http://news.bbc.co.uk/2/hi/business/6562743.stm


Dang, what has happened since 2001 that has weakened the US dollar so much?

Quote :

"The last time the $2-level was breached was just before sterling dropped out of the Exchange Rate Mechanism in September 1992."

Man, so the last time the dollar was this weak compared to the pound was back in 1992. Who was president then? Looks to me like Republicans are bad for the economy.

4/17/2007 11:15:26 AM

Great logic there dipshit

Go back to chit chat

4/17/2007 11:59:45 AM

Good ad hominem attack

4/17/2007 12:01:11 PM

let's see....our administration runs our debt into the clouds (AKA billions) and since we are spending all this money other places the fed reserve prints more money to keep up....therefore making our dollar more and more worthless everyday.

4/17/2007 12:04:45 PM

rofl stfu

4/17/2007 12:07:40 PM

our government has been printing too much money for years

4/17/2007 12:18:37 PM

This is not a new problem. The US government does not have a balanced budget, so whenever they need money, they make it.

Therein lies the problem. It will never stop until they balance the budget so that they only spend what they really have to spend.

/thread

4/17/2007 12:23:54 PM

what is the relationshop between conversion rates and actual buying power??


if $2 US equals 1 UK pound does that mean your buying power is cut in 1/2. $.99 bacon chesseburger in US= $2 US in UK, $20000 car in US= 40000lb UK.

on the other hand what about countries with shitty exchange rates where 1000 yen = $1US ; i know i can't buy a $10 US pack of beer, for $.01 in the other country

4/17/2007 12:41:10 PM

Floating exchange rates float around, it does not mean there is anything wrong with the U.S. or British economy.

In this instance, the rise has predominantly been driven by unusually high British Interest Rates, already at 5.50% and expected to rise further as traders are expecting rates of at least 5.75%. If anything, this is a sign of British weekness as Britian's Central Bank attempts to contain rising inflation which has topped 3% and is still rising.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.PDlJOn.cAQ&refer=home

If we wanted to drive up the value of the dollar we could easily do so by matching or exceeding Britain's Interest Rates, but with inflation back below 2% doing so would probably cause a recession.

[Edited on April 17, 2007 at 1:07 PM. Reason : img]

4/17/2007 1:06:56 PM

Quote :

"if $2 US equals 1 UK pound does that mean your buying power is cut in 1/2. $.99 bacon chesseburger in US= $2 US "

Currency strength is only a relative idea. For example, currently, it would cost you $2USD to buy a cheeseburger in the UK. If we cut printing and raised interest rates, suddenly you might be able to buy a cheeseburger for $1USD, so everyone with US Dollars would go to the UK and buy a ton of cheeseburgers, which would increase British exports, which would drive up demand and further strengthen the Pound, which would make the price of a cheeseburger $1.50USD or wherever the "real" price of a cheeseburger sits.

Also:

Quote :

"our government The Fed has been printing too much money for years."

I won't argue, this is way out of my league.

[Edited on April 17, 2007 at 1:50 PM. Reason : speling]

4/17/2007 1:48:37 PM

Quote :

"Dang, what has happened since 2001 that has weakened the US dollar so much?"

If that's a serious question, you have a lot of reading to do before you're anywhere near equipped to discuss this topic.

4/17/2007 1:54:26 PM

Quote :

"This is not a new problem. The US government does not have a balanced budget, so whenever they need money, they make it. Therein lies the problem. It will never stop until they balance the budget so that they only spend what they really have to spend."

So either we will need to lower our spending (which won't happen) or raise taxes (which won't happen).

Any takers?

4/17/2007 2:23:15 PM

Since the exchange rate with the British Pound has nothing to do with the federal deficit, reducing it would have no effect.

The true course of action is to do nothing. Britain's high interest rates will slow down the growth in the money supply, reducing inflation, allowing interest rates to be lowered, driving foreign banks back to the dollar in persuit of good returns, reducing the pound to normal levels.

4/17/2007 2:47:16 PM

Boy there is a lot of idiocy in this thread.


The exchange rate means dick.

4/17/2007 7:33:06 PM

not surprised

4/17/2007 7:40:12 PM

^^it means dick to someone taking a trip there

4/17/2007 9:58:12 PM

Quote :

"Boy there is a lot of idiocy in this thread. The exchange rate means dick."

'

Jesus Fucking Christ. Usually I wouldn't respond to this, but this is just ignorant. It might not mean anything to you, but it clearly means something to a lot of folks.

