Countries STILL settle up their debts with gold transfers. I was personally glad to hear this news. With a high deficit and a weak dollar gold will be worth more.

I've been buying precious metals for about two years now. A 600/oz price tag on gold suits me just fine.

Currently pawn shop prices are about 3-5 dollars a gram. A lot of people fall for that.

Mike the Usurper wrote:
] ] The dollar index, a measure of the dollar against a
] ] basket of currencies, extended a slide to a nine-year
] ] low.
]
] This is going to require a little explanation as to why this
] is important. A large portion of the US economy is dependant
] on imports. We'll start with cars. Currently the #1 domestic
] car manufacturer is GM followed by Ford and Toyota (yes,
] that's right, Toyota). The trick here is, no one makes a car
] anymore with all domestic parts. Toyota obviously makes a
] good number of their parts in Japan where they are brought
] over and installed in US cars, GM does similar things,
] primarily in Mexico, and Ford and Chrysler both do a good
] amount of their construction in Canada, which means the dollar
] sliding across the board will increase prices for DOMESTIC
] products. The sliding dollar will also cause increased
] pressure on import prices, so things actually made in other
] places will be more expensive as well.

Obviously you're oversimplifying for brevity, but I think that might be an error in regards to the weight of the situation. Most large corporations, particularly the automotive companies, due their own currency trading and arbitrage. So yes, almost every car on the market is composed of something north of 50% non-domestic parts (which would include Canada and Mexico), that doesn't mean that the exchange rates are toying with prices all that much. Tariffs and shipping are the usual culprits when it comes to price fluctuations with globally assembled goods, and with oil at all time highs, it's been very expensive to ship things ANYWHERE. Labor is also a big swing factor and probably has much more to do with costs going up for these types of goods. Remember, even though there is some plant in some third world country making car parts for a fraction of what it would cost in the US, there's inflation in that third world country as well, and those costs are going up appropriately.

I think the reason that our currency is falling is for two very important reasons, and THEY'RE the reasons to get concerned and worried about. One is our national debt, which is skyrocketing faster than anyone can fathom. That is putting pressure on currency because it's a direct effect of loading up on too much debt. Dollars are losing value because they will be less liquid in the future. Two is obviously our foreign policy. Foreign investors are not seeing an end to the national debt gravy train, and so they're migrating their investments to other instruments, generally out of US markets and into something else. This is making it harder to arbitrage US currency exchange, and that puts downward pressure on the dollar. The only thing I can't account for is why this slide started when we had a surplus and exports were at all time highs, but this might just be a statistical anomalie.

So let's get ... [ Read More (0.2k in body) ]

flynn23 wrote:
] Mike the Usurper wrote:
] ] ] The dollar index, a measure of the dollar against a
] ] ] basket of currencies, extended a slide to a nine-year
] ] ] low.
] ]
] ] This is going to require a little explanation as to why this
]
] ] is important. A large portion of the US economy is
] dependant
] ] on imports. We'll start with cars. Currently the #1
] domestic
] ] car manufacturer is GM followed by Ford and Toyota (yes,
] ] that's right, Toyota). The trick here is, no one makes a
] car
] ] anymore with all domestic parts. Toyota obviously makes a
] ] good number of their parts in Japan where they are brought
] ] over and installed in US cars, GM does similar things,
] ] primarily in Mexico, and Ford and Chrysler both do a good
] ] amount of their construction in Canada, which means the
] dollar
] ] sliding across the board will increase prices for DOMESTIC
] ] products. The sliding dollar will also cause increased
] ] pressure on import prices, so things actually made in other
] ] places will be more expensive as well.
]
] Obviously you're oversimplifying for brevity, but I think that
] might be an error in regards to the weight of the situation.
] Most large corporations, particularly the automotive
] companies, due their own currency trading and arbitrage. So
] yes, almost every car on the market is composed of something
] north of 50% non-domestic parts (which would include Canada
] and Mexico), that doesn't mean that the exchange rates are
] toying with prices all that much. Tariffs and shipping are the
] usual culprits when it comes to price fluctuations with
] globally assembled goods, and with oil at all time highs, it's
] been very expensive to ship things ANYWHERE. Labor is also a
] big swing factor and probably has much more to do with costs
] going up for these types of goods. Remember, even though there
] is some plant in some third world country making car parts for
] a fraction of what it would cost in the US, there's inflation
] in that third world country as well, and those costs are going
] up appropriately.
]
] I think the reason that our currency is falling is for two
] very important reasons, and THEY'RE the reasons to get
] concerned and worried about. One is our national debt, which
] is skyrocketing faster than anyone can fathom. That is putting
] pressure on currency because it's a direct effect of loading
] up on too much debt. Dollars are losing value because they
] will be less liquid in the future. Two is obviously our
] foreign policy. Foreign investors are not seeing an end to the
] national debt gravy train, and so they're migrating their
] investments to other instruments, generally out of US markets
] and into something else... [ Read More (0.3k in body) ]

Mike the Usurper wrote:
]
] Yep, I oversimplified a bit and it's also a more than a little
] disjointed (it was late, what can I say), but I think you've
] hit the nail with the Perfect Storm comment. This is one more
] contributing factor. Whichever one is the final straw will be
] the one that gets blamed, but it's never quite as simple as
] that.
]
] The one that scares me is the petro-euro. If that happens,
] that would move the whole system away from the dollar making
] recovery much, much harder.

