Dollar-Euro Rate Sparks Crisis Fears

[cal04]

The United States’ trade deficit is soaring and the once high-flying dollar has sunk to record lows against Europe’s common currency. But President George Bush’s administration has reacted with remarkable calm to developments that raise worries about a possible dollar crisis.

Treasury Secretary John Snow, when asked, sticks to his standard comment that the administration’s position in favour of a strong dollar has not wavered.Beyond such comments has come no single government action. During its four years in power, not once has the administration intervened in currency markets to support the dollar or done anything else to stop the dollar’s slide.


Most economists say the dollar, already down by about 10% over the past two years against a market basket of foreign currencies, has yet to reach its lowest point.In fact, some think the dollar needs to decline by 10% more to deal with climbing US trade deficits.
“The trend to a weaker dollar is going to continue. The trade deficit is just too big,” said David Wyss, chief economist at Standard & Poor’s in New York.

The dollar’s record low against the euro coincided with the government’s report that the United States was running a trade deficit through September at annual rate of 592 billion dollars. That compares with last year’s record 496 dollars billion.As a result, the country is having to borrow almost 600 billion dollars from overseas this year to pay for the imported cars, televisions and other items Americans are buying.

http://news.scotsman.com/latest.cfm?id=3759014

[PartyPooper]

1. At this rate, the dollar won't be worth much at all in another 4 years.

Will that be enough to oust the repukes from power?

:eyes:

[radfringe]

19. but but but

Snow says we are still on a Strong Dollar Policy...

as far as ousting repukes because of a weak dollar -- not their fault -- it's all Clinton's fault, it's the Democratic Party's fault, it's because of 9-11, it's everyone else's fault except repukes/bush*

don't you realize that this is the "NO-FAULT Mis-Administration"?

[The Zanti Regent]

23. But isn't Jesus going to intervene?

You can bet those fools at the Presidential Prayer Team are praying non stop for Jesus to intervene and erase the deficits!

[Emillereid]

2. I think the Bushits want the dollar to slide --

any financial/economists types out there know why? I mean I know it's good for exports, but bad for import prices. And I know that the really rich are buying the debt, which is another way to give away the company store. But traditionally the US government has not wanted a weak dollar -- until this one. What are they up to??

[pa28]

3. Reagan intentionally weakened the dollar.

The idea was to ease the trade deficit. This time I don't think it's intentional . . . just the result of budget ineptitude.

[DBoon]

6. After severely strengthening the dollar

to make US manufactured goods uncompetitive abroad, wiping out US industrial unions.

[AP]

5. Because the ensuing financial crisis will result in a fire sale which will

allow the super wealthy -- people who made money off of oil and war -- to buy up the rest of America at bargain basement prices. That'll allow them to concentrate even MORE wealth and power in the hands of fewer, wealthier people.

[Dover]

12. That's exactly right. They are divying up the spoils...the park lands

the publicly owned properties, they've already got the treasury, and anything else that's not nailed down. Remember their approach is to put it all up for auctions...a policy already underway. It's part of their globalizing plan...which includes the dismantling of the U.S. gov. infrastructure and laws. Corporations want to fill the power vacuum that exits in global institutions now.

[aquart]

14. Selling the nation to the rich. And making US pay the interest.

[Mike Niendorff]

24. Manufacturing a crisis

Hard to push through their violently right-wing agenda in times of peace, stability and prosperity.


MDN

[TahitiNut]

4. Why do I suspect ...

Morgan Stanley, Merrill Lynch, PricewaterhouseCoopers, UBS Americas, Goldman Sachs, MBNA Corp, Credit Suisse First Boston, Lehman Brothers, Citigroup Inc, Bear Stearns, Ernst & Young, Deloitte Touche Tohmatsu, Wachovia Corp, Ameriquest Capital, Blank Rome LLP, Bank of America, and JP Morgan Chase & Co have very strong cash positions in Euros?

Since their stock went up, it's my guess neither they nor their investors are too concerned. Thus, somebody's holding the short end of the stick, while they're holding the long end.

