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Thread summary:

Seeking opinions behind slide of United States dollar, weak currency, currency rate of US dollar slipping, currency inflation, economic recession

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Old 07-15-2008, 06:59 AM
 
Location: St. Joseph Area
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Hi!

New to the forum, with a burning question that's been on my mind for months. Why is the dollar losing so much value? And what determines the value of one country's currency vs anothers, like the euro?

If anyone can shed some light on this, that would be fantastic!

Mackinac
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Old 07-15-2008, 07:14 AM
 
485 posts, read 1,805,467 times
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Maybe our retreat from industry?

The growing economies of the world are the ones who actually make things, or so it seems to me.

The virtual world is fun and useful-I spend a lot of time there-but I can't wear virtual shoes or drive a virtual car.

Too much of our wealth has gone abroad, and not been replaced by new production.

Also, too much money has floated to the top-the rich have gotten very rich, the poor much poorer, and when that happens, the economy stalls.

The world of today too much resembles a century ago.

The middle class is dying.

And that makes our currency weaker-our economy is insubstantial.

Too much consumption, too little production.
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Old 07-15-2008, 08:22 AM
 
Location: western East Roman Empire
7,445 posts, read 11,234,793 times
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Quote:
Originally Posted by krakenten View Post
Maybe our retreat from industry?

Too much consumption, too little production.
This pretty much sums it up. In short, ultimately, currency rates are determined by relative productivity.

US productivity has been on the decline in comparison to most of the rest of the world.

The rest is manipulation of wealth (see above comments by krakenten on wealth transfer, the wealthy and the poor) and monetary variables.
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Old 07-15-2008, 10:22 AM
 
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You agree with me?

Self-pitying, feckless me?

Things are bad!
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Old 07-15-2008, 01:53 PM
 
Location: Ohio
21,311 posts, read 15,089,573 times
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Quote:
Originally Posted by mackinac81 View Post
Hi!

New to the forum, with a burning question that's been on my mind for months. Why is the dollar losing so much value? And what determines the value of one country's currency vs anothers, like the euro?

If anyone can shed some light on this, that would be fantastic!

Mackinac
The value of a given currency in relation to another is based on demand, and to a lesser extent, confidence in the government, the economy and the currency itself.

When I say confidence in the government, I don't mean whether or not you like the government, I mean are there smooth transitions of power, or is change effected through revolution or coup, or does the ideology of the government swing wildly?

Confidence in the economy is not whether the economy is doing "good" or "bad" it's based on the rule of law. Are contracts enforced? Are there property rights? Is there an unbiased judiciary (meaning is it separate and apart from the government), are their rulings consistent? Are they published? Do outsiders have access to court opinions and to the courts?

Is the currency consistent in its shape, size, color and denominations, or does it constantly change? And is the currency backed by anything?

The latter are subjective and hard (but not impossible) to quantify, but demand can be quantified.

Let's put all these things together and do some "myth-busting."

Does "inflation" affect the value of a currency? That depends.

What kind of "inflation" are you talking about?

Are you talking about Wage Inflation? Rising wages result in rising prices. Why? Greed. Adam Smith first observed this phenomenon as Britain began to industrialize in the late 1700s, and wrote about it in his book The Wealth of Nations. Every time the workers got pay raises, he noted that the shops and pubs across from the factories raised their prices. He attributed it to "the invisible hand" but it's really just greed. People know you can afford to pay more, so they charge you more.

Even though rising wages causes prices to rise, it has no affect on the value of a currency against other currencies. The last time the US experienced Wage Inflation was in the early 1970s. Nixon implemented a Wage & Price Freeze, which appeared to be effective (although I'm not a fan of such controls). Wage Inflation isn't particularly harmful, but it does prevent the Average Joe/Jane from every getting ahead in the game.

Are you talking about Cost Inflation? When there are shortages of commodities, prices rise but wages don't. That can be devastating. The declining value of a currency also causes Cost Inflation. When you have commodity shortages AND a declining currency, it is very destructive, and that's what's happening now. Note that Cost Inflation doesn't cause a currency to decline in value, rather it's the declining currency that causes Cost Inflation.

