The dollar is still the world's reserve currency, even though it hasn't deserved this status for a long time. The devaluation of the dollar can't be stopped -- it can only be deferred. The result could be a world economic crisis.
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Woe to him who builds his palace by unrighteousness,his upper rooms by injustice,making his countrymen work for nothing...Does it make you a king to have more and more cedar?Did not your father have food and drink?He did what was right and just,so all went well with him. He defended the cause of the poor and needy,and so all went well...But your eyes and your heart are set only on dishonest gain,on shedding innocent blood and on oppression and extortion. Jer 22:13, 15-17
America's Middle Class Has Become Globalization's Loser
By Gabor Steingart
At the beginning of the 21st century, the United States is still a superpower. But it's a superpower facing competition from beyond its borders as well as internal difficulties. Its lower and middle classes are turning out to be the losers of globalization.
There are essentially three exclusive characteristics whose simultaneous development have served as the foundations of the United States's success up until now -- and they only appear in this particular combination in America. They are not only the country's biggest strengths, but also its greatest weaknesses. It's worth scrutinizing them more closely.
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Woe to him who builds his palace by unrighteousness,his upper rooms by injustice,making his countrymen work for nothing...Does it make you a king to have more and more cedar?Did not your father have food and drink?He did what was right and just,so all went well with him. He defended the cause of the poor and needy,and so all went well...But your eyes and your heart are set only on dishonest gain,on shedding innocent blood and on oppression and extortion. Jer 22:13, 15-17
I consider der Spiegel just about the most useless rag of a magazine published in Europe (narrowly edging out some really horrible examples in France and Italy).
Trust nothing they say without ample verification.
No comment on this article - I just don't have the time to track down sources and find where they are digging up whatever knife they're seeking to sink into our back this time.
Again, not an indictment of the topic - just the source. One of the rare ocassions where I react this way - attacking the messenger. This particular publication has fallen off my radar screen, never to be allowed back in.
Good topic, though, and one I'll try to contribute to. I see there are other sources cited below...
The dollar is still the world's reserve currency, even though it hasn't deserved this status for a long time. The devaluation of the dollar can't be stopped -- it can only be deferred. The result could be a world economic crisis.
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tripleblack
"You can never be free until you let yourself go."
Aside from the obvious (even desperate) pining by der Spiegel for an American economic meltdown, the current indications are that the opposite is likely to occur. Despite some clear indications that a recession is likely next year, the usual formula of overkill interest rate hikes from the Fed will serve to BOLSTER the dollar's value in spite of the ongoing recession!
High interest rates will make dollar investments and currency speculation likely - driving up the value of the dollar.
Forex's analysis, though technical, shows that short/medium term trading in dollars (at the expense of european and asian currencies and competition) will drive up the value of the dollar.
This ties in nicely with the usual scenario that includes export-driven countries (chiefly Asian, and particularly China and Japan) that react to a recession in the U.S. by DEVALUING their own currencies to keep the exports rolling until the key American market is once again capable of absorbing their over-production.
Every time the price of oil goes down, certain analysts (such as the writers for the far-leftwing der Spiegel) who WISH for a dollar-disaster drag out the same hackneyed arguments. Since oil (which is traded in dollars throughout the planet, with the exception of Iran) is unlikely to languish forever at "only" $60 per barrel, the value of the dollars needed to fuel the giant oil trade will inevitably find their usual level of support from this prime source of strength.
When the U.S. economy once again clambers from its (largely self-induced) recession (probably just in time for the new Democratic administration of 2008 to look like heroes), look for the Dollar to once again drop in value as the markets start to grow once again.
Not to sound like some dollar salesman, the truth is that the long sideways movement of the dollar is likely to continue, though the reasons for this uneasy stability are going to shift from stable growth at home and low inflation to mild deflation at home and mild inflation caused by higher prices for oil.
The political situation in Asia, particularly the North Korean nuclear threat which has captured the Japanese government's undivided attention, leads me to believe the Japanese will NOT use the Yen as a weapon against American commercial interests. The recent quiet reassurances the U.S. gave the Japanese (who promptly stepped back from their threat to revisit their pacifistic constitution and begin acquiring advanced new military technology, perhaps even including nukes), leads me to believe that they will also forebear utilizing their tight central bank control over the yen to gain an advantage over the American dollar.