[daleo]

7. That's what I think too

The super rich can hedge their bets in international money markets anyway. I can see interest rates going way up, and lots of people losing their homes, which will be a massive transfer of money from the middle class to the upper class.

[anarchy1999]

20. You forgot Warren Buffet.

n/t

love your new sig line

[TahitiNut]

28. No, I didn't. As strange as it might seem ...

... I listed the financial institutions who are among the "Top 20" contributors to the Smirk/Sneer 2004 campaign. (Warren's not in the list, nor is Berkshire-Hathaway.)

http://www.opensecrets.org/presidential/contrib.asp?id=N00008072&cycle=2004

[whistle]

8. The trade deficit is a different set of numbers from the Federal.....

...budgetr deficit, but they both seem to be moving together now and that movement is in a downward direction. It strikes me that the budget deficit occurs because our federal government spends more money (U.S. dollars) that we take in (taxes) in any given period (during a fiscal year for example). But that can be a good thing for the economy because it supposedly means money is being pumped into the economy and that money in turn will be spent and that spending can mean more jobs (in theory at least). So, the Bush economics has been spending like crazy in the past three years creating record Federal budget deficits ($1.8 trillion new debts) and Bush has given away $1.5 trillion in tax cuts that have gone mostly to the very wealthy in the country.

Now the trade deficit is something entirely different. That happens when we as a nation, buy more goods and services abroad (outside of the U.S thus stimulating the economies of other countries) than those countries buy from us. For example, Disney imports almost all of the products (plastic Mickies, Goofy Tee Shirts, etc.) from abroad to sell in their theme parks and merchandise stores. Hundreds of millions of dollars worth. They are sold by Disney at very high mark-ups to the visitors at Walt Disney World and through their retail stores and much of that merchandise is purchased from China. Yet relative to what Disney imports, there are very few Chinese who would come to Disney World on vacation, or for that matter buy American goods and services in exchange. Multiply that economic flow from one large company like Disney over all the companies that are outsourcing to China and various other countries on the scale that we have witnessed under Bush and you get astronomical trade deficits like those being reported now.

So what we have is an economy in the U.S. that is not able to sustain itself with adequate goods and services within it's borders, so it has to get them from outside. The trick is to be sure we have something to exchange with nations we are importing from, that they need or want. The massive volume of the trade deficit $592 billion speeks to the total mismanagement and failures of the Bush administration and only suggest to me a big slow down in the economy. The U.S. dollar has to fall because there are so many floating around out there and nobody wants what we have to sell them, arms and weapons. At least not in the volumes that we need from trade to get our deficits in balance. Bush would like to get WW IV going I'm sure because he believes that the rest of the world will buy join in and buy the high teck weapons from us, blow each other apart, while our war industry reaps the profits. It ain't going to work that way. We are just going to plumet further down. I had prayed and hoped that the lection was going to turn out differently, so that our side would turn that kind of crap around. Let's hope some republicans in congress see through the illusion and come over to the light.

[TahitiNut]

9. It does, however, have a relationship to the federal deficit.

As the dollar falls, the value of dollar-denominated instruments (like T-bills) also falls on the global market. It's no accident that foreign purchases of federal debt instruments (which has been running about half of publicly-sold debt) have fallen dramatically.

We have a federal debt of $7,429,634,897,166.91 today. That's about 2/3 of our GDP.

[aquart]

15. They won't buy hi tech weapons from us.

Why? Because the component parts are made overseas. They can as easily buy reverse-engineered weapons with identical spare parts from the nations making our parts.

[cal04]

10. Long article, not sure how much of it is true, but interesting

07/03
A New American Century? Iraq and the hidden euro-dollar wars by F. William Engdahl, USA/Germany
This article was originally published in the June 2003 edition of Current Concerns

Despite the apparent swift U.S. military success in Iraq, the U.S. dollar has yet to benefit as safe haven currency. This is an unexpected development, as many currency traders had expected the dollar to strengthen on the news of a U.S. win. Capital is flowing out of the dollar, largely into the Euro. Many are beginning to ask whether the objective situation of the U.S. economy is far worse than the stock market would suggest. The future of the dollar is far from a minor issue of interest only to banks or currency traders. It stands at the heart of Pax Americana, or as it is called, The American Century, the system of arrangements on which America's role in the world rests.

