THE US DOLLAR - Strong Again? When, How, Why

#1
There's a lot of bright people on here that understand this stuff in much greater detail than I do. With that said why does the US Dollar just keep dropping (especially against the Euro it seems) and what is it going to take to get it up to one = one with the Euro again (do you think that situation will EVER repeat?). If Barack Obama becomes the next President and ends the war and all that crazy spending as promised will that help the situation? Will a McCain win make it even worse? Any and all info is welcome (topic detail elaboration/expansion is VERY welcome) and greatly appreciated..... Thanks in advance, Dudester
 

HDM

Active Member
#3
I do not count myself among the bright, just the curious. The short answer re. the $ is that a currency is worth what the larger market will pay for it, and because of dozens of factors, including the price of oil (which is skyrocketing), balance of trade payments, indebtedness (and who holds the debt), short-term market prospects, inflation and recession (which is what we have in the States, usually called Stagflation), and lots of other even more complex factors, currency investors are investing more in Euros than in dollars, thus the falling dollar. The vast amount of money spent in Iraq is just one part of that equation, and there is a lot of the "self-fulfilling prophecy" at work here. If McCain is elected, which is not likely, you can summarize the next four years as more of the same, or Bush's 3rd term. Therefore, any Democrat would be a better choice.

But will that strengthen the dollar in world currency markets? Maybe a little, but probably not recovering half of what it has lost in the past 6 months. In other words, if you earn dollars, you should have done your tourist traveling last year. If you earn Euros, then head for the States, which is now that great shopping mall in the sky.

Will we see a Euro - dollar parity anytime soon? I don't think so. If ever. Currency power is shifting and the dollar will probably cease to be the "world's currency." It will probably be the Euro for a while, the the Chinese yuan (?).

I can recommend a just published book by Fareed Zakaria (the editor of Newsweek International) called "The Post-American World." The central thesis is that America is not necessarily "falling" as much as a lot of the rest of the world is "rising" to meet and balance it. This includes an explanation of currency shifts.

Hoped that helped a little.
 
#5
The USD is a dying currency. Since the 70's when the gold backing was removed with the termination of the Bretton Woods act, it officially became "monopoly money." Because of incredible trade deficits, war costs, record breaking government spending, oil costs, non-stop printing of trillions of dollars (inflation), and a completely devastated manufacturing base, the USD will continue to die.
Smart investors or people who simply want to preserve their wealth will seek gold, silver, oil stocks, foreign currency, and foreign stock markets. The bottom line is, the USD is dying and will continue to fall.
 
#6
"NastySal" said:
The USD is a dying currency. Since the 70's when the gold backing was removed with the termination of the Bretton Woods act, it officially became "monopoly money." Because of incredible trade deficits, war costs, record breaking government spending, oil costs, non-stop printing of trillions of dollars (inflation), and a completely devastated manufacturing base, the USD will continue to die.
Smart investors or people who simply want to preserve their wealth will seek gold, silver, oil stocks, foreign currency, and foreign stock markets. The bottom line is, the USD is dying and will continue to fall.
That sums it up in pithy fashion and there's nothing else to say.
 
#7
Wow, that's a rather bleak outlook. Any chance a new president with new policies could change the course? Or is it past the point of no return?
 

Matty

Active Member
#8
Dollar to peso exchange today was the highest. Cambio guy was asking if we had more to exchnnge. Peso is falling I guess...
 
#9
"Matty" said:
Dollar to peso exchange today was the highest. Cambio guy was asking if we had more to exchnnge. Peso is falling I guess...
In the last week or so, the Europeans and Americans have reached a modus vivendi that a stronger dollar would be a good thing. An excessively strong euro means murder for European exports. The dollar is trading at less than its present inherent worth (i.e., its domestic purchasing power), so expect it to strengthen a little in the short term. In the long term, the prognosis remains gloomy. The euro and euroland are afflicted with their own set of problems. Today's hard currency is de facto commodities, not financial assets.
 
#10
NastySal said:
Smart investors or people who simply want to preserve their wealth will seek gold, silver, oil stocks, foreign currency, and foreign stock markets. The bottom line is, the USD is dying and will continue to fall.
Nja, I'm not so sure about gold, silver, oil and food. I think the commodity bubble is about to burst as well.

The resent spikes in commodity/food prices is largely thanks to the FED and speculative investors. The money the FED is pumping into the SYSTEM has mostly been invested into the commodity market, because that was the only "safe" place...

Since money is debt and debt is money, the problem the world faces and especially US of A is deflation or destruction of debt by both private persons, banks and the state. The consequence of this is less money in circulation and less velocity in the economy. Just like here in Argentina.

How different currencies relate to each other is not so important, since they're all fiat currencies. The relationship between currencies like the dollar, pound and euro is relative to the speed of deflation. Right now the dollar is leading :) Think of all the world currencies like sections of a balloon. The relationship of the currencies stays relative constant during the inflation of the balloon and that is true for deflation of the balloon as well. (mas o menos)

As I said in other threads, the real problem now is with cash. The FED is soon insolvent and many banks in the US are insolvent. When the public starts to realize that and a bank run starts, like here in Argentina in 2001 or like Northern Rock in UK, the shit has hit the fan...

Smart people stay ahead of the Gause Curve ;) Cash is king right now, but could easily change in the future, depending on what crazy politicians do.

If you like to gamble, shorting stocks is an easy way to "make" some money, hihi

I've posted this chart before, but I worth to do again.
http://folk.uio.no/fredrin/non_borrowed_reserves_April9.jpg

The US is BROKE... (Think Titanic)

This forum http://www.tickerforum.org is also good if you like to keep up with what's going on.
http://www.tickerforum.org/cgi-ticker/akcs-www?post=44477 That chart is being discussed in that thread. A good read
-s-