China will continue to focus its non-convertible yuan currency on keeping the high growth rate gravy train rolling, and they are extremely unlikely to take steps to devalue a dollar which their own currency is pegged to at an artificially high rate of exchange already.
When the factory orders in China start to slacken due to the American recession, look for the exchange rate to drop THEN, but not in a way to weaken the dollar, but to strengthen it.
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tripleblack
"You can never be free until you let yourself go."
Hold the presses, I agree with KS (not the der spiegal mag).No matter the rate of the dollar it is still the currency people have faith in. Say what you want about the Euro or the yen and the Chinese yuan, the dollar represents stability wether its high or low.
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06' GT Tungsten gray,seq. turn sigs. no spoiler.
XM,
An armed man is called a citizen.A disarmed man is called a subject.
Hold the presses, I agree with KS (not the der spiegal mag).No matter the rate of the dollar it is still the currency people have faith in. Say what you want about the Euro or the yen and the Chinese yuan, the dollar represents stability wether its high or low.
Hold on! I just woke from falling out of my chair!
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Woe to him who builds his palace by unrighteousness,his upper rooms by injustice,making his countrymen work for nothing...Does it make you a king to have more and more cedar?Did not your father have food and drink?He did what was right and just,so all went well with him. He defended the cause of the poor and needy,and so all went well...But your eyes and your heart are set only on dishonest gain,on shedding innocent blood and on oppression and extortion. Jer 22:13, 15-17
Hold on! I just woke from falling out of my chair!
Falls like this are the #1 cause of accidents in the home.
There's a guy selling a beanie cap that has a safety device that senses when the occupant is nodding off and kicks off the beanie's propeller , thus slowing the narcoleptic victim's rate of fall.
Works something like the Fed's idea of a soft landing.
No idea what effect it might have on the dollar, but it would probably respond well to nitrous injection.
(Fantasy commercial brought to you by the friendly folks at Gold Bugs Anonymous: Remember to buy Gold every month from Gold Bugs Anonymous - the End is Near).
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tripleblack
"You can never be free until you let yourself go."
Falls like this are the #1 cause of accidents in the home.
There's a guy selling a beanie cap that has a safety device that senses when the occupant is nodding off and kicks off the beanie's propeller , thus slowing the narcoleptic victim's rate of fall.
Works something like the Fed's idea of a soft landing.
No idea what effect it might have on the dollar, but it would probably respond well to nitrous injection.
(Fantasy commercial brought to you by the friendly folks at Gold Bugs Anonymous: Remember to buy Gold every month from Gold Bugs Anonymous - the End is Near).
Jeez, I toss a low and outside slow pitch, and you just had to take a swing!
Sorry, but the only economic driver in this country just deflated with the home markets.
There is little in the way of manufacturing, protectable IP (we're giving it all away to China, who just demanded American Manufacturers give chinese access to everything from suspension design to computer components -or else be Jeeped!) and interest rates while making the dollar more valuable to speculators will kill spending, which is already moving to credit card rather than cash on hand.
(I crammed a bunch into that paragraph, but you know what I'm talking about, Trip., if no one else does)
If it does become the target of speculation -that's even worse for us, as it killed Argentina's and Indonesia's economy in the matter of months.
That speculation, as speculation in stocks, housing, and flowers only means a harder crash.
__________________
Woe to him who builds his palace by unrighteousness,his upper rooms by injustice,making his countrymen work for nothing...Does it make you a king to have more and more cedar?Did not your father have food and drink?He did what was right and just,so all went well with him. He defended the cause of the poor and needy,and so all went well...But your eyes and your heart are set only on dishonest gain,on shedding innocent blood and on oppression and extortion. Jer 22:13, 15-17
Hey, just because I eschew smilies doesn't mean I don't have a sense of humor! 1001 ways to use beanie caps in daily living.
I see what's happening to the residential real estate markets - the "d" word (depression) has been popping up in real estate articles, and the national average dropped last month in a manner not seen in over 40 years of record-keeping.
The NorthEast was hardest hit, with Florida, Nevada and the left coast not far behind. The Bubble markets are popping as we speak.