Wasn't one of the primary reasons that we invaded Iraq to scare the region into keeping the petro-dollar? Or was that just a conspiracy theory?

Jello wrote:
] Mike the Usurper wrote:
] ] Yep, I oversimplified a bit and it's also a more than a little
] ] disjointed (it was late, what can I say), but I think you've]
] ] hit the nail with the Perfect Storm comment. This is one more
] ] contributing factor. Whichever one is the final straw will be
] ] the one that gets blamed, but it's never quite as simple as
] ] that.
] ]
] ] The one that scares me is the petro-euro. If that happens,
] ] that would move the whole system away from the dollar making]
] ] recovery much, much harder.
]
] Wasn't one of the primary reasons that we invaded Iraq to
] scare the region into keeping the petro-dollar? Or was that
] just a conspiracy theory?

Probably just a conspiracy theory, but it's as good a reason I've heard as any.

] ] I think the reason that our currency is falling is for two
] ] very important reasons, and THEY'RE the reasons to get
] ] concerned and worried about. One is our national debt, which
]
] ] is skyrocketing faster than anyone can fathom. That is
] putting
] ] pressure on currency because it's a direct effect of loading
]
] ] up on too much debt. Dollars are losing value because they
] ] will be less liquid in the future. Two is obviously our
] ] foreign policy.

The national debt is certainly a major driver, but foreign policy is much less of a factor. The primary driver, and the reason the dollar began to fall in the first place, is low interest rates. As you know, the Fed lowered interest rates to stimulate a weakening economy. The paradox is that this action also weakens the dollar as well. If interest rates remain low and the economy doesn’t respond, then I believe we will begin to see signs of stagflation as early as 6 months from now.

In terms of OPEC moving to the Euro, this would indeed be disastrous for the US economy. The fact that such a move would be so disastrous is the very reason why the US would not allow that to occur IMHO.

Someone mentioned earlier that the reason for going into Iraq was based on keeping them using dollars rather than Euros. I actually read a really good report on this that made a pretty strong case for this hypothesis. You can find it here http://www.ratical.org/ratville/CAH/RRiraqWar.html

doddster98 wrote:
] ] ] I think the reason that our currency is falling is for two
]
] ] ] very important reasons, and THEY'RE the reasons to get
] ] ] concerned and worried about. One is our national debt,
] which
] ]
] ] ] is skyrocketing faster than anyone can fathom. That is
] ] putting
] ] ] pressure on currency because it's a direct effect of
] loading
] ]
] ] ] up on too much debt. Dollars are losing value because they
]
] ] ] will be less liquid in the future. Two is obviously our
] ] ] foreign policy.
]
] The national debt is certainly a major driver, but foreign
] policy is much less of a factor. The primary driver, and the
] reason the dollar began to fall in the first place, is low
] interest rates. As you know, the Fed lowered interest rates
] to stimulate a weakening economy. The paradox is that this
] action also weakens the dollar as well. If interest rates
] remain low and the economy doesn’t respond, then I believe we
] will begin to see signs of stagflation as early as 6 months
] from now.

Good point and for some reason, that eluded me when I was composing my reply. My point around foreign policy as being a factor is that it's a prime driver of the national debt. Unless we repeal our little imperial escapades, we won't be able to continue funding this course of action, and that's a foreign policy decision. One begats the other.

It's interesting to note though that the market has done well in the last 18 months, which is why I think rates will rise and that might stabilize things a bit. But who knows. If you look at where the rubber hits the road, businesses are still cautious about major capital expense, and credit is still fairly difficult to come by despite low rates and liquidity. There's still a ton of cash sitting on the sidelines looking for something to happen. None of this is good news.

] In terms of OPEC moving to the Euro, this would indeed be
] disastrous for the US economy. The fact that such a move would
] be so disastrous is the very reason why the US would not allow
] that to occur IMHO.

Perhaps. I still think that the US's only concern here is in the currency market that it generates. It doesn't participate in the capital lending and finance activities of the Middle East to the extent that the Euros do. And as long as China and Japan are driving the cart, I think it'll stay USD. Surely, the US has other currency opportunities outside petro-dollars.

