The economy!

[sonny]

Whatever GW may or may not be, you have got to love the economy in the states over the past 4 years and looking forward-especially looking forward. things are flat out great. It doesn't get as much press as it should but things are doing quite well, lots of jobs, int. rates are at a resonable level, stock market performing very well, etc.. Lets give GW and the folks in his admin. that affect the business of the US a thumbs up!

[Mr Earl]

What I don't understand is how the US economy is growing and doing well while the world market value of the dollar is in the pooper.

[sonny]

indeed, i would like to see a stronger dolar for travelling purpose's. travelled to euro land earlier this year and got killed by exchange rate. not to happy with the LOS either, 37 baht or so to the buck. was much nicer at 43 to 45 to the buck a couple of years ago. thought the coup might ease things a bit but no help there.

[man with no head]

Because the U.S. economy is propped up by debt borrowing.

This isn't your grandfathers' post-World-War-II economy. This is the Visa/Master Card economy and it's financed by China (who is right now converting their almost $1 trillion in reserves to Euros).

[Butterfly]

^ that's definitely not good news.

Suckers are always the last to know, cheering while the ship is sinking.

[attaboy]

Countries have been making plans to convert a portion of their dollar reserves to euros for years. Now that the Euro has matured and proven itself stable it's being done. It makes sense to diversify and its hardly the 'end of the line for America' scenario BF and others get whet over.

It's economic liberalism. Each country has an investment in each others economies. The interdependence makes it less likely we go to war because we stand to loose our investments and the stability of our own economies. It's kind of like inter-tribal marriages of chieftan bloodlines so there is something that binds them together and discourages bloodshed, eh?

surasak can you post a link which states China will convert its entire dollar reserves into euros?

[aging one]

The economy! Whatever GW may or may not be, you have got to love the economy in the states over the past 4 years and looking forward-especially looking forward. things are flat out great. It doesn't get as much press as it should but things are doing quite well, lots of jobs, int. rates are at a resonable level, stock market performing very well, etc.. Lets give GW and the folks in his admin. that affect the business of the US a thumbs up!

Except for the zillion dollar debt the quaqmire in Iraq has rung up. Give me a break. Housing is doing real well also eh?

[man with no head]

That would also lower the value of China's own reserve assets - so China is only slowly moving out of dollars and into other currencies such as the euro.

BBC NEWS | Business | China's trillion dollar surplus

[attaboy]

China (who is right now converting their almost $1 trillion in reserves to Euros).

How does the article support your statement that China will convert $1 trillion in reserves to Euros? It states it would be a catastrophe to both China and the USA if they ended their interdependent relationship.

[man with no head]

It says they are slowing doing it. The only reason why they trade dollars is because dollars and oil mix together. Also note that once domestic Chinese demand kicks in the party is over.

Why do you think we went to war?

[attaboy]

And they plan to convert all of their dollars like you implied in your post?

The party is over...what makes you think we will remain static and await our demise during that time?

The only reason why they trade dollars is because dollars and oil mix together

That's the only reason they hold dollars is so they can trade them for oil? I don't think so.

[Sanuk Canuk]

What I don't understand is how the US economy is growing and doing well while the world market value of the dollar is in the pooper.

Provided you are not involved in an import/export business a week domestic currency is not usually something that directly impacts quality of life too much. Provided you are not in the process of making a significant purchase of imported goods you wont notice the dollar devaluation right away. So long as domestic interest rates don't get driven up by the central bank in an effort to prop up the currency you will only feel a small portion of the overall currency weakness.

On the other hand if you travel you are screwed. Long term currency devaluation can be a significant inflation driver and this can be particularly damaging to the fixed income crowd. Canada did quite well for years with low currency valuations and only recently has had its currency strengthen vs the US. Domestically you don't notice the difference much but the strong dollar does hurt manufacturing.

[man with no head]

That's the only reason they hold dollars is so they can trade them for oil? I don't think so.

Largely, yes, otherwise who would want dollars?

This is a good read:

Asia Times: US dollar hegemony has got to go

World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world's interlinked economies no longer trade to capture a comparative advantage; they compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies. To prevent speculative and manipulative attacks on their currencies, the world's central banks must acquire and hold dollar reserves in corresponding amounts to their currencies in circulation. The higher the market pressure to devalue a particular currency, the more dollar reserves its central bank must hold. This creates a built-in support for a strong dollar that in turn forces the world's central banks to acquire and hold more dollar reserves, making it stronger. This phenomenon is known as dollar hegemony, which is created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil. The recycling of petro-dollars is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973.