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Whither the Dollar?

Discussion in 'Other Off Topic Forum' started by Texas Forever, Jan 12, 2004.

  1. Texas Forever

    Texas Forever Four Time F1 World Champ
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    Texas!
    I posed this question in another thread --

    >>>During the Rubin, uh I mean Clinton, administration, we had a strong dollar. Today, we have a weak dollar. Why did a strong dollar work so well, at least for a little while, in the 90s and is a weak dollar the right policy today?<<<


    Except for Gabriel, the response has not been, well, overwhelming. I'm hoping that putting this in a new thread will raise the visibility of my query and gin up more answers.

    You see, my guiding mantra is, "If you see it coming, duck!" The key word is the preposition "If." Because most of us rarely see it coming, we don't even get a chance to duck. Again, my concern is now that the recovery is offical, what's next on the horizon?

    Gabriel said that China is the 800 pound gorilla that has got everybody worried.

    I'll go next -- I think that the weak dollar is a result, not a goal. The numbers clearly show that the Bush tax cuts did jump start the economy. However, what has not been as widely reported is Chairman Greenspan's fixation on home refinancing. Simply put, the fall in interest rates spurred many, many homeowners to suck out and spend the excess equity in their homes. This consumer spending, of course, also jump started the economy.

    However, the Fed is now walking a tightrope. On one side, the equity driven consumer spending is still working its way through the system, meaning that we ain't out of the woods yet. But on the other side, if interest rates jump up, this will squeeze these same homeowners because many of them borrowed their equity using floating interest rates. An increase in interest rates will also stall business investment.

    Long story short, Greenspan needs to keep a lid on interest rates for the time being. Instead of banging the inflation gong, the Fed has reverted back to focusing on interest rates.

    Lower interest rates, however, lead to a weaker dollar because fewer foreign investors want to invest in US securities, which lowers the demand for dollars...

    Because this is car guy board, I need to somehow tie this thread to Ferraris. Hmmm, let me see. I know, my dealer just called and said that he can get me an 04 Spyder today instead of waiting for the 05 420 replacement. The dealer also said that Ferrari is going to impose a 50% Euro surcharge on the 05 USA cars. What's a poor boy to do?

    Seriously, though, I'd love to hear your thoughts on which way you think the winds will be blowing for the dollar.

    Practicing ducking, DrTax
     
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  3. henryr

    henryr F1 World Champ
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    personally, i think the worst in the dollar decline is coming to an end. the "bushes" have been pulling out all the stops to get this economy moving and it's just a matter of time before all this gas ignites.

    i'd look for the fed to start to raise rates late in the year and signal intentions to do so a little earlier. the weak dollar has already been putting pressure on EU competitiveness and from what's been hitting my bloomberg news the central bank is contemplating supporting the dollar to halt any further declines. (which most of the time does not work)
     
  4. henryr

    henryr F1 World Champ
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    the dollar decline has been based on numerous factors:

    the fed has been printing gobs of money as stimulus
    govt has been borrowing a ton
    we buy more than we sell

    all of which floods dollars into the global mkts. simple supply/demand.
     
  5. Texas Forever

    Texas Forever Four Time F1 World Champ
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    ROTFLMAO I love it. It's the gas, stupid!

    Levering from you other thread, are you saying that Soros is shorting the dollar? Man, what an opportunity to pop him in the ass..
     
  6. need4speed

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  8. Texas Forever

    Texas Forever Four Time F1 World Champ
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    Hey Needs, I have read this guy's stuff before. He was predicting a bust all last year when the S&P went up 30%. So he kinda reminds me of Glanville (what ever happened to him?) in that even a broken clock is right twice a day.

    Do you put much merit behind his thoughts?


     
  9. henryr

    henryr F1 World Champ
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    you want currency safety.......

    try the swiss franc, backed 100% by gold.
     
  10. need4speed

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    Dr.Tax,

    Not all of it. I take it all as additional information to be gone thru.
     
  11. henryr

    henryr F1 World Champ
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    just read that linked article:

    i think he's a little doom and gloom but i agree with about 70%. if you think about it, yeah the mkt was about 30%+- but the US dollar was down the same amount. net net a wash.

    the leveraged consumer, levels of debt and the housing mkts are what have me concerned. when these rates start to rise (you'll see the dollar follow) financing cost will rise and squeeze all those that don't see their incomes move up in parity.
     
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  13. tifosi

    tifosi F1 Veteran
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    supply and demand - its that simple

    in the 90s -everyone wanted a piece of the US stock market hence high demand for dollars

    in the 90s rates were higher realtively to Japan and Euro. thus less need to sell dollars for other currencies to improve yields

    now , the middle east folks have been big sellers of dollars for euros, so all that oil we pay for goes right into supporting the rise of the euro versus the dollar.
     
  14. Texas Forever

    Texas Forever Four Time F1 World Champ
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    Sounds like you guys are somewhat pessimistic when you look beyond the election. I'm assuming that you see inflation kicking up, which will start driving interest rates up.

    But what about productivity gains? Wouldn't this tend to keep a lid on inflation?

