dollar weakness
- Thread starter man
- Start date
Interesting points of several posters. To me it is difficult to see what the final interest of US authorities might be currently. They want a weaker dollar in order to help the economy and at the same time need to be attractive to finance their deficit by foreign investment. Now, who has the final word? Greenspan? I guess so. Though I assume he will more and more play the role of a spokesman and will be inofficially replaced, simply because of his age.
What puzzles me is that, if you like it or not, the US is more powerful now than they ever were. Not at last because the EC as such proved to be n o t united. The US goverment is very much in control of world affairs. Look at former Yugoslavia, look at Iraq. World equity markets fall and rise with New York, the same with interest rates, no matter how hard Duisenberg tries to appear independent. And now the US is for the first time very much in control of oil or at least significant amount of it.
Yes the US economy might suffer severe problems but is Euroland doing any better? Great Britain is not within the Eurozone and everybody knows about Germany.
If many good news cannot help a market it is probably heading down. One poster asked if I believe in a strong Euroland. In fact I do not for the short run, but the currency market currently states the opposite and I would not want to lean against a strong trend based on pure conviction.
peace
What puzzles me is that, if you like it or not, the US is more powerful now than they ever were. Not at last because the EC as such proved to be n o t united. The US goverment is very much in control of world affairs. Look at former Yugoslavia, look at Iraq. World equity markets fall and rise with New York, the same with interest rates, no matter how hard Duisenberg tries to appear independent. And now the US is for the first time very much in control of oil or at least significant amount of it.
Yes the US economy might suffer severe problems but is Euroland doing any better? Great Britain is not within the Eurozone and everybody knows about Germany.
If many good news cannot help a market it is probably heading down. One poster asked if I believe in a strong Euroland. In fact I do not for the short run, but the currency market currently states the opposite and I would not want to lean against a strong trend based on pure conviction.
peace
Regarding some of the posts here
Whether you buy the currency argument or not, it does not matter because it is already true. Currency traders all over the world are taking bets already. It has been old news that the dollar is overvalued even before the Euro. In fact, the dollar's position as the only realy global and oil currency is one of the reasons the Euro was even implemented. And in case you do not watch the news, this issue has pretty much been let out in the open and confirmed by recent events.
Now I personally think that Western and Central Europe is a dead economy. It is old, yet stable. However there is no growth or opportunity left there.
Eastern Europe is another story. Being that the Eastern Europe block is about to become part of EU, means that the Euro can get some momentum. Also, with the addition of these new countries, the European Union's GNP and GDP becomes comparable if not greater than USA.
Since the dollar has been the oil currency for decades, the general idea is that the Fed could always print more dollars and there will always be international takers. There would be a slight inflation effect but nowhere to the point if the dollar was not the reserve currency. The basic idea is that dollars are always needed since oil is always needed. Those same dollars find their way back to the US as foreign investment hence growing our economy. This is also how USA (and no other country) could sustain such trade deficits years over years.
Now if this were to change and the Euro would become the new oil reserve currency, USA dollar denominated assets would basically get dumped. All dollar reserves would be pretty much converted to euro, hence dumping the dollar. What you would basically see is a standard third world bubble burst scenario. Except that unlike Argentina, US holds real value to the world economy. Still, a devaluation would occur.
OPEC is already considering switching currencies. Iran and Syria have pretty much done so. Venezuela is not even using a currency, but trading commodities. The main reason for this is the state of US economy and the recent bubble. Let's be honest, this country is in serious debt and that situation is not changing. Almost all of consumer spending over the last decade was based on pure credit. Same goes for the corporates, who still do not have the brains to completely stop their borrowing. There is also technology spending which is out of wack thanks to Microsoft.
But with Iraq, this can all be changed. Iraq is not part of OPEC and can easily produce oil for US$10 a barrel. This would disband OPEC (old goal of US and the world), and preserve dollar stability at least up to a point. Also, with Iraq, US can convert the rest of the Middle East to be an Americanized democracy (another old goal of US) and use the dollar as well.
Whether you buy the currency argument or not, it does not matter because it is already true. Currency traders all over the world are taking bets already. It has been old news that the dollar is overvalued even before the Euro. In fact, the dollar's position as the only realy global and oil currency is one of the reasons the Euro was even implemented. And in case you do not watch the news, this issue has pretty much been let out in the open and confirmed by recent events.
Now I personally think that Western and Central Europe is a dead economy. It is old, yet stable. However there is no growth or opportunity left there.
