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Currency moves if anything are random around the PPPs. Most of the time they are far away from a PPP equilibrium and show wild swings in both ways. To assign cause and effect to these moves is pure fantasy IMO.
I don't see currency changes as random, rather they are reactions to a large batch of data and actions as well as perceptions/reactions of people with large amounts of money.
This unprecedented rise in the dollar is crushing large US multinationals and giving a huge boost to European and emerging market exporters. This quarter's earnings are going to be an absolute disaster for the US.
It's not just the Euro that's weak, it's across the board dollar strength. The last time the dollar (and oil) moved like this we had the great recession of '09. Nearly all economic data is pointing to a US contraction and at the same time the fed is talking raising rates. Things are tightening up as the market starts to realize this which further pushes the dollar higher and higher. The best stock to hold right now is CASH.
Right. It's exactly what global investors want. Particularly those hold assets denominated in US$. They love it for the same reasons they've always loved it. It maintains our high trade deficit, which gives them an easy and profitable market for foreign made goods and services, and it makes it cheaper for them to invest in foreign markets.
The big message should be socialism, big government, lots of regulations and government control destroys the private sector and puts these countries on the road to poverty. Many far eastern countries, with a lot less govt. are doing much better. If we continue to follow the examples of Europe, the same will happen in the USA.
This unprecedented rise in the dollar is crushing large US multinationals.
?? Think you have that backwards. It's only hurting US companies who are net exporters, along with the US public of course. Multinationals are quite happy about this.
?? Think you have that backwards. It's only hurting US companies who are net exporters, along with the US public of course. Multinationals are quite happy about this.
What are you talking about?? You have it backwards. The US public benefits from this dollar strength while most multinationals get squeezed. This is a medium-term benefit for the average person depending how far the dollar goes. Eventually, it could hurt everyone if it goes too far or lasts for too long due to job losses from reduced competitiveness of the US.
Most of the companies in the S&P500 are multinationals. About half of S&P revenues come from overseas. Unless you're an energy intensive company, you are definitely taking it on the chin.
I don't see currency changes as random, rather they are reactions to a large batch of data and actions as well as perceptions/reactions of people with large amounts of money.
The why is it that for some years Germany is 25% more expensive than the US and other years it's the opposite? Why are there such wild and erratic swings in between? BTW February was the first month in 10 years that Germany was cheaper than the US again (according to the OECD PPPs)!!! Now I'm gonna show my family But I had to wait a long time and very time we visited I was shocked by prices... gulp. Now however we can show off.
The US public benefits from this dollar strength while most multinationals get squeezed.
Multinationals benefit if they sell goods and services to the US market that are produced overseas.
The US public is screwed because our currency is too expense to make investment here worthwhile. Basically a high US$ gives us exactly what we've had for the last 35 years that put us in this position to begin with. Low production and higher debt.
Multinationals benefit if they sell goods and services to the US market that are produced overseas.
The US public is screwed because our currency is too expense to make investment here worthwhile. Basically a high US$ gives us exactly what we've had for the last 35 years that put us in this position to begin with. Low production and higher debt.
And yet, record amounts of investment dollars continue to flow into US equities and Treasuries.
There is theory, and then there is reality.
You didn't actually read the article I posted did you?
"Traditionally, fast-growing economies have rising currencies due to capital inflows."
"If investors expect the dollar to be in favor then because of higher rates, it makes sense to buy dollars today to take advantage of the expected appreciation."
"Third, the shale energy revolution is having a major impact in reducing the U.S. trade deficit."
"In other words, while the long-term trend is startling, even the increase in domestic production between 2013 and 2015 could save 2.5 million barrels per day which, at $90 a barrel, would cut roughly $80 billion from a $480 billion trade deficit—this is a clear positive for the U.S. dollar."
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But I had to wait a long time and very time we visited I was shocked by prices... gulp. Now however we can show off. 