Markets that have more sane valuations (the South, Midwest, and much of the West other than the Coast) will cease to grow, but see only a modest drop in home values. At least, that is the current projection I choose to believe.
The Fed's exuberant tightening orgy triggered this, though it has also shielded the dollar to some extent from predatory central banks.
The fact that interest rates are still relativley low has nothing to do with human perceptions. The young couple that was hoping for a house they were looking at a while back which now sports a monthly payment 30% higher, and is no longer within their reach, has left the market and renewed their apartment lease. Timing is everything, and the habit the U.S. has fallen into of engineering miniscule economic growth rates is becoming increasingly to require that the Fed function as an awkward rev limiter.
I personally challenge the idea that the U.S. must forever accept a growth rate a small fraction of that granted to such countries as China. American economists start crawling out of the woodwork in panic when our growth rate climbs above 3% per year, and all sorts of inflation warning bells and whistles sound if it goes anywhere near 5%. The world's agog with admiration when China cranks out a 20% annual growth rate, but its an absolute horror if the U.S. allows itself to grow 5%.
The economic version of the Kyoto Accord.
Quote:
Originally Posted by kscoyote
Jeez, I toss a low and outside slow pitch, and you just had to take a swing!
Sorry, but the only economic driver in this country just deflated with the home markets.
There is little in the way of manufacturing, protectable IP (we're giving it all away to China, who just demanded American Manufacturers give chinese access to everything from suspension design to computer components -or else be Jeeped!) and interest rates while making the dollar more valuable to speculators will kill spending, which is already moving to credit card rather than cash on hand.
(I crammed a bunch into that paragraph, but you know what I'm talking about, Trip., if no one else does)
If it does become the target of speculation -that's even worse for us, as it killed Argentina's and Indonesia's economy in the matter of months.
That speculation, as speculation in stocks, housing, and flowers only means a harder crash.
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tripleblack
"You can never be free until you let yourself go."
I get your meaning, KS, and yes, such things did lead to currency disasters elsewhere (the Indonesian example is most apt).
As I've said before, if the world's oil markets start denominating values in Euros, look for the value of the dollar to drop 25% (and the value of the Euro to go up a like amount).
This shock would likely be amplified by any economic recession or cycle of deflation (a d word rarely heard when talking to American economists - they seem to think its obsolete).
I'm not saying none of this CAN happen - just that its not likely to happen in the current 2-3 year cycle.
Like the equities markets, the currency markets are now changing from an economic market base to a geo-political panic base, with valuations changing in tune to the base economies ONLY when the geo-political factors are quiet. Currency valuations however will tend to work in the OPPOSITE direction from equity valuations, with an Iranian war probably zapping the stock markets but raising the dollar (and oil, of course).
Quote:
Originally Posted by kscoyote
There is little in the way of manufacturing, protectable IP (we're giving it all away to China, who just demanded American Manufacturers give chinese access to everything from suspension design to computer components -or else be Jeeped!) and interest rates while making the dollar more valuable to speculators will kill spending, which is already moving to credit card rather than cash on hand.
(I crammed a bunch into that paragraph, but you know what I'm talking about, Trip., if no one else does)
If it does become the target of speculation -that's even worse for us, as it killed Argentina's and Indonesia's economy in the matter of months.
That speculation, as speculation in stocks, housing, and flowers only means a harder crash.
__________________
tripleblack
"You can never be free until you let yourself go."
Hey, just because I eschew smilies doesn't mean I don't have a sense of humor! 1001 ways to use beanie caps in daily living.
I see what's happening to the residential real estate markets - the "d" word (depression) has been popping up in real estate articles, and the national average dropped last month in a manner not seen in over 40 years of record-keeping.
The NorthEast was hardest hit, with Florida, Nevada and the left coast not far behind. The Bubble markets are popping as we speak.
Markets that have more sane valuations (the South, Midwest, and much of the West other than the Coast) will cease to grow, but see only a modest drop in home values. At least, that is the current projection I choose to believe.
The Fed's exuberant tightening orgy triggered this, though it has also shielded the dollar to some extent from predatory central banks.
