Thread: USD vs Euro - the future?

Exports to the US would completely dry up at 25:1. They're already under severe pressure. I suppose if Thailand can convert itself to a backroom supplier to finished products by Japan or China it might work, but it would be very harmful to Thailand to go to that kind of exchange rate.

Looks like it's beginning to top out... for now.

Judging from Bernanke's report yesterday, the US is in a spot of trouble for the next few months.

Originally Posted by A Traveller

Equally concerning as these areas of competence is the, often forgotten reality that China's development remains a highly coupled system, within which many events could trigger an economic slowdown.

From a layman's simple minded view of the situation regarding the weak US dollar, I pose this question to all here who clearly have a better grasp on global economics.

As mentioned by many, exports into the huge US market are major components of China, Japan, Europe and other economies.

Would it be in the best interest of these countries to devalue their currencies to retain parity with the US dollar?

Originally Posted by watterinja

Where would I be able to tap into information of this nature? Reliable magazines, good brokers?

Traveller, an excellent review. Thanks very much for that.

The Chinese have done well as the bankers & traders of Asia. Take as an example their penetration into, & control of, many markets around S.E. Asia, & beyond.

In Thailand, for instance, their penetration in the banking sphere is almost absolute, as I understand things.

I would have some major reservations, though, with their concept of honesty in regards to being honest custodians & protectors of their clients assets. As micro-lenders they excel - as many a broken kneecapped defaulter would/could attest. To act at the level of honesty expected as from a 'western-style' banker, may currently be beyond them. Only time will tell how much their culture of banking develops.

A major concern is what will happen when - not if - when Chinese Communism implodes. How would this severe lack of stability influence their position? The return to Three Kingdoms has always been a factor in the minds of many of the emerging intelligentsia I've met in business.

I'd hope that the US would be aware of the risks of Chinese penetration into their banking system & take measures to manage the entry & operation carefully.

Originally Posted by Thormaturge

Originally Posted by watterinja

Where would I be able to tap into information of this nature? Reliable magazines, good brokers?

Thanks TM... I'd forgotten all about them.

As if the weakening dollar didn’t have enough problems over the last week with new lows against the euro, speculation that the Chinese might shift their huge reserves away from the currency, and fears that the American economy is slowing there is pressure from an unexpected source.

The supermodel Gisele Bündchen may no longer consider dollars fashionable. Ms. Bündchen, who once dated Leonardo DiCaprio and modelled for Victoria’s Secret, now wants to be paid in euros, according to a report on Monday from Bloomberg News.

Her United States manager, Anne Nelson, quickly told CNBC that the report was false, but the story was enough to prompt an editorial in The Wall Street Journal and many more Web hits than currency fluctuations normally produce.

Whatever the truth, there’s no denying that the dollar’s descent has not been pretty for foreigners exporting their goods and services to the United States, even if they are supermodels.

Regards

err 'bout that $US ...............?

just declined against 10 of the 14 major currencies .

bbctv

^ I'll update the chart in a few hours when the US Stock market opens. At the moment it's leveling off close to previous peaks, but after the weekend's Opec discussions, I'd like to see what the US markets themselves do.

It is a sad story what has been going on for the past years. Some media institutions do EVERYTHING to bring down the $. Also Greenspan made endless statements to bring it down going even so far of dreaming of the end of the $ as world currency!!! And even retired he still cannot stop with damaging remarks. By contrast NEVER Bush, Bernanke or any treasury made ever a negative comment - even if they seem to be happy with the falling $.

The Chinese premier said today he is worried about the falling value of their huge $ reserves - I can imagine... The oil countries are complaining about their falling purchasing power since their currencies are pegged to the $ and so on. Endless people and countries get robbed of their wealth.

Some people and media try everything to bring the $ down. This goes so far that for instance for the biased media a jobless rate in Germany of 13 % is no problem but one of 5 % in the USA is a big chaos and so on and on. They do everything to bring the $ down further. Simply read the reports of Reuters or Bloomberg. They create fear all the time. If they cannot find anybody making a negative statement then they will look for someone even if it is the bank director of a small bank… And if this does not work a “person familiar” made a negative statement… As long as this does not stop the downtrend will not stop.

Before the same media did this the other way round with reports about the US stock market – buy more and higher supported by endless so called stock analysts. Now this game seems to have moved to the currency markets and the stock analyst have been replaced by currency analysts...

I think the people behind those “games” are the biggest threat to this world and it would be time and more than worth the effort to uncover and deal with them…since they really create a worldwide problem with their endless greed.

I wonder if some of the willingness to see the dollar's demise, has to do with the arrogance of the current US administration?

I get the distinct feeling that many folks & heads-of-state have become more than a little tired of the blowhard arrogance of former years.

People are always looking for a safe haven for their investments. As the dollar's secure status begins to drop off, another will take its place. Before the USD as security, there was the Gold Standard.

Euro & USD dancing around each other at the moment. Basically hovering around 1.465/6.

You seem to be blaming the media and financial institutions whereas if anything the opposite is the truth. They helped the bloody USD stay up for too long.
The USD stayed unrealistically high for far too long- I was saying this over three years ago, but it still went higher.
So that will just make it a bit worse now. I feel it has lower to go yet, it is very vulnerable to bad news- and bad news is coming.
If you want to get a sense of perspective look at long term currency charts, say 30 year periods.

