Why the Dollar is so cheap...

In that sense, I guess you could say it was good. If you really don't give a **** about the woman who is working 13 hours a day 7 days a week, and gets a nickle an hour while getting beaten by her boss. But you know, its cheaper for us americans, so why should we give a rats ass?

 

Interestingly, China is currently moving towards partial gold backing of the RMB. Once this takes place there will inevitably be large flight from other paper currencies to the RMB, which then may even become the defacto world reserve currency.

But this in fact, is not a concern of the Fed. Because the fall of the dollar is actually needed as excuse and impetus for introduction of the new Amero.

 

That had to be Clinton's fault too.

 

Remember the days when all people wanted to borrow was one dollar? Now everyone ask for two or three dollars.

 

Peter missed it, along with other things like possibly an intentionally weak dollar.




So a strong dollar means what, more purchasing power? But when China is willing to sell us products cheap regardless of the dollar's strength (so our standard of living does not drop), then a cheap dollar means our products and services are cheaper to others, e.g. Europe.

So we buy cheap products from China, sell services cheaper to Europe (beating foreign competition), and we keep interest rates low to try to avoid a deep recession... so downside... our travellers get screwed? That's it?

In the short term, yes. Longer term, we absolutely don't want a flight from the dollar, but now that it's low the dollar looks like a good investment since we still have the ginormous economy.

So no confidence in the dollar? The question is, is the dollar properly valued. Does Peter imply it will sink much further? You think other nations want/let it to sink further and make our exports even cheaper?

In finance, you always want to look at the fundamentals. For the US, you always come back to: who has the $13+ TRILLION economy?

It's never so dire as those with political motives try to make it seem.

 

The effect Chinese Gov has been buying boat-loads of US Treasury Bonds is to keep the US$ from falling, so that

• Chinese imports remain affordable to the avg US consumers.

by we, you mean the avg US citizen, or the US Gov ? in either case, neither the avg US citizen nor the Gov has the cashflow to buy "boat-loads" of US treasury.

• the avg US citizen is having enough trouble making mortgage payment

neither do US's allies such as Japan, SKorea, Taiwan, nor EU. The PRC is the only one entity that has the cashflow to do that

 

yes, under his watch, predatory lending-friendly legislations were passed enabling lending co to engaged in predatory lending practices

in Calif, there were instances where people making ~ $10/hr were getting mortgages >$300K to buy a home

under his watch, many bad things---Iraq fiasco, Katrina, rampant foreclosure---happened. as president, the bucks stops on his desk.

 

Wrong. Japan holds more US treasury securities than China.
http://www.ustreas.gov/tic/mfh.txt

 

true that, it still is the biggest holder of US indebtedness. but that's carried over from its purchases 15- 20 yrs ago.

over the past 15 years, Japan has not been able to buy more (of any significance) US treasury notes. with skyrocketing budget deficit comes more issuance of the US indebtedness. PRC has taken up the slack left by Japan. over the past 15 years, PRC has been, by far, the biggest purchaser of US Treasury notes.

It has proven to be a bad investment for the PRC, and they're contemplating diverting their cash into Euros. that'd mean trouble for the USD

 

China diverting money to Euros would be a mistake for China because the US wouldn't be able to afford as many of China's manufactured goods. No way would China risk that at this point in their economic development

As to your point about China buying more dollars over the past 15 years, your point is moot because Japan still owns more and the treasury securities are very liquid investments. If you're talking about China growing at a faster rate than Japan, of course, but I don't think that was your point

 

there are more buyers in the EU. the EU can pay with a stronger currency. a rather easy option.

au contrare.

the point is China is the only entity that can substantially change, by boat loads, their US treasury holdings. Japan will maintain its current level, so will other US allies. none of the US allies are in good shape, cash flow wise, to pick up China's slac, whould that happen

 

Then why hasn't it happened? You think you snap your fingers and voila?

Right now, it's not even close.

Hmmm.... from Dec07=Dec08, China's investment increased by about $80b. Over the same period, the UK's increased by $65b and Brazils increased by about $80b.

What was your hypothesis again?

Old money is still money, and I haven't researched but I would gamble that China is using a lot of cash to develop infrastructure.

And you would wonder why seemingly rationale people would invest in dollar-backed debt instruments, esp the financially savvy British? Maybe the old buy-low adage?

Guess they British wouldn't put much faith in this article either.

 

Upon his recent release from The Federal Correctional Institution in Danbury
Gordon Gekko is quoted to have said, "you know, maybe greed isn't really all that good."

 

I just strolled by a Mickey D's and let me tell you gentlemen, unlike on the financial markets, the dollar is looking STRONG, maybe even VERY STRONG.

 

Not mentioned directly so far ...

Can't the fed bid up the dollar on the global exchange markets? IIRC the Fed has done that before.