    And what about the Asian tigers, including Japan, and particularly China? One of my concerns is how far can we take offshoring before we become like the Germans with a 10% unemployment rate, but with unemployment benefits that beats working for a living.

    One example: One dirty little secret in the CPA bidness is offshoring tax return preparation. You scan in your client's info, pipe it to India, and for $125, you get all the detail entered into your tax prep software of choice.

    (Disclamier, most CPAs, including me, don't offshore. But many of the bigger firms are using offshore services. Just for grins, ask your CPA about this before handing over your stuff this year. I'd love to hear the responses.)

    So instead of your CPA paying a professional staffer say, maybe, $825, he gets the grunt work done for $125. The CPA's profit goes up by $700, but what happens to your staffer whose income goes down by $825? Moreover, if your CPA is the typical CPA, he or she will not spend this additional $700 profit. (CPAs are tightwads!) Thus, your local economy is out $700, which means that maybe next year, you will not be able to afford to pay your CPA to do your taxes.

    Meanwhile, somebody in India is $125 ahead, but will he or she use this money to go see a Disney movie or will it get spent on whatever folks in India spend their money on?

    Trust me. I know that what goes around, comes around. But I once saw a pothead at a rock 'n roll festival strip off all his clothes and start running through the crowd throwing bags of reefer to everybody while shouting, "Give it all away. It will come back sooner or later." I have always wondered if he ever got his clothes back. :)

    DrTax
     
  15. need4speed

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    Interesting about the offshore aspect as "60 Minutes"(?) did a spot on it last night, specifically India. It was very interesting and I'm just now starting to think about the ramifications.
     
  16. henryr

    henryr F1 World Champ
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    Germany - Thats exactly where mr Dean wants to take us.

    fact is nothing can really be done about our cuurent situation, we have to become more competitive in wages, cost and regulations otherwise business will leave (and employemnt with it)

    the south once did it to the north. now it's on a global scale.
     
  17. MarkG

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    Sending Tax info, SSN and credit card info to India, RED China, etc....do you REALLY want that info in the hands of unstable countries that do not fall under US anti-fraud laws, or the jurisdiction of US Law Enforcement?

    Imagine, if you will, a bill of unknown origin showing up on your monthly CC statement, followed by a visit from the FBI who gives you a ride to your new free room and board cell, where you sit uncharged, with no access to legal assistance (thanks to the "Patriot" Act)......because some guy named Mohamed in a city you never heard of used your readily accessible CC info to finance the bomb that blew up the .....well you get the picture. Not as far fetched as it sounds - thousands of people fall victim to CC fraud and identity theft every year. Just in this scenario the goods purchased go towards terrorism rather than a new stereo.

    The governments willingness to allow this type of critical information, along with millions of American jobs, to go to 3rd world countries is why I believe the entire 'war on terrorism' is a fraud. No way in Hell would a government that truly believed (or cared) about outside risks to America send this type of critical information to these countries.

    Outsourcing jobs also eliminates the largest tax-payer base in America - the middle and upper middle class. Here in Colorado Springs according to a recent article we have lost 17,000 jobs due to outsourcing (sounds high to me, but our building alone is like ghost town now). A local realtor tells me some home lenders here are now requiring a 40% down payment for people in high-tech jobs. I have one ex-coworker who just lost his house after months of unemployment (which he has used up and is now one of the 'the economy is improving' statistics since he is no longer on the unemployment rolls).

    Another ex-coworker (he had to train the guy in India who took his job under threat of loosing his severance package) just got a letter from the unemployment folks stating "We are pleased to tell you that you will not be receiving any further benefits until February" .... because The White House Puppet formally know as the Governor of Texas has not yet signed the unemployment extension law....WE ARE PLEASED to tell you..!!! Jesus, if they're pleased about that, what would 'we regret' mean??
     
  18. spidr

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  19. tigermilk

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    I'm just bummed the dollar keeps falling. I've got to go back to Japan next month and the dollar has dropped a few yen from the last time I was there in the fall. My first trip 2 years ago was like 120+ Yen per dollar. Today it's around 106.
     
  20. Texas Forever

    Texas Forever Four Time F1 World Champ
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    Mark, offshoring tax returns is a very hot topic among us beancounters. CPAs are no different from anybody else when it comes to making a buck. However, I keep telling my fellow travelers that they had better start telling their clients what they are doing. Because folks are gonna be real pissed when they find out.

    If you don't mind, I'd love to copy your response to a CPA reform board that I belong to. I'm afraid that your reaction will just be the first of many.

    Thx, DrTax
     
  21. atheyg

    atheyg Guest

    I don't get why the US Govt is not stepping in to the offshoring that is taking place now, they are loosing Billions in tax revenue, many industries are protected now from so called dumping such as the japanese did with the steel industry,electronics and attempted with vehicles, the same needs to be done with offshoring via tariffs and import duties and the moneys used for constructive benificial programs
    for the displaced employees to keep the economic cycle going.
    My Dad was a Programmer Contractor at Sprint for 9 years until they outsourced his dept to India.


    The dollar has been hammered the last year an almost Parabolic decline, and further still to go IMO, if it busts below 80 at the cash level look out further, it has found no support and needs to show some recovery attempts before it will happen in any significant way.
     

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