Originally Posted by sabang

You seem to be blaming the media and financial institutions whereas if anything the opposite is the truth. They helped the bloody USD stay up for too long.
The USD stayed unrealistically high for far too long- I was saying this over three years ago, but it still went higher.
So that will just make it a bit worse now. I feel it has lower to go yet, it is very vulnerable to bad news- and bad news is coming.
If you want to get a sense of perspective look at long term currency charts, say 30 year periods.

I'd tend to agree with your perspectives. The US financial media has been excellent at talking up their economy, greatness, dollar as safe haven & so on, & in the same breath, they've always come out on the winning side of major financial crises e.g. 1997 Asian crash.

With the current state of the US economy, there does not seem to be much more space to spin.

With oil closing on $100 per barrel, you'd think they'd consider driving smaller cars - somehow I doubt they'll seriously consider that - probably better to go off & invade Iran.

making me sick ,

to think it debuted at 80 odd cents ...................

I know the development of the USD in the last 30 years - it just went down. But there were different political situations.

But now I would really say - who needs the US and their currency??? Who needs the reporting of the economic data out of the US??? I would not invest in the US anymore. It seems to be crazy to buy any stocks or even the currency. So my question is really - do we need the reports of Reuters or Bloomberg??? We should focus on economies that will grow and not on dying economies. We have to accept that the US is a thing of the past like the Roman Empire. And nobody will miss the US with all the useless army. It is a poor country anyway - just spent 2 months there. Most of the people are poor and the infrastructure does not work and is breaking down. My brother in a very good location next to New York still needs his well and his generator sometimes because there is no power. The street lighting switches off at 8, the cellular network is a joke and so on... Ordered a shuttle to the airport for $ 200. It did not show up... Flights canceled... A rental truck that broke down after 7 miles... Could continue endless with chaos from there. Thailand seems to be more advanced... We really do not need the US or this currency. So let's focus on the Euro and Yen. They have a future.

You might be interested in reading this article by the eminent former Ass't Secretary of the Treasury under Reagan, and the "father of Reaganomics," Paul Craig Roberts, whom we have been discussing today on several threads and forums.

There is abundant evidence that the loss of confidence in the dollar is underway. When it is complete, the US will no longer be a superpower.

The decline in American power and influence could be dramatic. Part of America’s power results from European countries going along with Washington. However, the sharp rise in the Euro’s value has hurt European exports, squeezing profit margins, wages, and encouraging offshore production.

Fights over monetary policy between European capitals could doom both the EU and the Euro, leaving the world with no reserve currency and America with embittered former allies.

VDARE.com: 11/01/07 - Hegemony’s Cost

Would it perhaps be a good time to go back to a 'Gold Standard'?

Originally Posted by watterinja

Would it perhaps be a good time to go back to a 'Gold Standard'?

Well, Roberts is arguing not only with the USD be destroyed, but the Euro along with it, leaving no reserve currency.

This could be a coming crisis of huge proportions, though I don't want to think like that.

By going to war for hegemony, the Bush Regime has brought about American decline. While the neocons have spent two administrations trying to deracinate Islam, real threats to America’s power have been neglected. Offshoring, which turns US GDP into imports and larger trade deficits, together with war debts, has eroded the dollar’s status as reserve currency, undermining the foundation of American power.

In the west, at least, perhaps we're not far off returning to a gold standard. Banks appear to be insolvent, and the only investment that appears to have value is commodities. What "wealth" exactly do USDs Eurs etc actually represent any more?
If TW mugabe is gonna nationalise the platinum mines in Rhodesia (known temporaily as zimbabwe) I'd put my money in platinum futures.

As weird as it sounds I think Javier and watter are on to something. Yes, maybe a return to Gold standard before everything goes to hell in a hand basket.

The concept of a Gold Standard meant that Reserve Banks were forced to hold physical assets in gold, as a security. If things went haywire, then they could sell off from their gold assets & stabilise the situation.

Moving away from a fixed standard to a purely speculative instrument allowed the USD to step in as the defacto gold-standard equivalent. This all pre-supposed that the USD would remain steady & that the underlying fundamentals of the backing for the USD (US economy) would remain stable. In essence, the world was backing the stability of the US - the USD Standard.

Over a period of time, the US took advantage of their position of trust & essentially cowboyed & ran up huge debts - so intrinsically undervaluing the 'USD standard'.

The world is becoming wise to this, & seems to be moving away to another bastion of stability - hopefully, the EURO. Ironically, this 'Euro Standard' will probably end up going the same way as the USD, over time.

Moving back to a solid 'commodities-based standard' eg. gold, will help to stabilise what has now become understood as a highly nonlinear, possibly chaotic monetary system.

If anyone has dabbled in the underlying partial differential equations governing the futures market, for instance eg. the Black-Scholes equation - most would be horrified to find out that it is has some very non-linear components to it & can often be very unstable. I have actually run up simulations of this equation where I create waves within a controlled space. I'll bet Black & Scholes would hate to know this little caveat.

Originally Posted by chinthee

I think TD is ready for a business and economics thread

I think that's what this forum is for. Maybe we can change the forum title to something like "Business, finance & economics" and drop the Thailand bit? I'll put it to the man.