Huh?! WTF is with the Dollar?! Check out this Dollar v. Euro Chart.

[nicknameless]

http://www.x-rates.com/d/USD/EUR/graph120.html

Look what's been happening since October. Is shit just about ready to hit the fan?
This graph, plus this news clip about the dollar are troubling, to say the least.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x9365

[rodeodance]

1. there has been a few articles the last few days on DU about this slide.

[ChairmanAgnostic]

2. no surprises,

our deficit is growing at about the same pace

[nicknameless]

4. But that's just a 120 *DAY* chart

Look at the last 45 days.

[ChairmanAgnostic]

27. true, but remember that market forces play with numbers.

expectations often become realities. It is just possible that the dollar was strong because the US was futzing w/ unemployment numbers, telling the world that our economy was strong. Heck, the Dow confirmed that to people.

Now that the covers have rusted off, and the emperor's destruction is seen clearly, the markets will move and run away from a tottering economy, a worse political quagmire and an unpaid, uninvestigated invoice due to IraqNam.

In many ways, markets create situations, and they react to situations, always in an unpredictable manner in the short term, but eventually reflecting the reality as news becomes confirmed and more clear. For ex, Google will soon be at 125- 150, not 500 per share. Once reality sets in, the big players "play the small suckers" and take their profits, leaving the dregs to the "investment class".

[SpiralHawk]

3. "Nothing to worry about. Me and my republicon cronies have a plan." - Commander AWOL

"You can bet your bippy that me and my republicon oil & munitions cronies will still manage to reap MASSIVE PROFITS from this. So why don't you proles just shut up and sit down."

- Commander AWOL

[liberal N proud]

5. The bu$h regime has succeeded in doing what they were trying to stop Saddam from..

Iraq, Iran and other axis of evil countries were going to stop trading in the dollar. The bu$h regime couldn't let this happen so they attacked Iraq and now have forced the rest of the world to abandon the dollar as well.

Way to fucking go george!

[Chimichurri]

6. People are dumping the dollar and buying Euros because they

are not getting a return on all the debt they've bought from us. Those exotic mortgages that have been fueling our economy since 2001 are being bundled and sold on the stock market to the Chinese and anyone else interested alleviating the banks that dole these bad loans out. After the feds began raising rates to make these stock holders happy, it began to sink our economy. Higher interest rates means people who got themselves into adjustable rate mortgages are loosing their shirts, stopped using thier homes as ATMs forcing the feds stop raising rates in a vain attempt at saving our fake prosperity. Now the Chinese along with every other debt holder are unhappy about getting stifled returns for their investment, so they're dumping the once almighty dollar.

Today the feds meet but they are in a bit of a pickle. If they raise rates, the housing market slides faster into demise, puts tons of people into possible foreclosure ultimately causing a massive slowdown of purchasing power across the consuming spectrum. If they don't raise rates, countries holding these worthless loans continue dumping the dollar hence the dollar decline continues. If they do nothing, it only slows down both of these scenerios and buys our economy some time, for now. Speculation is, the feds will not raise rates this time around.

No matter how you look at it though, it's bad.

[Jon8503]

7. Ya, you pretty much hit it. It used to be that it would be good for a time if

the dollar fell as our goods would be more sellable overseas as they cost more and would help in the import-export problem but we have been losing jobs and now it seems we really don't export much of anything but trouble so that doesn't play as much anymore.

Not sure how this is going to be handled.

[htuttle]

9. I think it's all beyond 'handling' at this point

I think the Bush administration's strategy will consist mostly of spinning, rationalizing, justifying and minimizing -- pretty much like all their other strategeries.

[FreeStateDemocrat]

8. What's the scenario if the dollar keeps tanking, will this impact the

Feds ability to finance our growing deficient or will the low yield be compensated for in the debt auctions for US Treasury bonds and notes? I don't have a clue but it seems Fed will ignore foreign concerns to prop up our economy but it seems there must be a day of reckoning like using your credit card until your bankrupt.

[Chimichurri]

10. That's the quagmire. Nooone can predict what will happen. This is

why you're seeing gold rise.

[davekriss]

19. If the dollar keeps dropping...

...we'll have a repeat of the effects of the post-James Baker Plaza Accord from around 1986-1988.