The fact that interest rates are still relativley low has nothing to do with human perceptions. The young couple that was hoping for a house they were looking at a while back which now sports a monthly payment 30% higher, and is no longer within their reach, has left the market and renewed their apartment lease. Timing is everything, and the habit the U.S. has fallen into of engineering miniscule economic growth rates is becoming increasingly to require that the Fed function as an awkward rev limiter.
I personally challenge the idea that the U.S. must forever accept a growth rate a small fraction of that granted to such countries as China. American economists start crawling out of the woodwork in panic when our growth rate climbs above 3% per year, and all sorts of inflation warning bells and whistles sound if it goes anywhere near 5%. The world's agog with admiration when China cranks out a 20% annual growth rate, but its an absolute horror if the U.S. allows itself to grow 5%.
The economic version of the Kyoto Accord.
1% of our GDP would be a 20% increase in China.
When you have nothing, 100% increases are easily obtainable.
China's growth is largely our own displaced growth as our manufacturing base moves there.
__________________
Woe to him who builds his palace by unrighteousness,his upper rooms by injustice,making his countrymen work for nothing...Does it make you a king to have more and more cedar?Did not your father have food and drink?He did what was right and just,so all went well with him. He defended the cause of the poor and needy,and so all went well...But your eyes and your heart are set only on dishonest gain,on shedding innocent blood and on oppression and extortion. Jer 22:13, 15-17
I reckon I've had to use the smilies so that people understand when my tongue is in my cheek.
__________________
Woe to him who builds his palace by unrighteousness,his upper rooms by injustice,making his countrymen work for nothing...Does it make you a king to have more and more cedar?Did not your father have food and drink?He did what was right and just,so all went well with him. He defended the cause of the poor and needy,and so all went well...But your eyes and your heart are set only on dishonest gain,on shedding innocent blood and on oppression and extortion. Jer 22:13, 15-17
When you have nothing, 100% increases are easily obtainable.
China's growth is largely our own displaced growth as our manufacturing base moves there.
KS, the ratio is more like 4 : 1, perhaps 3 : 1.
I would also call China's current condition as far from "nothing". They are the third largest economy on the planet. Talking about them as if all chinese were still out in the fields pulling ox plows (because they already ate the ox) is nonsense. China is a modern, high technology economy with a gigantic world footprint.
Discussions such as this one must be up-to-date.
China is attacking more economies than just ours (though of course we are a prime target). Japan, the smaller Pacific Tiger economies, and Europe are their other adversaries.
You and I agree that one of the main sources for Chinese growth is the subversion of America's manufacturing base. The limp Bush administration response is one of the prime hits I have for Bush.
In a related topic, look at what is happening today with the North Koreans. China has managed to convince them to return to the 6 way talks.
I wonder how many American factories Bush gave away to get this "favor"?
And I am amazed that our government seems to think these two topics are somehow seperate in the first place!
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tripleblack
"You can never be free until you let yourself go."
I would also call China's current condition as far from "nothing". They are the third largest economy on the planet. Talking about them as if all chinese were still out in the fields pulling ox plows (because they already ate the ox) is nonsense. China is a modern, high technology economy with a gigantic world footprint.
Discussions such as this one must be up-to-date.
China is attacking more economies than just ours (though of course we are a prime target). Japan, the smaller Pacific Tiger economies, and Europe are their other adversaries.
You and I agree that one of the main sources for Chinese growth is the subversion of America's manufacturing base. The limp Bush administration response is one of the prime hits I have for Bush.
In a related topic, look at what is happening today with the North Koreans. China has managed to convince them to return to the 6 way talks.
I wonder how many American factories Bush gave away to get this "favor"?
And I am amazed that our government seems to think these two topics are somehow seperate in the first place!
That is interesting since I read today that it was China who gave them this capability in the first place.
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2006 GT Tungsten Grey 5 spd, Xcal2/Pipeline CAI, Powerhouse tune. Spoiler delete. Front Speakers:Infinity 6812CF;Blaupunkt GTc652. Rear:Infinity Kappa 682.7CF. H/U:Alpine CDA-9885. Alpine MRP-F250 amp. Sequentials. President of the Splash guard registry. On Deck: Motoblue UDP's.
International investors analysis of the dollar 
