The rapid decline of the US dollar
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Seems like the Fed is not worried at all about a bit of inflation due to a dropping dollar:
http://quote.bloomberg.com/apps/news?pid=10000087&sid=aSfD5LfkQz3c&refer=top_world_news
http://quote.bloomberg.com/apps/news?pid=10000087&sid=aSfD5LfkQz3c&refer=top_world_news
The reason the falling dollar isn't a problem yet is that we haven't seen any rising inflation. Inflation is very low and the weak dollar is helping profits of US companies dealing internationally. I think inflation will be a key to watch and so far the recent strength in the economy and equity markets has yet to spark inflation and so Dr. Greenshades sits on his hands.
Looks like the $ has some 5% to go.
As long as china is taking our dollars as dollars our internal prices are probably not rising too much.
Have you guys been to wal mart lately. In San Diego I thought costco was cool but over the years it seemed to have lost it real low price closeout deals. I was not near a walmart.
I am now near a few walmarts in florida. That place is so cheap for everything it is unreal. You can buy a better schwinn bike today for less money than when I was a kid. (I am 40).
I just bought my 4 year old a damn good bike for 40 bucks. I saw schwinns for less than they were 30+ years ago. I am buying suave shampoo that imitates paul mitchell or biolage for $1.40. (may not be from china) You can buy dvd players for nothing.
Prices are lower today than I have ever seen because of walmart and costco. Yeah bread may be higher at the super market or 7 eleven, but that does not take into account Walmart. Walmart and electronics have made things cheaper.
Compare a car today to what you got in the 70s. I bet on an inflation adjusted basis you get more car for the money.
You want to do business in the U.S. and you do not want to let our goods in your counttry, well you are just going to have to take cheaper dollars.
Right or wrong who knows.
Have you guys been to wal mart lately. In San Diego I thought costco was cool but over the years it seemed to have lost it real low price closeout deals. I was not near a walmart.
I am now near a few walmarts in florida. That place is so cheap for everything it is unreal. You can buy a better schwinn bike today for less money than when I was a kid. (I am 40).
I just bought my 4 year old a damn good bike for 40 bucks. I saw schwinns for less than they were 30+ years ago. I am buying suave shampoo that imitates paul mitchell or biolage for $1.40. (may not be from china) You can buy dvd players for nothing.
Prices are lower today than I have ever seen because of walmart and costco. Yeah bread may be higher at the super market or 7 eleven, but that does not take into account Walmart. Walmart and electronics have made things cheaper.
Compare a car today to what you got in the 70s. I bet on an inflation adjusted basis you get more car for the money.
You want to do business in the U.S. and you do not want to let our goods in your counttry, well you are just going to have to take cheaper dollars.
Right or wrong who knows.
Falling dollar is good for multinationals with sales and earnings to consolidate into the company financials. The weaker dollar makes the same number of euros translate into more dollars.
the falling dollar is bad for multinationals that manufacture offshore to import to be assemblied in the US or even just delivered. so car parts for Ford that come from a strong mfg country has a profit margin squeeze at current prices. . .
however, china's currency is pegged to the dollar, so china's position is a moot point, there is no affect with china, however, there is an effect for china to buy from OTHER than the US as these goods will be increasing in price.
So, if you are the US, do you want China to be pegged to the US dollar?
further weakening of the dollar increases the price competitiveness for china to purchase from the US to build its infrastructure, as the prices don't change, and the other currency's prices appreciate against the dollar. This policy has two important goals. . . 1) to have china to prefer to buy US goods over other goods to build their national infrastructure 2) irritate the Chinese enough that the dollar is so weak to get them to FLOAT the renimbi, or unpeg against the dollar. . .
that is, I believe, the goal of the current policy. . . which is not readily apparent, but because we have tremendous excess capacity, and productivity, we have the ability right now to allow the dollar to fall without the expected effects of inflation. . .
sportsguy
the falling dollar is bad for multinationals that manufacture offshore to import to be assemblied in the US or even just delivered. so car parts for Ford that come from a strong mfg country has a profit margin squeeze at current prices. . .
however, china's currency is pegged to the dollar, so china's position is a moot point, there is no affect with china, however, there is an effect for china to buy from OTHER than the US as these goods will be increasing in price.
So, if you are the US, do you want China to be pegged to the US dollar?
further weakening of the dollar increases the price competitiveness for china to purchase from the US to build its infrastructure, as the prices don't change, and the other currency's prices appreciate against the dollar. This policy has two important goals. . . 1) to have china to prefer to buy US goods over other goods to build their national infrastructure 2) irritate the Chinese enough that the dollar is so weak to get them to FLOAT the renimbi, or unpeg against the dollar. . .
that is, I believe, the goal of the current policy. . . which is not readily apparent, but because we have tremendous excess capacity, and productivity, we have the ability right now to allow the dollar to fall without the expected effects of inflation. . .
sportsguy
good post.... many already have been buying gold. unfortunately it is still looking like the place to put some significant money.
Aphie:
For phyisical, I think Harris said he had good experience with Kitco. I cannot think of a (non-terrorism related) situation where it would "not even matter"; gold has been accepted as a currency for thousands of years.
For paper gold, I personally recommend the mini futures, as well as the unhedged gold (and silver) stocks, such as GSS, BGO, MNG, PMU, CDE, WHT etc. etc.
For phyisical, I think Harris said he had good experience with Kitco. I cannot think of a (non-terrorism related) situation where it would "not even matter"; gold has been accepted as a currency for thousands of years.
For paper gold, I personally recommend the mini futures, as well as the unhedged gold (and silver) stocks, such as GSS, BGO, MNG, PMU, CDE, WHT etc. etc.