What is your first thought upon hearing that the dollar (U.S.) is at an all time low?

[Steph]

Invest in our market too.

You mean, like by American companies, with our strong Euro vs your weak dollar, and then we can fire of the workers claiming they are not efficient enough?

 

[rilnator]

Means our dollar is at an all time high. Which to me, means no change in my life whatsoever.

 

[White Elk]

One thing it means to me is if I had left this miserable self centered
nation years ago I might now begin reaping some rewards.

 

[Dame Edna]

First I would buy out McDonalds and make them serve vegemite sandwiches instead of big macs, next buy out all the baseball teams and turn them into Cricket teams, after that buy out all the American Football teams (take off the padding you Nancies!) and make them play a man's game - Aussie Rules Football and then buy out all the US schools and colleges and teach the Queen's bloody English - and, with the way the US dollar is heading south - still have change left to pay for my psych counselling.

 

[Jawz II]

Please do. When you do we will have to build more then hire more people. Invest in our market too. Its at an all time high. A weak dollar isn't all bad.

Buying american products will stimulate the american economy? NO?! you dont say? surely not?

My thought was, "since the US economy is entirely driven by the president, this is all his fault."

You don't think this corny little war of his has anything to do with your economy being in the crapper?

Hey man, whatever you need to tell yourself. You probably voted for the guy.

 

[Eran of Arcadia]

I don't think that the war a) is entirely "his" or b) is the entire reason for the dollar being weak, but most of all I don't need to "tell myself" anything. The fact is, economies are big, complex beasts.

 

[Jawz II]

Ok, his and cheneys then.

Wait, who do you exactly blame for this war? Saddam for not having WMD? Iraqis for being too lazy?

If you know economy, you know its all about credibility. Economy is pretty complex if you wanna get into details, but the big picture is usually pretty simple.

You dont think this war has hurt your countries credibility?

 

[Eran of Arcadia]

Saddam for acting like he had WMDs, everyone on the Coalition side for not adequately planning for when the war was over (ie Saddam was out of power) etc. I mean, I don't support what ended up happening, but I don't hold President Bush personally responsible for all the evil in the world today. But really, this is all OT - not everything is about him.

 

[Dida]

Bush is the head of US military and personally made the decision to invade Iraq. If he is not responsible for screwing it up so badly, then who is? Heck, fighting Saddam was like a 'family thing' for him. "Just have to finish what daddy started."

 

[Eran of Arcadia]

He couldn't have done it on his own, if Congress hadn't authorized it. Etc. Besides which, again, the decision to invade Iraq is not the source of everything wrong in the world today.

 

[Jawz II]

Well yeah but he lied to the congress about the WMD, and they didn't have the spine to go against him, because of the anti-arab sentiments/big terror scares going on at the time.

The congress was in no way the driving force behind this war and you know it, they were too busy covering their own asses to stop it.

Hey, all his speeches from the time are on Youtube, go watch them if you don't belive me. At the same time you had the CIA telling the press they didn't know if Iraq had WMD or not. Bremer said so himself at the time, and he has been saying it ever since. Watch his 60 minutes interview.

I didn't say the iraq war is the reason behind everything that is wrong in the world, I said US economy being in the crapper is because of the Iraq war.
Are you in the discussion or am I talking to myself?

Listen again, if you want to lie to yourself, then thats fine. Don't throw blatan lies in my face, cause its insulting. Anyway, youre a good guy and I've said all I wanted to say, so Im gonna get out of this right now.

 

[Eran of Arcadia]

First of all: Why do you think I am "lying to myself"? I don't support the current debacle.

Second: This may be irrelevant, but I am not convinced he actually lied - rather, that he believed what he wanted to be true. And everyone forgets that Saddam sure was acting as though he had WMDs.

Third: You obviously didn't blame the Iraq war and Bush for everything - some people seem to, though. I really don't know how much the war has affected the economy, but I don't think it is entirely responsible.

Fourth: You are right, no need to get upset about it.

 

[Whomp]

When did the US economy go in the crapper? Eesh...

Thanks for the book, it looks interesting so I might just give it a read. I always like a good globalization text.

Back to the discussion: are we equating profits with sales then? I agree some significant portion of the profits will be returned to the HQ for marketing, acquisitions, expansion, investment, etc, but total sales is another matter. Then again, if the respective HQ departments are also located in the country, less returns to the original country.