Back then, the Reagan administration was battling the awful effect of a too strong dollar. Reagan followed a rich-man's Keynesian strategy of cutting taxes even while building up national defenses. At the same time, Paul Volkner was battling high inflation at the fed. Federal debt was consuming most of our private savings so, for the US to technically remain solvent, we had to look overseas for the cash to fund the (then) huge Reagan deficits. What happened? Real interest rates reached records not seen since (ok freeper bozos, Carter holds the record for nominal rates, inflation + real rate; Reagan holds the record for real rates).

Our interest rates in the early Reagan administration grew attractive, after discounting for risk, compared to the rest of the world, so foriegn funds flowed into the treasury and the massive debts were funded.

The problem was, you could only buy a US Treasury Bond with US dollars, so the rest of the world raced to trade their Yen and Franc and Marcs for dollars, bidding up the relative value of the dollar compared to the rest of the world's currencies. I recall the Yen falling to around 268 per dollar -- that was cheap!

The unfortunate effect of a too strong dollar was people rushed to buy cheaper Toyotas and Sony TV's. American firms lost market share and sometimes whole industries, resulting in the rusting of the bedrock of blue-collar middle classism, the midwest manufacturing base. Reagan was fast plummeting in popularity so something had to be done. In rushed the black knight, James Baker the III, who hastily formed the Plaza Accord where the central bankers of the leading economies agreed to trade reserves to maintain the dollar in a narrow target range. However, they didn't have it quite right and over-adjusted and the dollar plummeted. Now a dollar could only fetch 89 Yen.

There were some good effects from this. Now Toyotas and Sony TVs were looking expensive so there was some recovery of market share and, thus, some recovery of bedrock blue-collar jobs (of course, offshoring put an end to any "recovery"), but there was a huge downside too. As a result of the weak dollar, we held a massive "fire sale". Whereas before the Reagan administration the US owned 3.7x more of the rest of the world than the world owned of us, by the end of the GHWB administration the rest of the world now owned 0.4x more of us than we of them. How many of us today work for a firm owned by some transnational headquartered in Bonn or London or Hong Kong?

These are huge structural changes that have made us a less prosperous, less eqalitarian nation. A shame, really (it didn't have to be, but as now, we like lemmings followed Republithug idealogues over the cliff).

We've been able to maintain a modicum of US prosperity because of dollar hegemony. A lynchpin to this hegemony is agreements with nations like Saudi Arabia, who agree to trade oil only in dollars in exchange for military aid and non-interference in internal affairs. This agreements, however, are unravelling (note that 15 of the 19 hijackers on 9-11 were Saudis). Thus the invasion of Iraq, which I believe was first and foremost meant to establish impregnable military garrisons from which the US can radiate imperial power throughout the region, thereby preserving hegemony but now with bombs and bullets.

This strategy, of course, is failing miserably. All Bush has accomplished is gain of the ill-will of the world. So the rug will be pulled out from under the dollar (I expect 1.4+ per Euro by March), increasing prices and slowing US consumption (as so much of what we consume now comes from overseas); interest rates will rise as the dollar devalues in order to attract the foriegn cash needed to fund the Bush deficits, further eroding aggregate demand -- and so we will fall into a very steep recession (if not an actual depression).

The near/mid-term, I believe, is pretty bleak.

[Chimichurri]

21. Wow. The Bushes and James Baker are a pox on this country.

As the economy goes the way of the Plaza Accord, the democrats will be the ones holding the bag. No doubt they will be blamed for this.

[AngryAmish]

11. With respect, this is nonsense

A falling dollar is good for the US economy.

It makes exports cheaper. It makes imports more expensive. We have been trying to cut the dollar for years.

[Chimichurri]

12. That's over simplifying this. You would be right 30 years ago, but

we hardly export anymore because we do very little manufacturing. In order to finance our growing trade deficit we need 3.5 billion to come into this country every day. Most of this money comes from foreign central banks which own large amounts of dollars. Recently central banks from around the globe have begun diversifying their holdings thus dumping the dollar and investing in Yens and Euros instead. If the dollar continues to devalue, their holdings will become even more worthless and they will no longer finance U.S. debt. If they raise rates to avoid this, we go into recession. Manufacturing/export is no longer a viable back up. We have painted ourselves into a corner.

This has stinging consequences. Companies will amp up their outsourcing to exhibit profits as American consumption continues to dip.