Eastern Europe is another story. Being that the Eastern Europe block is about to become part of EU, means that the Euro can get some momentum. Also, with the addition of these new countries, the European Union's GNP and GDP becomes comparable if not greater than USA.
Since the dollar has been the oil currency for decades, the general idea is that the Fed could always print more dollars and there will always be international takers. There would be a slight inflation effect but nowhere to the point if the dollar was not the reserve currency. The basic idea is that dollars are always needed since oil is always needed. Those same dollars find their way back to the US as foreign investment hence growing our economy. This is also how USA (and no other country) could sustain such trade deficits years over years.
Now if this were to change and the Euro would become the new oil reserve currency, USA dollar denominated assets would basically get dumped. All dollar reserves would be pretty much converted to euro, hence dumping the dollar. What you would basically see is a standard third world bubble burst scenario. Except that unlike Argentina, US holds real value to the world economy. Still, a devaluation would occur.
OPEC is already considering switching currencies. Iran and Syria have pretty much done so. Venezuela is not even using a currency, but trading commodities. The main reason for this is the state of US economy and the recent bubble. Let's be honest, this country is in serious debt and that situation is not changing. Almost all of consumer spending over the last decade was based on pure credit. Same goes for the corporates, who still do not have the brains to completely stop their borrowing. There is also technology spending which is out of wack thanks to Microsoft.
But with Iraq, this can all be changed. Iraq is not part of OPEC and can easily produce oil for US$10 a barrel. This would disband OPEC (old goal of US and the world), and preserve dollar stability at least up to a point. Also, with Iraq, US can convert the rest of the Middle East to be an Americanized democracy (another old goal of US) and use the dollar as well.
Mecro
valid points IMO. yet I doubt the quick positive impact on EC from new members. It will take substantial money and time to bring these countries to western european standard.
to state that old europe has a somehow old fashioned economy disregards the fact that up to a few years ago, germany had highest productivity in the world. current problems there are due to several reasons including huge social cost by reunion. too much generalisation within your statement.
given that all oil currency argument is valid and the key driver, why does the dollar return to the downward trend, a l t h o u g h there is now substantial argument for a stronger US influence on oil than ever?
peace
valid points IMO. yet I doubt the quick positive impact on EC from new members. It will take substantial money and time to bring these countries to western european standard.
to state that old europe has a somehow old fashioned economy disregards the fact that up to a few years ago, germany had highest productivity in the world. current problems there are due to several reasons including huge social cost by reunion. too much generalisation within your statement.
given that all oil currency argument is valid and the key driver, why does the dollar return to the downward trend, a l t h o u g h there is now substantial argument for a stronger US influence on oil than ever?
peace
No-one has as yet brought gold into the equation.
The US dollar and gold have an inverse relationship.
I note that gold isn't exactly running away so that augurs well as confirmation that the US dollar isn't exactly collapsing.
freealways
The US dollar and gold have an inverse relationship.
I note that gold isn't exactly running away so that augurs well as confirmation that the US dollar isn't exactly collapsing.
freealways
The sport of Europe is football
The sport of the world is football
The US has its own special version
The measurement system of Europe is metric
The measurement system of the world is metric
The US uses imperial measurements
The mobile phone system of Europe is GSM
The mobile phone system of the world is GSM
The US has its own system
The language of Europe is broken English
The language of the world is broken English
The language of the US is American English
Maybe the world will follow Europe in its currency too...
The sport of the world is football
The US has its own special version
The measurement system of Europe is metric
The measurement system of the world is metric
The US uses imperial measurements
The mobile phone system of Europe is GSM
The mobile phone system of the world is GSM
The US has its own system
The language of Europe is broken English
The language of the world is broken English
The language of the US is American English
Maybe the world will follow Europe in its currency too...
Gerry, I am referring to what gold has been doing since it hit the $ 375 area.
At the moment, for the moment, the inverse relationship between gold and the US dollar isn't holding up the way one (i.e. I ) would expect.
I imagine that most of the people who have responded to this thread sofar are long the US dollar and, unless they actually have a position in gold, perhaps aren't paying as much attention to gold's performance as is warranted.
I am holding goldshares and just cannot understand why gold is struggling whilst the US dollar is dropping.
Perhaps I am too impatient.
freealways
At the moment, for the moment, the inverse relationship between gold and the US dollar isn't holding up the way one (i.e. I ) would expect.
I imagine that most of the people who have responded to this thread sofar are long the US dollar and, unless they actually have a position in gold, perhaps aren't paying as much attention to gold's performance as is warranted.
I am holding goldshares and just cannot understand why gold is struggling whilst the US dollar is dropping.
Perhaps I am too impatient.
freealways