetly tuck away in the hands of a Korean Stockmarket and a swiss bank
 
Something very weird is that, since the creation of the euro in 1999, the oil prices have revealed remarkably stable in that currency.

When the euro rates low compared to dollar, oil prices are low in dollar, when the euro rates high compared to the dollar, oil prices are high in dollar. If you see the euro reaching an all-time high, you can expect oil to do the same a bit later. If we believe that what was true in the past will be in the future, then we can expect oil rates to continue raising.

As a result, the volatility of oil prices turns out to be lower in euros than in dollars. For economists, that statement is rather counter intuitive considering that oil rates are determined in dollars, and the great advantage of this for the US is supposed to be a smaller volatily in oil prices. Obviously it doesn't work as it should, and I have no clue why.

Anyway, this phenomenon isn't unknown, many people realized this in the past. And if you check things in the details, you will realize that it's mostly oil producing countries which talk about priviledging the euro instead of the dollar. Venezuela and Iran wanted to sell their oil in euro, Russia increases its reserve in euro, Saudi Arabia considers pegging its currency to the euro. All these decisions come from the same observation, as oil prices are more stable in euros than in dollars, they would decrease volatily on their oil revenues in stabilizing their currency rates to the euro instead of the dollar.

I've made some internet researches on that phenomenon few years ago when I was writing my thesis on the euro, and I've never found an explanation of this which convinced me. Probably I should read a bit more on this topic today since I really find that curious.
 
True, but countries with relatively low value currencies will have trouble on imports. Anything imported from the UK, for example will cost a lot more than it used to (and yes, I realise the USA doesn't import much from the UK). Exports get easier because they're paying you, not the other way around.
That's only true if those companies want to lose market share. My guess is people will be less inclined to buy a BMW if they raise prices versus an equivalent luxury car which they haven't over the recent decline in the dollar. I'm sure they hedged off that risk.

I think the UK and US have a very strong relationship in trade. Forget about NAFTA the reality is the US invested 57% of foreign direct capital in Europe and Europe invested 75% in the US over the first half of the decade.

As far as US and UK don't discount it. IIRC 1 million UK people are employed by US companies and the next closest is Germany at 602,000.
The US has invested 4x as much in the UK as China, in fact, Ireland beats China since 2000. British affiliate income in the US jumped 50% in 2005 to $30 billion (last data point I have).

Though it seems HSBC took a sustantial goodwill write off and small cash write off today by exiting the Subprime market today. Bye bye sub prime and hello FHA.

Ultimately, it only matters what currency your assets are denominated in. If you're hedged or diversified then none of this matters. This is what people don't understand...
 
A weak dollar is surely not a bad thing, necessarily?

Not at all. I'm no economist, but it makes our exports more attractive. I do not know all of the effects of a weak or strong currency.
 
Not at all. I'm no economist, but it makes our exports more attractive. I do not know all of the effects of a weak or strong currency.
There's a number of risks.
If prices of imports rise then it will cost the American public more to buy these goods hence a inflationary bias.
Assets moving out of US denominated investments into foreign denominated investments. This is particularly problematic for fixed rate investments because as rates rise prices fall and the higher inflation erodes the coupon payment. Commodity prices tend to accelerate a bit to cushion the decline in the value of the dollar. Oil and gold have been non correlated to the dollar hence part of the reason they're so strong.

This is the tightrope the Fed has to be wary of when setting policy.
 
Hasn't the latest data shown that inflation is easing in the US?

I know that it is highly likely that it will go back up again due to imports being more costly, but for goods manufactured in the US (wheat springs to mind, as its price has a knock on effect on meat as well as other food stuffs), won't this be mitigated to a fair degree? Especially if the goods the US manufactures are more "staple" than its imports? Not sure how accurate that is.
 
Hasn't the latest data shown that inflation is easing in the US?

I know that it is highly likely that it will go back up again due to imports being more costly, but for goods manufactured in the US (wheat springs to mind, as its price has a knock on effect on meat as well as other food stuffs), won't this be mitigated to a fair degree? Especially if the goods the US manufactures are more "staple" than its imports? Not sure how accurate that is.
It has eased. We saw PPI come in at -1.4% and CPI was down 0.2% in August.

I suppose we're somewhat insulated by the wheat problem but Americans are importing a lot of exotic foreign foods more than I've ever seen at the grocery. Food and energy are the most volatile components and have gone in opposite directions. Food is up 4.2% and energy is down 2.5% over the last 12 months. I've read an interesting comparison to 1998 for why energy prices may come down substantially (a trio of Farmer's Alamanac calling for the warmest winter in history both years, housing crisis now and Asian crisis 98 along with a substantial increase in output by OPEC both years). I'm skeptical.

I saw Australia just slashed their wheat forecast by 30% due to droughts and they're the second largest exporter of wheat. I think wheat stocks are at their lowest since '79 so this seems to be inflationary. Prices are up ~80% since January to about $9/bushel.