4/18/2007 12:12:27 AM

To Americans thinking of vacationing in Britain. Are you one of them?

4/18/2007 12:23:16 AM

Quote :

"The exchange rate means dick"

asinine comment of the day

and if you'll notice, in general the pound has been valued above the dollar for as long as i can remember....this is not new. the euro is almost always ahead of us too. not a bad thing for exporters...they have the potential to make more money off the exchange rates. the bush administration seems to favor a weaker dollar for that reason. sucks for you guys who like guinness though

4/18/2007 1:29:20 AM

I don't like your phrasing. This is not a competition, we are comparing apples and oranges. It takes 7.73 Chinese Yuan to make a US Dollar. Does this mean the dollar is ahead of the yuan? No, it just means the two currencies are valued differently.

4/18/2007 8:23:39 AM

Open question:

Lets say the dollar goes down in value 10% (what was worth $1 is now worth 90 cents compared to a basket of world currencies)

Does that mean that investments (e.g. stocks) would have to go up 11% in dollar value to be worth the same amount as they were before, if looking at it from a world market perspective? (so from $100 per share multiplied by 10/9 from the currency ratio = $111.11 per share)

Regardless of whether we like it or not, most everything we buy today small-scale and mass-produced is from overseas. So those prices are going to go up if our exchange rate compared to those currencies goes down. Whether that actually means more domestic production or not is the million dollar question.

[Edited on April 18, 2007 at 9:55 AM. Reason : .]

4/18/2007 9:46:03 AM

^not necessarily. domestic companies who deal with international companies have caught onto hedging. the larger ones are heavily involved with forward contracts and futures so price flucutations don't hit them near as hard. it also helps keep volatility out of their earnings so their stock prices are more stable.

4/18/2007 11:08:59 AM

Quote :

"Does that mean that investments (e.g. stocks) would have to go up 11% in dollar value to be worth the same amount as they were before"

Only to some people and only if they wish to sell their holdings right now. But most will do the opposite, as U.S. investments now appear cheap foreigners will rush in to buy assuming the dollar will appreciate at some future date. Either way, as foreigners make up a reasonably small share of domestic holdings the impact should be minimal.

Quote :

"most everything we buy today small-scale and mass-produced is from overseas. So those prices are going to go up if our exchange rate compared to those currencies goes down."

Not necessarily. Prices are rarely set at the margin, so a large chuck of the loss will usually come out of profits. This is what the statistics show, either way; although the dollar has fallen by about 30% against every trading partner, import prices have risen less than 10%.

4/18/2007 11:14:47 AM

super ben and iceplaya

Hate to burst your bubbles guys but I'm an Econ major.

The exchange rate means absolutely nothing. At least not in the context you imply it does.


To measure the strength or weakness of an economy based upon something as unimportant as a freaking exchange rate shows that you basically know nothing about what you're talking about.


As always, I'll defer to LoneSnark on economic issues because he has a better understanding and better communication skills than I do.

However, I do want to point out that fatcatt316 used awful logic about Democrats v Republicans by pointing out the EXCHANGE RATE. It means precisely zero.

KeB is making some off the wall comment about printing too much money. Yeah, I'm going to have to refer you to a concept called inflation. That's not interchangeable with exchange rate.

Quote :

" This is not a new problem. The US government does not have a balanced budget, so whenever they need money, they make it. Therein lies the problem. It will never stop until they balance the budget so that they only spend what they really have to spend."

As far as this diatribe of bullshit goes, you do realize what percentage of consumption is comprised by gov't spending right? I mean sure, our gov't could stop spending money and plunge us into a recession causing mass layoffs, labor surpluses, markets to crash, etc

That would be wonderful.. .I mean hey, we'd have a balanced budget! For about 5 fucking minutes. Our taxes are collected based on spending and income. A massive recession would shrink tax revenues and we'd be right back where we started.

The National Debt means nothing as long as its kept at a reasonable percentage.

Keep the political crap out of economic theory, please.



You bitch when the dollar weakens but you're the same idiots who bitch about the trade deficit. You can't have it both ways you dolts.






P.S. The Fed is made up of a lot of very wealthy people. If they wanted to erase the national debt it would be very easy to just print more money. The only problem is they would reduce their own personal wealth in the process. Since when are rich people apt to make policy change that shrinks their wealth considerably? If you don't know what you're talking about don't just spew bullshit. You infect others with your uninformed, illogical opinions and in the process you drive intelligent people crazy.

