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Old 10-07-2008, 01:52 PM
 
Location: NJ
854 posts, read 2,603,139 times
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quick question,

with all this crap that's going on in the economy, shouldn't the dollar be become much weaker?
I still have some Euros on my bank account in Europe and was hoping to get a good rate in the next few weeks, but it looks like I should've exchanged it before the wall street crash. Anybody care to explain what's going on?

Thanks in advance
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Old 10-07-2008, 02:04 PM
 
Location: Charlotte, NC (in my mind)
7,946 posts, read 15,686,925 times
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The European economy is experiencing as much if not more weakness than the US economy. The stronger dollar is an illusion because of the weaker euro.
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Old 10-07-2008, 02:12 PM
 
19,304 posts, read 16,834,088 times
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Quote:
Originally Posted by diddiyo View Post
quick question,

with all this crap that's going on in the economy, shouldn't the dollar be become much weaker?
I still have some Euros on my bank account in Europe and was hoping to get a good rate in the next few weeks, but it looks like I should've exchanged it before the wall street crash. Anybody care to explain what's going on?

Thanks in advance
Hello diddiyo,

During the depression the dollar increased on value. That is because as loans dry up aka de-leveraging their are fewer of them in circulation. The dollar is debt to a bank. With less debt their is less money in circulation.


http://www.billcara.com/archives/2007/04/a_sad_picture_of_americas_purc.html (broken link)

See from 1930 to 1940 the purchasing power went up?

Also notice in 1970 when Nixon closed the international gold window. Meaning now foreign country could exchange dollars for gold. That set loose the debt currency printing press and the purchasing power plummeted. This is the inflation tax you have been paying.

Last edited by gwynedd1; 10-07-2008 at 02:23 PM..
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Old 10-07-2008, 02:14 PM
 
Location: western East Roman Empire
7,955 posts, read 11,691,223 times
Reputation: 7812
Consider the following.

1) A significant number of European banks likewise bet on toxic US mortgage paper, in addition countries like Spain and the UK had their own speculative housing bubbles.

2) For months now, the ECB has been pumping about as much liquidity into the European system as the Fed has into the US banking system.

3) The eurozone and probably the UK economies were already in recession before the latest round of the financial crisis broke out with the bankruptcy of Lehman to which, by the way, many European counterparties had exposure.

4) The European Commission has nowhere near the same powers as the US Federal government, the Europeans have to agree on coordinated policy largely on a government-to-government basis (a confederation, not a federation) and this past weekend they failed to show signs of unity, deciding instead to let each country fend for itself. Now, that may change in the coming days and weeks, but it will take them months and years to agree on structural changes.

5) The US economy is more flexible and, at least potentially, it could rebound faster and stronger from the recession.

This, however, assumes that US policymakers get policy right in economic terms, but all indications are that they will continue focusing on robbing the treasury, so to speak, at least for two-four more years, the structural state of the economy be damned.

Then, once all the sheep are naked, they might refocus on restoring productivity and retooling the domestic economy's production base.

Don't hold your breathe.
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Old 10-07-2008, 04:27 PM
 
Location: America
6,993 posts, read 15,982,632 times
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Guys you are thinking to hard. Look into what a reserve currency is and then look what people are doing in the market. I will leave you to put two and two together.
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Old 10-07-2008, 04:36 PM
 
Location: western East Roman Empire
7,955 posts, read 11,691,223 times
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Quote:
Originally Posted by Wild Style View Post
Guys you are thinking too hard. Look into what a reserve currency is and then look what people are doing in the market. I will leave you to put two and two together.
It's not just that: the yen, for example, has gained against both the dollar and the euro, while the dollar and euro have hardly moved against each other in the past two days as the two continents' stock markets have tanked.

Right now the safe-haven reserve is sovereign securities, because a country cannot go bankrupt in its own currency, but not necessarily the dollar as such.
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Old 10-07-2008, 05:10 PM
 
Location: Ohio
22,587 posts, read 15,775,598 times
Reputation: 19111
I agree mostly with your reasoning, except I'm not so sure the US economy is that flexible.

Quote:
Originally Posted by bale002 View Post
It's not just that: the yen, for example, has gained against both the dollar and the euro, while the dollar and euro have hardly moved against each other in the past two days as the two continents' stock markets have tanked.
Likewise, the Ruble has remained fairly stable against the dollar, and so has the Yuan.

The dollar has gained a little against the Kroner, but the Euro has gained more.

I think it just proves the problems or more American/European centered than global.
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Old 10-07-2008, 07:18 PM
 
Location: America
6,993 posts, read 15,982,632 times
Reputation: 2077
Quote:
Originally Posted by bale002 View Post
It's not just that: the yen, for example, has gained against both the dollar and the euro, while the dollar and euro have hardly moved against each other in the past two days as the two continents' stock markets have tanked.

Right now the safe-haven reserve is sovereign securities, because a country cannot go bankrupt in its own currency, but not necessarily the dollar as such.
you dont get what i am saying.
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Old 10-07-2008, 08:36 PM
 
19,304 posts, read 16,834,088 times
Reputation: 7500
Quote:
Originally Posted by Wild Style View Post
Guys you are thinking to hard. Look into what a reserve currency is and then look what people are doing in the market. I will leave you to put two and two together.
Hello Wild Style,

Do you mean people are hoarding dollars as a safe heaven? Again its the system. Banks should not have the power to create currency and draw interest on it.
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