It’s not just profits it’s affiliate revenues that don’t appear in trade figures and all I’m questioning is why. What’s the difference if GE manufactures prostate seeds in Amersham, UK or Uppsala, Sweden or Arlington Heights, IL USA? If those prostate seeds are exported to the US should that count as UK, Swedish or USA trade?

So my point is when affiliates generate revenue regardless of where the revenue comes from that is not apparent in the trade figures.

These numbers are a bit dated but in a recession year 2002 Europe accounted for 1.5 trillion in global US foreign affiliate sales (half of the US total btw) versus $975 billion in US exports. Again none of which is accounted for in trade figures.

If out of $100 in revenue for said Wal-Mart, $70 goes to paying for the products' manufacture in China, $10 for taxes, tariffs, and land usage/utilities, $3 for low-level wages, and $17 goes back to the US HQ, then the $100 in sales should only count for $17 in the export/import sense, right, since direct US interests only gained that much?

Wal Mart is the biggest trading partner with China as far as imports and those count as exports for China but we still don't count Motorola's 12% of sales as exports. Why?

Let’s use Apple as an example. The iphone generates ~50% profit on their $600 phone. The suppliers into that product includes some Taiwanese companies who hardly generate large margins but for their companies generate large sales volume.

Even some of that $17 could be reinvested in the foreign country in terms of a new warehouse (foreign labor), a local marketing department (probably necessary if it's a significantly different culture), or the acquisition of a local market rival, etc. The stronger the foreign affiliate became, the more HQ functions I would expect to be transferred abroad. Although absolute profits returning home would probably increase, their relative amount of the sales would probably decrease. Maybe there's an economic law for that? If not, I call it David's Law, and now all economics students must learn it (it might not even be true, but still they will learn it!)

Undoubtedly they do invest back into these countries. Also who cares about borders in this time? The US has 5x the trade imbalance with Canada in affiliate sales. Don’t count.
However, if you look at what most US companies are doing a lot of it is being used to reduce their share float by buying back shares. The earnings yield is about 40% above borrowing cost (after tax benefits) so the return on investment is substantial. If GM generates losses overall and profits in China do you think it’s coming home to support the dividend? You bet.

Also, what if most of that $17 just ends up being development of other international markets, opening shop in Japan or Brazil?

Great. However, Europe and North America are the most tightly bound together. To put this in perspective US affiliate sales in the UK exceeded aggregate sales in Latin America as a whole. US affiliate income in China is exploding however affiliates earned 3x as much in Ireland and 5x as much in the Netherlands.

A man approached me and offered me a job selling stock. I went to the seminar and then interview and was hired out of a very large field. But I needed to know more. I asked why me and what is it Exactly I do for you. I was told that my initiative and creativity was the reason they wanted me. Then I was told that it would be my job to talk clients into investing with my company. For this service I would gain 10+% of their investment.
......

They figured that I could use my talents to convince others to invest their hard earned monies into their investment firm. I would have earned 10+% of the monies that people who had saved all their lives investing in. That seemed to good to be true but I learned that that is the way it is done. I almost took the job. I could make more in a successfully month more that I had made in an entire year of retail management. But it did not seem right for me to convince the elderly to bank their entire savings on the projections of that outfit. I would have benefited regardless as to how they fared.

I call BS. Any investment firm will run head on with the NASD and SEC charging those rates. First off that's illegal to charge those types of costs so I doubt this was legitimate or it was 20 years ago and you'd still face charges for inappropriate investing and churning. A typical mutual fund would only charge 2% at the most and that's expensive.

If it was a private placement or hedge fund the fees are higher but so are the qualifications on income and net worth to be able to invest in these types of vehicles.

If you’re betting against developed and developing countries, I wish you good luck. It’s always been a bad bet and we're more intertwined than ever in history.

 

[Godwynn]

When did the US economy go in the crapper? Eesh...

Yesterday when the Dow was up 283 points. The largest single day point gain since October 15, 2002.

Also today when General Electric reported their profits were up damn near 10%

/sarcasm

 

[Vondutch]

Really?