[Edited on April 18, 2007 at 1:34 PM. Reason : a]

4/18/2007 1:23:07 PM

Quote :

"If that's a serious question, you have a lot of reading to do before you're anywhere near equipped to discuss this topic."

Recommend please. I've been out for 5 years and haven't used any of my Economics since. I need to catch up.

4/18/2007 1:52:28 PM

And for the love of god did i just see that you said when the gov't needs money they make it!?!?!? Perhaps you meant they "borrow" it??? Those words are not synonymous. And if the gov't didn't have so much money demand then interest rates would fall considerably. Maybe even cause the economy to overheat. Opinions are fine but please get the facts straight.

[Edited on April 18, 2007 at 1:54 PM. Reason : a]

4/18/2007 1:53:47 PM

Quote :

"Only to some people and only if they wish to sell their holdings right now. But most will do the opposite, as U.S. investments now appear cheap foreigners will rush in to buy assuming the dollar will appreciate at some future date. Either way, as foreigners make up a reasonably small share of domestic holdings the impact should be minimal. "

What if you take the assumption that long-term the value of the dollar will depreciate?

4/18/2007 2:29:19 PM

Then you will subtract your estimated rate of slide from your estimated rate of return. If this estimated final rate is below what you can get elsewhere then you will relocate your investment. If large numbers do this then the dollar will fall further in the present and drive up whatever currency you went into. This is what is called market speculation and is a fairly useful feature of a free market because it corrects imbalances early.

For example, let us assume interest rates are identical in both countries and the year is 2003 and the pound is worth $1.50 and you correctly estimate that in 2007 the pound will be worth $2.00 and as a result you (whatever your nationality) move investments out of the dollar and into the pound this will drive down the dollar today until you break even, thus making the pound worth more in 2003 than it originally was. As a result, you have changed history; because of your actions British exporters will do particularly poor and American exporters will do particularly well, balancing the trade deficit slightly by the time 2007 roles around such that it the exchange deflection will be smaller (less than $2.00).

4/18/2007 2:51:22 PM

Quote :

"Then you will subtract your estimated rate of slide from your estimated rate of return. If this estimated final rate is below what you can get elsewhere then you will relocate your investment. If large numbers do this then the dollar will fall further in the present and drive up whatever currency you went into. This is what is called market speculation and is a fairly useful feature of a free market because it corrects imbalances early. "

What you're describing is what the Yen Carry Trade pretty much is, right?

4/18/2007 4:20:46 PM

Quote :

"Hate to burst your bubbles guys but I'm an Econ major."

wow i'd better back off. if you reread my comments, i never said that the exchange rates measure the strength or weakness of an economy (so i do agree with you there). but to say that exchange rates mean dick is pretty dumb. many people on wall street and around the world make fortunes off of exchange rate speculation. and with the increasing globalization of economies, you won't see many listed companies that do not have some effect of fluctuating exchange rates in their earnings. their earnings set their stock prices and yada yada yada you're an econ major, you know where it goes from there. so even though you might think they mean dick, there's plenty of evidence to the contrary even though it might not jive with economic theory.

4/18/2007 5:30:17 PM

It matters to specific peoples. Examples include Boeing making record profits while Walmart gets pinched. But on a macro level this is just shifting fortunes between individuals (such as from Walmart to Boeing), a change in the exchange rate has no net effect upon economic well-being after you factor in both sides of the equation (net gains - net losses ~= zero).

[Edited on April 19, 2007 at 12:17 AM. Reason : eq]

4/19/2007 12:17:20 AM

^^ okay in that context they mean something.

But that's not at all what the thread creator or 90% of the posts above were using.


^ That is a great explanation.


Speculation on exchange rates is essentially gambling. I wouldn't make a claim that the American economy hinges upon the Phoenix Suns winning the NBA championship because me and 30 other people bet $10,000 apiece on them to win.

4/19/2007 9:39:50 AM

\./ <--- those guys

4/19/2007 10:05:18 AM

Quote :

"average daily turnover in traditional foreign exchange markets was estimated at $1,880 billion."

Clearly, the investing and econ perspectives on the currency exchange are vastly different. Maybe I should have taken some more econ to be a little more rounded. In any case, sorry for my drunken outburst. We were talking about different things, it seems.

4/19/2007 10:25:07 AM

i got a great laugh reading this

4/19/2007 11:21:05 AM

Doesn't NCSU require as LEAST one Econ course?


This is embarassing.

4/19/2007 2:17:20 PM