[lectrobyte]

16. The problem with that theory is that other than jobs, I don't see much

of anything to export. And since we are depending on importing 60% of our energy, then it all becomes very very fragile.

[Chimichurri]

17. We are in the business of selling debt (securitization) and war.

The military industrial complex Eisenhower told us about is alive and kicking. When a product yields high profits, naturally you will see more of it.

[davekriss]

20. It's a mixed blessing

See my post above.

[MadHound]

15. All very good points, and I would like to add one more.

More and more foreign oil is being dealt in Euros, not dollars. And as less and less petro-dollars are backing out economy and our debt, the further the dollar will slide.

It is going to get ugly in the next few years, I hope that everybody is prepared.

[Chimichurri]

18. Wasn't Saddam about to sell his oil in Euros just before we invaded?

In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O’Neill, the major topic was how we would get rid of Saddam Hussein – though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O’Neill.
...
There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

In 2001, Venezuela’s ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA. http://www.lewrockwell.com/paul/paul303.html

Iran is currently looking to do the same.

The Tehran Times, a central media outlet of the world’s fourth-largest oil exporter, said that Iran has started substituting euros for dollars in oil sales. The minister of economy, Davoud Danesh-Ja’fari, announced that Iran wants to cut its dollar-based transactions to a minimum. http://www.digitaljournal.com/article/69374/Tehran_Times_Iran_Has_Started_Substituting_Euros_for_Dollars_in_Oil_Sales

[MadHound]

22. Yes, and they aren't the only ones.

Venezuala is dealing a lot of its oil in Euros, as is Russia, Iran and other countries. Not a good sign for us, since the petrodollar was one of the major things propping up our debt and our economy.

[Jeffersons Ghost]

23. why do you think DIEBOLD allowed a slim majority of Dems to win in DC?...

The dumb masses will need someone to blame when this house of cards collapses in a few months.

[aquart]

13. How can this possibly be a surprise?

The day the fed stopped publishing figures on the money supply...should have been a big clue.

[Chimichurri]

14. So true. I don't know why the financial markets didn't make a big

stink about discontinuing the M3.

[Chimichurri]

24. Bankers are beginning to raise concern

Banks and mortgage brokers have been passing along to unwary investors as much as $600 billion a year in risky mortgages they made through untested channels in the junk-bond market. That raises the threat of a financial crisis beyond the ability of the Federal Reserve to remedy, said Lewis Ranieri, the Wall Street guru who is widely credited with creating the multitrillion-dollar market for mortgage-backed securities in the 1980s and 1990s.

Bank regulators told the National Housing Forum here yesterday that they have found major banks punting to investors questionable mortgages they could not legally keep in their own loan portfolios. Mr. Ranieri said brokers on Wall Street have raised the risks by repackaging the mortgages in deceptive and opaque ways so that the small investors and foreigners who buy them are unable to understand the risks.

“No securities market can stand if we do not have true disclosure, and we do not have true disclosure” of the growing risks of exotic mortgages whose payments can double overnight and force buyers into default, said Mr. Ranieri. “This stuff doesn’t just get sold to money managers. It gets sold to the public and to foreign investors who don’t have a clue what to look for.”

Teeheee in the Washington Times no less http://www.washtimes.com/business/20061212-121704-1591r.htm

[mohinoaklawnillinois]

25. The slide in the dollar is really going to affect me later on this

week.

Mr. Wonderful and I are leaving Friday night for a visit with his family in Northern Ireland. I just checked the rates for changing dollars into British pounds and Euros with the bank we use when we're there. The rates today are $1.4504 for the Euro and $1.9203 for British pounds.

Add these rates to the fact that everything from gas (petrol), heating oil and food is about double the price we pay here in the US, this is going to be a very expensive Christmas for us.

I'm not complaining about the cost, we both realized that this was going to be a very expensive trip "home" months ago and put aside the money we'll need.

That being said though, the fact that the US dollar ain't worth shit anymore is very worrying and if anyone thinks "C+ Plus Augustus" is going to do anything about it, he ain't... His "listening tour" on Iraq is much more important to him than the lives and well-being of us peons.

[movie_girl99]

26. my in-laws are in from England and my m-i-l

exchanged her money in England last week at a rate of 1.95. So she basically doubled her money. She was pretty happy about it coming here and all.

[nicknameless]

28. Kick