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Isn't that as likely to be a reason for the invasion of Iraq? Forget Iran, they're out of control and change will only occur from within, if ever, but probably with a little nudge here and there and hopefully before it gets too serious,Quote:
Originally Posted by surasak
keda
I think for now the US (note, not the Free World, which includes slimy Europe) has its hands full.Quote:
Originally Posted by surasak
Only an opinion and with no backup, but I believe the Saudis are keeping a wary eye on the very radicals they are sponsoring, because at some time the Saudi royals will also be in line for the chop.
keda
Consider Afghanistan. The outlet for most of the Caspian region's oil goes through Afghanistan to Pakistan and India.
Coincidence? Iran is also the enemy of Saudi Arabia. Would we be willing to use force against Iran if push came to shove? The groundwork is being laid as we speak.
Control the oil and you control what method of payment is accepted for the oil. That is a further hedge against China in case China decides to stop hoarding dollars.
Right now the expanding EU is a threat to American economic dominance in the world. Collectively Europe has more potential oil customers than America (but vastly lower consumption). If OPEC starts trading in Euros watch for China to follow.
I still am in disagreement with this line of thinking. People are mixing up debt with deficit. The debt is already set and a low dollar already helps it. Bond prices are not usually set on a floating interest rate such as prime +1%. This means that increases in interest rates only affect future debt. In other words week dollar is good for your existing debt, unfortunately it will lead eventually to increased interest rates which will greatly increase the cost of current and future deficit spending. If your currency gets devalued then your debt relative to any other standard declines.
This is a big part of why the Canadian manufacturing centers are getting hammered these days. Our dollar is stronger than usual against the US dollar so our exports to the US are more expensive to US consumers and they buy less. In turn US exports to Canada are cheaper so we tend to buy more. This would normally tip import/export surpluses in the favour of the US. The only thing that has prevented this is the simple fact that most of Canada's exports are in the form of natural resources and we all know what has happened to the price of oil, coal, lumber, gold, base metals, etc.
In any event I still believe that a weak dollar helps the US. The thing about the Chinese currency is a bit of a red herring since many think that the Chinese purposely keep the yen low to assist their exports and to reduce their imports. Don't forget that if the yen is held artificially low then imported coal and other imports are more expensive than domestic coal/wheat/whatever. Also exports will be price advantaged versus foreign currencies and this will help to promote value added (manufacturing) exports.
It is true that your average person residing in the country will experience some inflation as the cost of imports will go up but this simply shifts their spending back to domestic products that once again bolster the domestic economy.
I guess what I am trying to say is that strong economies tend to result in strong currency valuations. The converse is not true.
Strong currencies do not create strong economies, instead they are a result of them.
But debt can be redeemed any time the holder wishes. There might be a penalty, but, if the interest on debt is earning 5% and the dollar slides 10-15% it would make more sense for the foreign debt holder to cash in their chips. They would make a profit more than they would if the debt matured and they collected their interest.
Your scenario works if one person loans another person the same currency without conversion. But most owners of U.S. government debt are foreign because they hedge their bets on the dollar sliding. If the dollar remains the same then when the debt matures they will make a small profit. If the dollar slides, the debt matures, they make even more.
Take my scenario again: you live in Canada and you want me to loan you money. Instead of handing you $1000 I convert my $1000 to Canadian dollars and then loan you the money. If the Canadian dollar weakens and I demand repayment in Canadian dollars then I will get back more than $1000 US when I reconvert.
You are right about strong economies creating strong currencies, but, the strong currency is a combination of economic power along with wage earning power of the citizens and the ability of the home government to borrow and repay debt (along with the government not simply printing more money to repay debt like third world countries usually do).
Weak dollar = benefits U.S. exports but penalizes imports. Weak dollar = worse buying power overseas for U.S. tourists and makes borrowing money more expensive for the government.
Strong dollar = makes our exports more expensive and cheapens imports (along with cheaper vacations) and makes it cheaper to borrow money.