How about Fiscal/Monetary Inflation? When credit is too cheap or plentiful, it can inflate prices. That is caused by low interest rates. If the central bank (for the US that's the Federal Reserve) does not raise interest rates, then the government must raise taxes and/or cut government spending, and/or reduce the money supply. However, the rate of inflation for Fiscal/Monetary Inflation is only tenths of a percent. It isn't particularly harmful. Yes, over the long term prices will rise slightly, but then so will wages, even though there is a short lag time. However, where you have goods, services or commodities tied to interest rates, it can be very harmful. Look at housing. Housing is definitely tied to interest rates, and when you have low interest rates, it will cause the value of home to rise and become over-inflated, which is what you've been seeing over the last 15 years. Still, it has no effect on the value of currency.

How about Currency Inflation? It can affect the value of a currency, but that only happens when there is Hyper-Currency Inflation (Germany post-WW I is one of the best examples). Currency inflation will cause prices to rise, but wages also rise with prices. The US is not currently experiencing Hyper-Currency Inflation, so that can be ruled out as a cause for the falling value of the US$.

But what about normal Currency Inflation? Is it the cause of the declining US Dollar? No.

The rate of Currency Inflation for the Swiss Franc averaged about 0.50% over the last 25 to 30 years, yet the US Dollar has always been stronger than the Swiss Franc and even now, $1 = 1.01 Swiss Francs.

The rate of Currency Inflation for the British Pound Sterling since 1974 has been 6.3%, more than twice that of the rate of Currency Inflation in the US, yet over the same period, the British Pound Sterling has always been stronger than the US Dollar. Even now the rate is $1 = 0.49 Pound Sterling.

Remember I said one of the considerations is what backs a currency?

For the Brits and the Swiss, they have gold backing their currencies (a percentage of gold not a 1:1 backing), while the US doesn't, but we still have an incongruity as the US$ is worth more than the Swiss Franc, as well as being worth more than other currencies that are backed by a percentage of gold (like the Russian Ruble).

Obviously, there's another factor that has a great impact on the value of a currency, and that's demand.

For decades, almost everything on Planet Earth was bought and sold in US$: oil, natural gas, coal, timber, gold, silver, precious metals, metal ores, minerals, wheat, barely, sorghum, corn, rice, cotton, linen, flaxen, wool, sugar cane, coffee, tea, chocolate and many other things.

The Soviets/Russians were forced to sell their oil and natural gas in US$, Cuba had to sell its sugar cane in US$, New Zealand bought cotton from Egypt and paid in US$, India and China sold their tea in US$ and so on.

That created an artificial demand for US$ and so for decades, the value of the US$ was grossly over-inflated.

With the introduction of the Euro, that changed. EU members trading amongst themselves traded in Euros, not US$, which reduced demand for the US$, and it started to slide.

The former East Bloc countries (Latvia, Lithuania, Estonia, Poland, Cheha, Slovakia, Slovenia, Croatia, Serbia, Macedonia, Bulgaria, Hungaria, and Romania) all operated on a quasi-US Dollar economy. As they moved to join the EU, the switched to a Euro economy or a quasi-Euro economy (in the case of Romania and Bulgaria as they were waiting for entry).

During the Clinton Administration, the US$ slid 39 points against the Euro, from $1 = 1.24 Euros to $1 = 0.85 Euros on Election Day 2000.

Since Bush has been president, the US$ has slid another 23 points to $1 = 0.62 Euros.

And all of it because of reduced demand for the US$

More than 60 countries, and possibly more than 100 countries (we don't know since the US ceased publication of the M3 in March 2006), have dumped 100% of the US$ currency reserves and now trade almost exclusively in Euros, Rubles, or basket currencies.

Russia has dumped 100% of its US$ reserves and replaced them with Euros and gold. Russia now buys and sells all commodities on the world market in Euros and Rubles. Since the opening of the Moscow Exchange in July 2006, the Ruble has gone from $1 = 37 Rubles to an astonishing $1 = 22.6 Rubles.
Japan now buys oil from Norway in Kroners and Iran in Yen. China will soon be paying in Yuan instead of US$ for oil, and Iran's oil bourse opens soon and its oil will be sold in Euros, Rials and Rubles, not US$.