Yet, even as the dollar is steadily dropping against the Euro after the end of fighting in Iraq, Washington appears to be deliberately worsening the dollar fall in public comments. What is taking place is a power game of the highest geopolitical significance, the most fateful perhaps, since the emergence of the United States in 1945 as the world's leading economic power.




http://www.williambowles.info/guests/dollar_euro.html

[54anickel]

25. Great article, thanks for posting. n/t

[Pale_Rider]

11. Buy Euros ...

... right now!

[sweetheart]

13. punishing those "euros"

Keep in mind that bush don't doesn't do anything unless it attacks
the economics of his political opposition. The economies in euros
are now having their exports overpriced, as China and Japan are
not letting their currencies slip to fair value, so the burden of
the deficit is falling primarily on europe, and making the euro
painfully expensive.

If you are feeling frustration about this, vent it on japan and
china's central banks. They are supporting bush's war against
europe, as the whole thing ultimately works in their advantage.
The great satan is going bankrupt and injuring europe with it, whilst
the far eastern countries export their way to wealth on the back of
the US taxpayer.

[anarchy1999]

17. China is just waiting. They operate on a 1000 year plan.

There is nothing to vent on China or Japan. China will take this country down, courtesy of Wal-Mart. Our country has been trying to make them cooperate and they have been, up to now. All bets are off. Alliances all over the world are being made against the US military-industrial complex. China knows what it is doing. Who owns the Panama Canal?

[anarchy1999]

16. There is more than one way to fight a war and be a world power.

Watch out US of A and the "God Bless America" crowd. It is going to get ugly.

In October of 2001 I met a man who told me it was already too late. He envisioned people leaving the US in boats. Many of our most influential friends are already gone. Costa Rica, Canada, Germany...... Why?

[Iceburg]

21. Putin & Blair are "crazy like a fox" ... encourage George

to maintain a belligerent position in the world, spend all your money in the cause while sitting comfortably on the sidelines cheering him on but not contributing much beyond a handful of troops. That's one very effective way to weaken the US as a world power in a short time span. What conditions led to the demise of the USSR??? ... years of unsustainable wars. The British have been there/done that too.

[DinahMoeHum]

26. Possible epitaph for USA under Bush: The war is over - EuroAsia won. . .

they took all our money,
and they never used a gun.

:evilgrin:

[radfringe]

18. Treasury Sec Repeats Strong Dollar Policy

from the "saying it makes it so department" :eyes:

Treasury Sec Repeats Strong Dollar Policy
Mon Nov 15, 2004 04:06 AM ET
http://olympics.reuters.com/newsArticle.jhtml?type=busi...

DUBLIN (Reuters) - The United States backs a strong dollar but believes the currency market should determine exchange rates based on fundamentals, U.S. Treasury Secretary John Snow said on Monday during a visit to Ireland.

"I've had a tradition of never commenting on the relative exchange value of the dollar," Snow told journalists traveling with him during a European tour.

---snip---

The dollar fell to a seven-month low versus the yen on Monday as it resumed recent weakness due to concerns about the growing U.S. current account deficit.

---snip----

Snow's comments came amid speculation the Bush administration tacitly approves the dollar's decline, without saying so officially for fear of spurring a faster fall in its value.

[PROGRESSIVE1]

22. Bush caused this so maybe it is not so bad that he gets another term.

Let the house of cards that Bush built fall on Bush!

[74dodgedart]

27. It will fall on all of us..

Sometimes it's better to be happy than right...

If the currency collapses, it's going to suck for everyone.

[HereSince1628]

29. Outsourcing jobs is painful, shifting global standard away from dollar

would be ruinous, and it seems just around the corner...

The mistake of ignoring the fall of the dollar could stomp on the investor class and the entrepreneurs Bush claims as his base.