Not true for bonds which is where much of the debt is held.Quote:
Originally Posted by surasak
This is backwards, all that cashing in the chips would do is lock in your losses due to the sliding currency.Quote:
Originally Posted by surasak
In this example assume Canadian currency starts with a value of .9 dollars US or $1 Canadian = 90 cents us. If you were to loan me $1000 US in Canadian funds I would get ~ $1,111 Canadian and would be obliged to return that money to you at some future date in Canadian funds regardless of future exchange rates. Say in the future the Canadian dollar decreases in value relative to the US dollar as you suggest lets go with $1 Canadian = 80 cents US for argument's sake. This means that if I repay the money you will LOSE money in US dollars. This is because my debt in Canadian dollars is still $1,111 and that is what I would give you. When you head back to the US and convert the money back to US dollars you only get $889 US dollars a loss of $111 US.Quote:
Originally Posted by surasak
^You're right, I made several mistakes in the way I presented what I was trying to prove. I should have exchanged 'weaker' and 'stronger.' I worked it all out in my head correctly and somehow had keyboard dyslexia because it's obviously backwards. The ideal situation, of course, is to buy the currency when its lower and sell when it's higher.
However, bonds can in fact be sold prior to maturity:
Individual - Treasury Bonds In DepthQuote:
You can hold a Treasury bond until it matures or sell it before it matures.
You can also buy forward cover to...err..cover your arse.:)
That's strange - I thought it was because we are rather proud of our wonderful Pound Sterling, and we hate the bl00dy French, Germans, EU, etc., and don't want any part of their corrupt organisation.Quote:
Originally Posted by surasak
Britain would rather trade dollars (because Britain is an oil producer) than Euros.
Plus the other reasons mentioned ;)
No, you're right of course, Britain just has jolly good old chaps scratching each other's backs, which is naturally something completely different. :DQuote:
Originally Posted by RDNThat's strange - I thought it was because we are rather proud of our wonderful Pound Sterling, and we hate the bl00dy French, Germans, EU, etc., and don't want any part of their corrupt organisation.Quote:
Originally Posted by surasak
Has the pipeline been built yet?Quote:
Originally Posted by surasak
I still can't agree with your scenario. In reality the US government is not borrowing 4000baht. They are borrowing 100 dollars. Foreign entities purchase our securities with their currency at the present rate of exchange and we agree to repay the amount stated on the security. My understanding is that the amount on the security is stated in dollars. So if the dollar falls in value in relation to other currencies it doesn't matter because we pay out in the dollar amount stated on the security.Quote:
If the dollar drops and you owe $100 dollars of debt from yesterday's prices then the burden of the debt increases if the foreign holder of your debt's currency increases in value.
For example, say I owe you $100 and I borrowed it when the terms were 100 dollars = 4000 baht (in reality, I'm borrowing 4000 baht from you, not $100 dollars). Now, say the dollar weakens and the baht becomes 30 to the dollar. I still have to pay your 4000 baht because that was the terms of the loan. So, now, in real terms my debt suddenly becomes $133. That's a huge negative for me but good for you.
They purchase a $100 dollar US govt. security at the present exchange rate of 40b/$. The cost to them is B4000.
The security matures. The entity is paid $100 dollars plus interest. The contract is completed. The present exchange rate is 38b/$. If foreign entity exchanges the dollars into baht they receive B3800.
They lose money on the principle. They don't gain. More than likely they are purchasing US govt. securities with US dollars they have received from conducting trade so there is no exchange rate involved. The entity proabably keeps rolling the mature security over into another security so they never realize the loss in value on the principle because they never exchange the dollar back into their own currency. Or maybe they purchase US real easte with the dollars. A portion of their dollars never get exchanged. They get locked in.
^As I noted I posted the wrong terms. I should have said 'stronger' when I said 'weaker.'
China and Japan want a strong dollar because it not only makes that their imports cheaper but also they can invest the gains by buying U.S. debt securities and in the process make even more money if the dollar gets stronger.
Considering the pipeline the Soviets built one (a reason why the Soviets invaded Afghanistan) but the rebels destroyed it. There were plans to build one in the 1990s but the U.S. government opposed it...until 2002:
BBC NEWS | Business | Afghan pipeline given go-ahead
So, yeah, Afghanistan was about oil.
I just finished reading the posts at the top. My mistake.
