Weak Dollar.....What Is Wrong With It ?

[gnome]

Quote from KeithOmalley:

which deficit do you speak? budget, current account, or government debt? becuase i think our budget, and government debt are low. who cares if we carry a 3% budget deficit, if we grow at 6%-7% a year OVER THE PAST10 Years on average? the our debt gets smaller vs our gdp.

This sounds like a Krudlow or Paulson spew.

This thread has amazed me. Seems the evils of having our currency trashed should be OBVIOUS to just about anyone. But apparently there are many who've been hoodwinked and many others whose brain is just fogged-over on this issue... which of course would be the intention of the evil doers.

 

[AMT4SWA]

The U.S. government is financially dysfunctional on almost ALL levels. Carrying excessive debt (which is a sad cost to taxpayers) and running current deficit spending, while going into a contracting economy with decreasing tax revenues, can't be fixed by fuzzy math and wishful thinking...and the value of the dollar proves this reality.

 

[Trendytrader]

Quote from KeithOmalley:

which deficit do you speak? budget, current account, or government debt? becuase i think our budget, and government debt are low. who cares if we carry a 3% budget deficit, if we grow at 6%-7% a year OVER THE PAST10 Years on average? the our debt gets smaller vs our gdp.

The one saving grace for the US federal debt has been low intrest rates and consequently interest payments on the debt. Watch out if the buyers demand higher i-rates. Then it will get messy fast......sounds just like the subprime ARM issue.

 

[achilles28]

Quote from KeithOmalley:

Last time i checked China would also have a weak currency and they have done pretty well over the past 20 years. japan may not have a good economy now, but has one cheap currency, and has had deflation for the past 10 years

China and Japan suffer from the same commodity supply shocks and RE bust, that we are now. Incidentally, thats why Japan suffered uncontrollable deflation since the 90's (RE crash). Gasoline is rationed in China and costs are pushing up very quick because the Yuan is tied to the dollar. These are all warning signs of over-extension..

Both countries cited in your example are export-dependent economies which mitigate inflation to some extent by selling more to outsiders. America is a net importing nation - largest one on the planet - so the effects of inflation on GDP are not offset by exports. IOW, because America exports far less than it imports, the effect of inflation cutting GDP will be far greater...

 

[libertad]

Excellent Commentary All

.....................................................................................

What if the government decided to wring out all the excesses and employ financial normalcy.

Financial normalcy implies that the savings of labor should be rewarded, and that the value of money should be upheld for a retiree's labor....for an average person's capability.

Normalcy would mean that 90 day tbills should yield at least 7%.

Whereas equity risk would imply around 14%, as many larger mature companies set objectives in this range.

And just let everything else fall into place.
........................................................................................

What a country needs is a functional overall system whereby labor is rewarded for its work.

 

[achilles28]

^^^

Could be done a few ways.

1) Revert to a precious metal-standard. Value of money increases over time, which encourages savings - not consumption.

2) Impose flat tax (preferably on sales). Again, encourages savings, not consumption.


If rates went & stayed at 7%, the Market would collapse to fair value. So to the Financial Industry.

Most funds can't beat the S&P. After risk-adjusted considerations, investors would pull from the market and put in T-bills.

 

[gnome]

Quote from libertad:

Excellent Commentary All

.....................................................................................

What if the government decided to wring out all the excesses and employ financial normalcy.

Financial normalcy implies that the savings of labor should be rewarded, and that the value of money should be upheld for a retiree's labor....for an average person's capability.

Normalcy would mean that 90 day tbills should yield at least 7%.

Whereas equity risk would imply around 14%, as many larger mature companies set objectives in this range.

And just let everything else fall into place.
........................................................................................

What a country needs is a functional overall system whereby labor is rewarded for its work.

Remember when passbook savings accounts yielded 5.25%, money markets and T-Bills about 6% and T-Bonds about 8-9%?

Those were much less fragile and dangerous times.

Everyone who thinks "weak $USD is good, low rates are good, deficits and money-pump are good"... should do themselves a favor and study a bit on world financial history. A good place to start would be the fall of Rome. Similarities between the Romans and the US now are eerily scary.

But it's not just Rome...
Weimar Germany, Zimbabwe now, Turkey from '83-'05... and there are HUNDREDS of other examples... all ending the same. (I read an article once where some university professor had researched this issue of inflation and currency debasement and found 316 examples... ALL... A-L-L... ending the same way.)

What the Gummint is doing to us and our future generations is nothing short of CRIMINAL... we should not be complacent at all about it.

 

[AMT4SWA]

Quote from gnome:

What the Gummint is doing to us and our future generations is nothing short of CRIMINAL... we should not be complacent at all about it.

Amen .... America has been sold to the LOWEST bidder!

 

[gnome]

Quote from achilles28:

^^^

Could be done a few ways.

1) Revert to a precious metal-standard. Value of money increases over time, which encourages savings - not consumption.

2) Impose flat tax (preferably on sales). Again, encourages savings, not consumption.


If rates went & stayed at 7%, the Market would collapse to fair value. So to the Financial Industry.

Most funds can't beat the S&P. After risk-adjusted considerations, investors would pull from the market and put in T-bills.

We wouldn't even NEED a gold standard... but the reason we got off of it was because it held our Gummint's feet to the fire when they acted responsibly (like now)... and of course Gummint didn't want to be held to "acting responsible" then, either.

Milton Friedman once on Wall Street Week said, "The Fed should be abolished and replace with a computer which increased the money supply at about 2% per year... to more or less match the population growth"

If the government showed that kind of restraint and didn't run budget deficits, a gold standard would be completely unnecessary... our currency would be backed by the Gummint's authority to tax the citizenry... and that would be enough.

But of course... such restraint would take half of the fun (and most of the thievery) out of being a federal politician... they'd never go for that.

 

[KeithOmalley]

Quote from Trendytrader:

The one saving grace for the US federal debt has been low intrest rates and consequently interest payments on the debt. Watch out if the buyers demand higher i-rates. Then it will get messy fast......sounds just like the subprime ARM issue.

Low rates have only been around since 2001, before that the cheapest we could borrow at was 7% most of our debt is in long term instruments at higher rates right now