And how does that follow? It is not that the Euro is going up, is that the dollar is falling against all the other currencies (that I know of), so if a nintendo game is produced in Japan and if it has a fixed price in Yens, when is shipped to Europe, the price is not changing because Euro is keeping its value against Yen, but if it is shipped to the USA, the price is going to go up cos the dollar is falling against the Yen.

But somehow this is not happening (as far as I know) so I am waiting for somebody else to explain why what I said might be wrong.

Not true.

The US dollar is down against the Euro. The Euro is up against the US dollar. Almost everything on the planet is priced on the US dollar for the American consumer market (as Americans are the largest consumers on Earth). A weak US dollar does not noticeable effect consumer prices in the US.

Europeans, who buy a lot of stuff (second only to Americans) have to buy products in Europe at European prices and pay high European taxes on top of those high prices. As the Euro goes up, so do condo prices in Frankfurt and Nestle chocolate prices in Sweden. Fewer people in the world buy European products causing prices to go up on those European products and as a result, more folks buy American.

 

[Raisin Bran]

What is your first thought upon hearing that the dollar (U.S.) is at an all time low?

That this sucks, I'll loose a edge to sell my compressors in the USA.

 

[DNK]

It’s not just profits it’s affiliate revenues that don’t appear in trade figures and all I’m questioning is why. What’s the difference if GE manufactures prostate seeds in Amersham, UK or Uppsala, Sweden or Arlington Heights, IL USA? If those prostate seeds are exported to the US should that count as UK, Swedish or USA trade?

I feel a miscommunication. I'm saying shouldn't only the money that is physically (electronically, whatever) moved from the foreign country back to the US count as an exported sale of that company?

So my point is when affiliates generate revenue regardless of where the revenue comes from that is not apparent in the trade figures.

Alright, but should it be is what I'm asking. The only thing I think should be added is what I mentioned above. Whatever money is made overseas and used for buying parts overseas, paying workers overseas, etc, stays overseas. US citizens see none of it, so why should we care? It's good for the companies, yes, but in that sense should only be looked at on company balance sheets, etc.

I can understand looking at it in order to compare US businesses versus other countries' for long-term health/growth/power/etc, but as an actual indicator of the US domestic situation I'm not seeing how it sheds any light. This is precisely at issue with the new protectionist debates, if I'm understanding them correctly: US businesses may be doing well, but domestic workers are losing ground to foreign workers, and along with that income and employment opportunities, not to mention tax revenues. Not to get into a debate on this, since it's a topic for another thread, but just to show my POV in this discussion, and why I'm focused on what comes into the US directly.

I appreciate the statistics, but I won't comment on the rest since I think the core of the discussion is in what I've already said, and no need to repeat for each point.

 

[Whomp]

DNK-- I think there's a few things I'll add and then I'll shut up because I'm probably boring the kids.

All I'm suggesting is just 20 years ago the trade figures would've been more accurate since trade was less globalized and more domesticaly centralized.

IE services like financial svcs, telecom, computer services, engineering, architecture etc was delivered through trade in the 70's and 80's. In the 90's that mode changed to affiliates/subsidiaries (1994 = $85 billion to 2002 = $212 billion in Europe. The UK alone was greater than Asia as a whole and Latin America by nearly double).

A. Who do you think owns US companies where these sales and profits are derived? Primarily US investors, funds, pensions and company employees. Investors tend to be xenophobic on their investments because it's what they know. In fact, someone in Chicago is more likely to own Walgreen's than CVS because they're based here.
B. I'm not sure where the health of the domestic situation comes into play. If anything stagnation has not been a problem here like Japan or high unemployment in good parts of Europe and near double digit in China. US companies have primarily Europeans working for subsidiaries overseas the same can be said for European companies in the US (2/3 of the 5.4 million are European companies).

Both sides of the Atlantic benefit by high wages, high labor standards and generally open access to each other's markets.

 

[Julian Delphiki]

My thought was what actually would happen if oil market would change to € on a global scale.

Some years ago when i was ordering lot of dvd's overseas dollar was much more expensive -- those would be lot cheaper now but having quit collecting movies is even more cost-effective.

 

[DNK]

Alright, Whomp.

I don't think the protectionism arguments are aimed at the EU and Japan, though, and I'd think people would want more open trade between the three than less, but I'm hardly an expert on what everyone wants.