Quote:
Originally Posted by surasak
Surely you mean "exports", not "imports"? A strong dollar makes Japans or Chinas exports to the US cheaper to the US public.......
On the other hand, a strong dollar hurts US exports.
Imports = from my point of view.
Perfect situation for them: sell things to the U.S. cheaply, take the money earned and loan it to teh U.S. government so we as consumers have more 'money' in which to keep buying their stuff. They increase their countries' living standards by providing jobs and allow us to keep buying their stuff by keeping our government afloat.
Makes me think of a loan shark or a store credit card. Near your credit limit? No problem, here, let's increase your borrowing capacity so you keep running up debt (so we can earn interest as well on your purchases).
I may be splitting hairs here but when you talk about "their imports", I believe most economists would assume you mean "what <third party> are importing".Quote:
Originally Posted by surasak
Otherwise I agree with what you are saying.:cool:
Their imports [to the United States].
Poor choice of wording, was trying to put baby to sleep while posting ;)
I wonder how the same people who complain about the low cost of foreign products in the USA would feel about a "Buy American" campaign ?
Would this be the rare instance where "Patriotism" is acceptable ?
Seems to me the bottom line is that there is nothing to worry about. These countries want access to our markets and our money bottom line. They don't want to lose on their investments.
All the "What if" scenarios are fictional and aren't going to happen any time soon.
But it's not sustainable. How long can we keep borrowing and borrowing?
We aren't getting these goods cheap. We are trading a massive amount of debt for these 'cheap' goods. The accounts must balance each year and if our exports in real services and goods don't cover the bill then we must export debt to balance the account. And until that debt gets paid off there's interest piling up. There is no free lunch here. Not to mention that by allowing things to be made in China we are indirectly allowing oil prices to increase and allowing for the potential of a well armed adversary in the future.
I want to know where these cheap imports are because I sure as hell don't see them. I go to Wal-Mart, the king of low prices, and I don't see much difference in terms of prices of things. I see a bunch of cheaply made crap that ends up costing the same as if it were made here.
You know what really gets prices down more than anything? Shorter warranties. You find me something that actually has the same or longer standard warranty as it did prior to the age of cheap Chinese imports.
I think it's against our national security to buy oil from any Middle Eastern country and I think it's against national security to buy things made in China.
Absolutely not! "Thailands exports to the United States" or "US imports from Thailand" is the same thing.Quote:
Originally Posted by surasak
The opposite would be "US exports to Thailand" or, if you prefer "Thai imports from the US".
But the Phrase "Thai imports to the US" is meaningless.
Mission impossible, I know...!:cool:Quote:
Originally Posted by surasak
Picky, picky ;)
And....the Chinese have threatened a couple of times (bluffing for now) to change their reserves to the Euro.Quote:
Originally Posted by surasak
The more we borrow, the less clout we can have.
Jobs creation. Are we really that strong or is it smoke and mirrors? After all, we should know that the unemployment figure is just a guess.
Consider that from Jan. 1992 - January 2001 the economy added about 20,000,000 jobs. From February 2001 to present it has added 7 million.
From January 1992 - January 2001 = 184,000 jobs per month increase (average). From February 2001 to present = 104,000 jobs increase per month (average).
From 1992 - January 2001 an average of 50,000 people each month dropped out of the labor force. From February 2001 to present 104,000 per month have dropped out of the labor force.
The U.S. population is growing by over 300,000 per month.
There are still 1 million more people collecting unemployment compared to Bush's first month in office. Average hourly and weekly earnings are in decline and have been since 2002.
So, are we actually being misled when we say unemployment is 4.7%?
Want to know where the jobs have been created over the past few years? Healthcare, hotels, and restaurants are responsible for over 50% of the 'new' jobs created since 2001.
These are all statistics readily available from the Bureau of Labor Statistics.
The Economy Sucks...
By Matt Margolis
...for Democrats...
Initial jobless claims fell by 6,000 last week... The Dow hit its all time high this morning... Hispanic unemployment is also down...
The pro-growth policies of President Bush and the Republican Party are working. No wonder why Democrats have nothing to run on this year.
Click on the underlined portions for the links ;)