Indonesia left OPEC in May and will initiate its oil bourse soon, selling oil in Euros, Rubles and basket currencies.

Non-OPEC members Singapore and Malaysia are preparing oil bourses in Euros, Rubles and basket currencies.

OPEC Associate Members Angola, Algeria, Nigeria and Venezuela are seeking permission to switch from US$ to basket currencies.

Those 7 countries will cause the US$ to drop about 2 points each, about 12-14 points total, making the US$ worth $1 = 0.48 Euros over the next 24 months.

There is sufficient demand for the US$ from US exports, Canada and Mexico's sale of oil and natural gas in US$, and many Central and South American countries who trade in US$ or who use the US$ as an official currency (like Ecuador) to keep the US$ from sliding below $1 = 0.36 Euros.

However, if the US does not invade Iran and seize the oil fields in Kuzehstan, then the US will not be able to gain control of the Central Asian states (Kyrgyzstan, Kazakhstan, Turkmenistan, Tajikistan and Uzbekistan), and if Russia, China or the EU do, then the oil, natural gas and minerals there will be sold in Euros, Rubles and basket currencies, and the US$ will eventually decline over the next 12-15 years to $1 = 0.26 Euros.

So that's the story on the US$.

There is nothing the Federal Reserve can do to stop it, and for the rest of your life, barring a nuclear war or a cataclysmic event, you'll never see $1 = 1 Euro.

Even if the US invades Iran and ultimately gains control of Central Asia, the best case scenario is that the US$ would eventually stabilize at around $1 = 0.60 Euros.

Creating a North American Union and switching currencies to the Amero would have no effect. It'd be 1 Amero = 0.60 Euros (assuming the US controls Central Asia, if not then 1 Amero = 0.26 Euros). The reason is that the US$ is currently being buoyed by US exports and the sale of oil and natural gas from Canada and Mexico in US$.

As the US$ falls, commodity prices for Americans will rise, but not for the rest of the world. At $1 = 0.62 Euros, a bushel of rice might be 5 Euros, but it's $8 for Americans, and at $1 = 0.46 Euros, a bushel of rice might still be 5 Euros but it'll be $10 for Americans.

You might as well accept the new reality and plan accordingly as prices for commodities continually rise over the course of the next several decades.
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Old 07-15-2008, 01:58 PM
 
Location: Backwoods of Maine
7,256 posts, read 8,580,784 times
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Post Cause of the "Weak" Dollar

Since the abandonment of the gold standard (1971 Nixon 'closed the gold window'), all countries have had a fiat, or mandated, unbacked paper money system. No longer are any currencies in the world backed by gold or silver. This allows the central bank of each country to print as much currency as it wishes. In the US, our central bank is the Federal Reserve. It no longer has to print dollars; it just produces them as digits which it "deposits" in the accounts of US agencies, other banks, etc.

Please bear with me here, this is simple but gets a little drawn out. When the US wants to fund a war, for instance, it prints up US Treasury bonds and sells them to the Federal Reserve. The "Fed" then "buys" those bonds by issuing Uncle Sam a check for them. Where does the Fed get the money? Out of thin air. That's what all central banks do. That's why they are such a crime and taxpayer rip-off.

The more money the Fed prints or makes up digitally, the greater the supply of our currency floating around. The more of it there is, the less each unit is worth, or will buy. Many folks think "inflation" means higher prices. Not so; that is just the effect. The cause of inflation is unbridled money creation.

Since all currencies in the world operate much the same way, they all "float" against each other on a market called the Forex (google this). If one country prints twice as much currency as another, its currency will begin to "sink" vis-a-vis other world currencies. At this point in time, all world currencies are 'sinking' - some just faster than others. The US dollar is sinking faster than the Euro or Cando because the US is spending its unbacked paper faster than the others, and creating more of it. The world champion right now is Zimbabwe - google what is happening there!