I'm trying to make a case for why the rest of the world would decouple from the US but I'm having a hard time doing it. Everything seems more intertwined than ever.
 
Something very weird is that, since the creation of the euro in 1999, the oil prices have revealed remarkably stable in that currency.

When the euro rates low compared to dollar, oil prices are low in dollar, when the euro rates high compared to the dollar, oil prices are high in dollar. If you see the euro reaching an all-time high, you can expect oil to do the same a bit later. If we believe that what was true in the past will be in the future, then we can expect oil rates to continue raising.

As a result, the volatility of oil prices turns out to be lower in euros than in dollars. For economists, that statement is rather counter intuitive considering that oil rates are determined in dollars, and the great advantage of this for the US is supposed to be a smaller volatily in oil prices. Obviously it doesn't work as it should, and I have no clue why.

Anyway, this phenomenon isn't unknown, many people realized this in the past. And if you check things in the details, you will realize that it's mostly oil producing countries which talk about priviledging the euro instead of the dollar. Venezuela and Iran wanted to sell their oil in euro, Russia increases its reserve in euro, Saudi Arabia considers pegging its currency to the euro. All these decisions come from the same observation, as oil prices are more stable in euros than in dollars, they would decrease volatily on their oil revenues in stabilizing their currency rates to the euro instead of the dollar.

I've made some internet researches on that phenomenon few years ago when I was writing my thesis on the euro, and I've never found an explanation of this which convinced me. Probably I should read a bit more on this topic today since I really find that curious.


Sensible oil exporting countries wish to maximise whole life revenues not
necessarily this year's revenue and certainly not production (=depletion).

They may therefore be content to sell n amount within price range 'x'-'y'.

However, if price drops below 'x'; they cut production(=depletion), if price rises
above 'y', they try to may bring more expensive fields into production (=depletion).

'x' and 'y' may vary slightly according to the grade of crude oil.

The question is what are 'x' and 'y' set in?

dollars
euros
a basket

Now while oil is traded in dollars, the policy makers may use their own floating
currency, a basket or euros for setting their values of 'x' and of 'y'.

Let me put this another way, certain countries may have decided not to
annoy the USA by formally abandoning the dollar for trading in crude and
thereby risk having a coup, getting invaded, sued in US courts etc; but
their oil forecasting planning accounting may now be in a basket or in euros.
 
[Fifty] No, but a collapse of the US dollar is certainly immanent. [/Fifty]
 
No it isnt

Prices will remain the same in Canada for about 2 years.

MUCH cheaper to drive down the Buffalo though.
 
The euro's strength, together with the recent jitters in global credit markets, were behind a sharp decline in the September purchasing managers indices for the euro zone, reported early Friday. Business leaders fear that continued euro strength will speed the slow down and cost jobs...

Ludwig Stiegler, deputy leader for the Social Democratic Party in parliament said the rising was "an alarm signal for export-oriented industry" at the core of the German economy, threatening jobs in Germany and elsewhere in Europe, the Associated Press' German service reported Thursday...

In Italy, Luca Cordero di Montezemolo, head of Italy's largest business group, Confindustria, Thursday called on the ECB "to do something" about the strong euro, saying he would put pressure on the Italian government to lobby the central bank to bring the value of the currency down...

French plane maker Airbus is seen as one of the more vulnerable of Europe's industrial giants.

"Obviously, we're very vigilant, and we don't want the euro to strengthen," said senior Airbus Chief Operating Officer Fabrice Bregier said Friday.

The euros negative impact on European business "is starting to be realized at the political level, and that's very important," he said in a French radio interview.

Bregier said the company's EUR2 billion annual savings plan was based on a euro-dollar rate of $1.35. At current levels, savings would have to be sought elsewhere and the plane-maker would have to switch to dollar-based suppliers.
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=ab3e9dc1-0c21-492b-8b8b-0950f6fb58d1
 
You forgot to include this bit in your quote:
Continued concerns about the U.S. economy are keeping the dollar on the decline in Europe Friday, extending declines triggered by the U.S. Federal Reserve's decision earlier in the week to slash interest rates by 50 basis points.
The Euro goes up as the Dollar goes down. Of course it will cut into the profit-margins of an export oriented industry.

It's not a sign of weakness otoh. If depreciating your currency to competitiveness was the way to get rich we'd all be doing it. But it's not, so we don't.
 
It's not a sign of weakness otoh. If depreciating your currency to competitiveness was the way to get rich we'd all be doing it. But it's not, so we don't.
The problem of currency depreciation is that it generates inflation. This is generally true for all countries in the world, but apparently, it's not Greenspan's concern for the US dollar. I guess the old guy knows what he's doing. After all, the US dollar is the world standard currency. It doesn't react as a usual currency.
 
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