Selfishly, I wish it would change, because I think it would be an indicator of moving towards a new paradigm, which would hopefully be sustainable energy.

] Someone mentioned earlier that the reason for going into Iraq
] was based on keeping them using dollars rather than Euros. I
] actually read a really good report on this that made a pretty
] strong case for this hypothesis. You can find it here
] http://www.ratical.org/ratville/CAH/RRiraqWar.html

There's no question that invading Iraq has numerous strategic advantages (provided, it gets executed effectively). I just wish that the administration would've been forthright with that explanation. Instead they lied, which has damaged our credibility worldwide. Not that if they posed it with the truth that anyone in their right might would've agreed to the agenda, but at least you're damned for what you really are trying to accomplish, instead of being damned for lieing AND killing.

Mike the Usurper wrote:

] Yep, I oversimplified a bit and it's also a more than a little
] disjointed (it was late, what can I say), but I think you've
] hit the nail with the Perfect Storm comment. This is one more
] contributing factor. Whichever one is the final straw will be
] the one that gets blamed, but it's never quite as simple as
] that.

It's interesting that the currency drop is more effect than cause, but is getting treated like cause. Particularly when we're looking at a 9 year pattern. WTF? How can analysts mislead people like this?

] The one that scares me is the petro-euro. If that happens,
] that would move the whole system away from the dollar making
] recovery much, much harder.

I dunno if that's all that bad. Considering that the nearterm gluttons for fossil fuels are PacRim countries (Japan, always the whore, and China poised to take first place at the table in a matter of months), it would likely stay dollars. But even if it did shift to euros (and the reasoning there is confounding, since most of the Middle East economy is bolstered by the Europeans, hence their aversion to the war in Iraq, particularly the French which still have something like $90B in outstanding Iraqi debt), that would probably indicate a move by the US to decouple itself from Middle East fossil fuels and onto something less volatile. If so, that could reignite the economy, and not necessarily stunt it. But this is just theory.

flynn23 wrote:
] It's interesting that the currency drop is more effect than
] cause, but is getting treated like cause. Particularly when
] we're looking at a 9 year pattern. WTF? How can analysts
] mislead people like this?

Actually, currency drop is presently a matter of deliberate policy as well, so it is a cause lever.

] I dunno if that's all that bad. Considering that the nearterm
] gluttons for fossil fuels are PacRim countries (Japan, always
] the whore, and China poised to take first place at the table
] in a matter of months)

Are you sure about the China thing?

http://www.investorsinsight.com/print_preview.asp?id=jmotb102504

dmv wrote:
] flynn23 wrote:
] ] It's interesting that the currency drop is more effect than
] ] cause, but is getting treated like cause. Particularly when
] ] we're looking at a 9 year pattern. WTF? How can analysts
] ] mislead people like this?
]
] Actually, currency drop is presently a matter of deliberate
] policy as well, so it is a cause lever.

well, both cause and effect are oversimplifycations, but I think that it's more effect than cause. There's much more deliberation around foreign policy and interest rates over the last 5 years than devaluing currency. That seems to be much more of a bad side effect that we've been upto now willing to tolerate.

] ] I dunno if that's all that bad. Considering that the
] nearterm
] ] gluttons for fossil fuels are PacRim countries (Japan,
] always
] ] the whore, and China poised to take first place at the table
]
] ] in a matter of months)
]
] Are you sure about the China thing?
]
] http://www.investorsinsight.com/print_preview.asp?id=jmotb1025
] 04

yes. It doesn't matter what type of oil they're importing. The fact is that they're puchasing it in petro-dollars, and they're consuming a growing amount that's disproportionate to their development efforts. While the article makes good points about their consumption being cost tempered, and that growth in China might slow (both of which I agree with, and for different reasons), that fact remains that China will be the #1 consumer of fossil fuels in a matter of months. So they have, and will continue to have, significant sway over how that market behaves.

Mike the Usurper wrote:
] ] The dollar index, a measure of the dollar against a
] ] basket of currencies, extended a slide to a nine-year
] ] low.

It appears the federal policy is to keep wanting it to fail. I assume
when it hits a magic number that the govt will step in and put the
brakes on in coordination with the Euro.

Here is a quote from a CNN article

""Recent comments from U.S. and European officials that hint at a weaker
dollar are also adding fuel to the selling," said a dealer at a U.S. bank.

Last week U.S. Federal Reserve President Janet Yellen said the dollar
was still "relatively high despite our large and growing trade deficit."

Euro zone finance ministers and European Central Bank officials have
said the euro's strength poses no problems."

http://edition.cnn.com/2004/BUSINESS/10/25/asiamarkets.midday.reut/