The Federal Reserve has all it can handle right now with banks going belly-up. What it's doing is swapping good US Treasuries for 'toxic debt' from the banks - mortgages and loans gone bad and endangering the balance sheets of these banks. That's why this 'credit crisis' or 'bank crisis' is so bad for the US dollar - the Fed prints money for its "discount window" for the banks to borrow from. Being a bank, the Fed is going to try to save the banks, taxpayers be damned. They will destroy the dollar trying to save the banks. Down the road this leads to more inflation. Other countries who accept our dollar in exchange for goods are starting to feel suspicious about the dollar, and with good reason. They know what the Fed is doing!

On a related note, this is one very important (and seldom mentioned) reason why oil and gas prices are rising so precipitously. OPEC does not want our depreciating dollars, which they already have TONS of. So they are charging us more of them for their oil. Congress and the Fed don't want the public to know the real reason, so they fault the "speculators" or the "greedy oil companies". Neither of those last two is doing anything wrong or illegal. It is the Fed that is doing the damage.
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Old 07-15-2008, 02:07 PM
 
Location: Tampa Bay
1,020 posts, read 3,112,510 times
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Its flat out sabotage. From within our country and abroad. The USA is meant to crumble under propaganda and espionage. Its demise and liquidity is meant to be the fuel for other rising powers at work. The first president of the United States George Washington warned about secret espionage groups from Europe already at work since the nation was founded. JFK tried to get the peoples attention to these secret networks. Its been a long slow battle. Globalization and the loss of the US backbone people built was the first sign of things to come. Its all corporate sponsored. No one can honestly tell me that it is a good idea that my clothes come from nine thousand miles away. I'm sure it has selling points, but if governments are that intertwined then everybody is screwed.

The council of Foreign Relations and many other groups have got the USA in to many different spending wars, and military wars. Nation rebuilding, and a lot of other things. The USA was fine with its industry after WW2 if we would have stepped back and checked the government, and rooted out globalists and reformists that tied our economy in to every other economy enabling our decline. What ever made you guys think mom and pops on the farm were meant to be sold as livestock to the world? They did just fine working with their hands and neighbors to build up strength, not being drawn in to this divisive trap. These plans have been in motion for a long time now. All the while others are reaping excessive profits at the US liquidation.

Knowing this, or at least suspecting what has been happening over a long period of time. The United States people should vote to set Alaska free, as an independent nation, not tied to any other nation or currency but its own people. Somehow I don't think the added military installations in Alaska are meant to combat Russia and China. Especially when the current president comes out and says his cabinet does not trust the state. To me that was an omission. I'm appalled by Bush and this entire congress. So many people have lost hope for our country. Then they get to hear people on the news mock them and laugh in their face telling them it will all be okay and nothing is wrong.

It was never in congress authority to sell out the United States or tie it in globally. Only through shoddy back door deals have they accomplished it. If it were put to vote at any time it would have been shot down before it even got support. Thank you US media for blinding people and keeping them distracted.

Last edited by the_pines; 07-15-2008 at 02:31 PM..
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Old 07-15-2008, 02:20 PM
 
Location: St. Joseph Area
6,235 posts, read 8,640,334 times
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Wow...a lot to read from everyone. I'll have to sort it out in more detail when I have time. But from the gist of it, it seems like the government is destroying our economic clout in the world due to various policies. Am I correct in this assumption?
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Old 07-15-2008, 02:27 PM
 
Location: Backwoods of Maine
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Correct. You got the gist of it just fine!
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Old 07-15-2008, 02:49 PM
 
Location: Detroit, MI
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Quote:
"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." -Thomas Jefferson
The founding fathers must be rolling in their graves.

A great video to help people understand why we're losing our country which was made years ago.

The Money Masters-How International Bankers Gained Control Of America

The Parallels to the fall of Rome are startling...

Quote:
...with no vote to sell, their motto is "couldn't care less," Time was when their plebiscite elected generals, heads of state, commanders of legions: but now they've pulled in their horns, there's only two things than concern them: BREAD and CIRCUSES.-Juvenal
The people became sloven, mindless and decadent and engrossed in mindless entertainment while consenting to being "governed" by by an international cabal of bankers and schemers who want total world domination and a one world currency. Sound familiar?

It's a game almost as old as Eve...
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