The Dying Dollar - Page 2 - U.S. Politics Online: A Political Discussion Forum Archives

Zedrow · #11 (**permalink**) 05-22-2006, 08:29 AM

While I don't claim to know much about economics I do find it fascinating. I just came accross this article from a Canadian paper that may shed a different light on the subject.

For example:

Quote:

...But the U.S. dollar has not yet adjusted to the euro and key Asian currencies, including the Japanese yen and the Chinese yuan. In the past 12 months, the euro has gained less than half a per cent against the dollar, though it is up more than 7 per cent since the start of the year. The yen, up about 5 per cent this year, has actually lost ground against the dollar since last May.

There's talk of higher interest rates in both Japan and Europe. That would make U.S. investments relatively less attractive, and add to the downward pressure on the dollar. Jen Nordvig, a currency strategist at Goldman Sachs in New York, pointed out that traders are continuing to sell the dollar short, mostly against the euro, but also against other key currencies. Short positions may account for as much as a quarter of all current trades on the dollar, he said.

Story here

trailblazer · #12 (**permalink**) 05-22-2006, 09:09 AM

Quote:

Originally Posted by cygnus

Just out of curiosity whats the problem with a weak dollar? It makes our goods cheaper and makes foreign goods pricier.

If the dollar gets TOO weak, not only will the U.S. be less able to borrow, it will create inflationary pressures. You of all people on this board should know that.

cygnus · #13 (**permalink**) 05-22-2006, 10:16 AM

Quote:

Originally Posted by trailblazer

If the dollar gets TOO weak, not only will the U.S. be less able to borrow, it will create inflationary pressures. You of all people on this board should know that.

Yes I am aware of this. The inflation primarily effects foreign goods and services since a depreciating dollar does not effect dometically produced goods and services, this gives domestic goods and services a big benefit not only from increased domestic demand but also increased foreign demand. An increasing borrowing costs doesnt sound like a bad thing either considering the FED has been trying to jack up interest rates for almost 2 years but long term rates have remained stubbornly low. So once again it is not really clear how a weak dollar is necessarly bad - like every thing it has positive aspects and negative aspects.

cygnus · #14 (**permalink**) 05-22-2006, 10:18 AM

Quote:

Originally Posted by Zedrow

While I don't claim to know much about economics I do find it fascinating. I just came accross this article from a Canadian paper that may shed a different light on the subject.

For example:
Story here

yeah there are alot more traders in all markets these days. They are certainly going to have an effect on things. The current commodities boom has been attributed to traders as well. if stocks are providing good trading opurtunities they trade where the oppurtunities are.

trailblazer · #15 (**permalink**) 05-22-2006, 10:47 AM

Quote:

Originally Posted by cygnus

Yes I am aware of this. The inflation primarily effects foreign goods and services since a depreciating dollar does not effect dometically produced goods and services, this gives domestic goods and services a big benefit not only from increased domestic demand but also increased foreign demand.

Which would be fine if there were still a significant manufacturing base in this country; unfortunately, it's nearly all migrated across the Pacific.

cygnus · #16 (**permalink**) 05-22-2006, 11:34 AM

Quote:

Originally Posted by trailblazer

Which would be fine if there were still a significant manufacturing base in this country; unfortunately, it's nearly all migrated across the Pacific.

Thats actually a fallacy. While we are no longer an industrial manufacturing economy like we used to be we are still manufacturing about 80-90% more today than we were almost 20 years ago.

The US is persistantly a net exporter of services, a weaker dollar should only make that stronger. The weaker dollar has also propelled more domestic manufacturing to reduce currency risk. This is why you have BMW's made in Spartanburg NC, and tons of toyota, honda and kia manufacturing plants in the US.

trailblazer · #17 (**permalink**) 05-22-2006, 01:17 PM

Quote:

Originally Posted by cygnus

Thats actually a fallacy. While we are no longer an industrial manufacturing economy like we used to be we are still manufacturing about 80-90% more today than we were almost 20 years ago.

And what measurement unit does this graph use? Dollars? If so, that's an even bigger fallacy: anything output by a US company in a plant overseas is thereby counted as an export.

cygnus · #18 (**permalink**) 05-22-2006, 03:39 PM

Quote:

Originally Posted by trailblazer

And what measurement unit does this graph use? Dollars? If so, that's an even bigger fallacy: anything output by a US company in a plant overseas is thereby counted as an export.

Its an index of "Output". It does not specify what that output is. It is usually measured by domestic industrial capacity and utilization - how many widgets can your factory produce - the federal reserve does not survey output of domestically owned but internationally located factories.

Here is another graph that shows manufacturing output - this one specifies that it is measured by capacity and utilization. Its also a longer series to boot.

http://research.stlouisfed.org/fred2...=Medium&crb=on

trailblazer · #19 (**permalink**) 05-23-2006, 10:26 AM

Quote:

Originally Posted by cygnus

Its an index of "Output". It does not specify what that output is. It is usually measured by domestic industrial capacity and utilization - how many widgets can your factory produce - the federal reserve does not survey output of domestically owned but internationally located factories.

But these statistics don't come from the Federal Reserve; they're from the BLS. Aside from which, what makes you so sure that either methodology excludes output from overseas factories?

Quote:

Here is another graph that shows manufacturing output - this one specifies that it is measured by capacity and utilization. Its also a longer series to boot.

http://research.stlouisfed.org/fred2...=Medium&crb=on

Again, nothing on their site (that I could find, at least) on their methodology.

cygnus · #20 (**permalink**) 05-23-2006, 11:36 AM

Quote:

Originally Posted by trailblazer

But these statistics don't come from the Federal Reserve; they're from the BLS. Aside from which, what makes you so sure that either methodology excludes output from overseas factories?Again, nothing on their site (that I could find, at least) on their methodology.

the first graph is in deed BLS.
The second graph explicitly states that the source is the board of govonors of the federal reserve system. They use the census's annual survey of manufacturers which only surveys domestic manufacturers. It is data created by surveying individual plants and manufacturers in each state and aggregating into a nationwide picture. So they are clearly not counting output from US owned foreign factories.

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