The Demise Of The Dollar And What To Do About It

[Cannon Shell]

Heavily invested in euro markets. Doing very well.

[GenuineRisk]

Don't forget to look at how you're planning, too. Since my stuff is almost entirely long-term retirement money, I'm a fan of dollar-cost averaging (putting in a fixed amount every month). When the market is doing poorly, at least I'm getting a better price on what I'm buying. I dread the idea of another huge depression, but since I'm still 30 years, minimum, away from retirement, the stock market taking a hit doesn't have me in a panic. Closer to retirement, yeah; I'd be worried.

And yeah, diversifying.

Apparently, the popularity of the President also affects the dollar's strength- check it out:

http://www.slate.com/id/2165579/nav/tap2/

A loose correlation at best, but entertaining reading, anyway.

Thanks for bringing this up, Randall. Short term things don't look good. Long term? Well, the Great Depression led to all kinds of changes in policy that created a strong middle class. Took a long time, but most worthwhile things do. Sometimes we need to get slapped pretty hard to start focusing on really changing things. Though I hope it won't come to that.

[randallscott35]

GRisk,
That's an interesting chart....Bascially from the end of Clinton on the dollar has weakened. A rally here and there, but the decline is staright down....Notice the high popularity of Bush was b/c of September 11th. It makes sense that a terroist event would lead to an increase in strength in the dollar. It is a "safe haven." But less so than ever before. Last month when tensions between Iran and Britain were high the dollar did nothing at all. Oil went up, but the dollar just sat there....

Even more interesting is that some countries are starting to buy oil off the open markets in Euros. That's unheard of. If the world moves away from the U.S. as its currency of choice for things such as oil pricing, the spillover effect is fewer dollars held in foreign banks....The point to this whole thing is that the rest of the world is tired of our collective shopping spree in this country and can put an end to it in a heartbeat if they want to. If China sold 10% of their U.S. reserves, the dollar would drop another 15%....Keep taming that tiger Fed Reserve. B/c the rest of the world has us by the balls when it comes holding our debt.

[Downthestretch55]

Originally Posted by randallscott35

GRisk,
That's an interesting chart....Bascially from the end of Clinton on the dollar has weakened. A rally here and there, but the decline is staright down....Notice the high popularity of Bush was b/c of September 11th. It makes sense that a terroist event would lead to an increase in strength in the dollar. It is a "safe haven." But less so than ever before. Last month when tensions between Iran and Britain were high the dollar did nothing at all. Oil went up, but the dollar just sat there....

Even more interesting is that some countries are starting to buy oil off the open markets in Euros. That's unheard of. If the world moves away from the U.S. as its currency of choice for things such as oil pricing, the spillover effect is fewer dollars held in foreign banks....The point to this whole thing is that the rest of the world is tired of our collective shopping spree in this country and can put an end to it in a heartbeat if they want to. If China sold 10% of their U.S. reserves, the dollar would drop another 15%....Keep taming that tiger Fed Reserve. B/c the rest of the world has us by the balls when it comes holding our debt.

Randall,
Interesting points you make.
Do you have any idea what each penny increase per gallon in gasoline prices
really costs? Or what the cost of a 2 trillion deficit war policy costs? Or what the collapse of the housing market costs?
Some do. Some don't.
After seeing Queen Liz and the Smirker at last night's "white tie affair"...shucks...."Let them eat cake."

We're screwed! So are our kids, and theirs, and theirs.
Good luck!

[randallscott35]

From Minyanville Today: (an excerpt)

"1. Give the Consumer Credit

You have to give the consumer some credit. No, seriously, you have to. Because that's apparently how they're paying their bills.

Consumer borrowing increased in March by the most in four months according to the Federal Reserve's Consumer Credit figures.
Consumer credit (non-mortgage loans) to individuals increased $13.5 billion, or 6.7% at an annual rate, to $2.425 trillion, the Fed said.
Economists were expecting a more modest increase of $4 billion.
Use of revolving credit, primarily credit cards, rose at a 9.2% pace in March.
That was up from a 2.9% growth rate in February and was the biggest increase since November.
Perversely, this is good news for the economy because it shows consumers are willing to do whatever it takes to keep on paying their bills and buying stuff, even if it means turning to higher interest credit cards.
According to the Associated Press, consumer borrowing is a sign of "resilience."
"Consumers boosted their borrowing in March at the fastest pace in four months, showing resilience in the face of rising energy prices and a painful housing slump," the Associated Press reported.
While using the term "resilience" to describe a jump in consumer borrowing largely made up of credit card debt itself violates most tenets of logic, that was only the beginning.
"Consumer spending is indispensable to a healthy economy," the AP rightly said.
Then the article followed the "consumer showing resilience by borrowing at the fastest pace in four months" observation with this: "The economy grew at an anemic 1.3 percent pace in the January-to-March quarter, the weakest in four years."
So consumers "showed resilience" by borrowing at the fastest pace in four months... while the economy grew at its slowest pace in four years?
Huh?
We don't think this is resilience at all. It's desperation. "
http://www.minyanville.com/articles/print.php?a=12773

[ArlJim78]

I agree about the point regarding savings, or lack thereof in America. We save the lowest in the world and it will continue to hurt us until that changes.

[SentToStud]

Sometimes the dollar weakens and it has nothing to do with domestic factors. It happened in the mid and late 90's mostly due to the very high growth of the Japan and European economies, especially Germany. It's a different part of the world these days, but the concept is the same.

And when the dollar is strong, it's not correct to generalize that's 100% positive. When the dollar is hot, it makes it more difficult for US corps to compete in foreign markets. With increased globalization of world economies, this tempers the effect of a weak dollar. A weaker, or weakening dollar also make US investment more attractive to foreign markets.

It's hard to generalize. But I do agree that it makes a lot of sense to be increasingly invested in certain foreign markets and in securities of US firms with larger exposures to foreign markets.

I have no idea why people save so little in the US. With all the bills people have to pay it's insane they do not pay themselves first (savings). I don't get it at all.

[GenuineRisk]

Originally Posted by SentToStud

I have no idea why people save so little in the US. With all the bills people have to pay it's insane they do not pay themselves first (savings). I don't get it at all.

We live in a society where we are bombarded with commercial messages from waking to sleeping telling us we'll be happy if we buy this, buy that, have this or that. I think we don't save because there's no instant gratification in saving (believe me, I continue to have this argument with my husband over him funding his IRA. Which reminds me- need to go nag him again about it.). It's good for the economy if people buy stuff here, and so we're pressured to do so. If we save, the economy suffers. If the individual spend, he or she suffers. Maybe if wages weren't so stagnant, thanks to the excessive corporate welfare of the past years people might actually have disposable income left after putting money into savings.

I also think the worst day's work Reagan ever did was deregulating the credit card industry. As soon as the credit industry no longer had a maximum amount of interest it was permitted to charge people, we got barraged with credit card offers galore with late payment rates comparable to that of loan sharks. I have a friend who got slapped with a 30 percent interest rate on her oustanding balance because she was late witih ONE payment. And of course, the Republican-led "Bankruptcy reform" of a few years' ago made it much harder for people to declare bankruptcy. Over half of people who declare bankruptcy do so because of a medical situation that, because of our f*cked up health system, drains them of any and all assets.

So, we have a society told every day we have to spend spend spend (hell, it's what Giuliani told New Yorkers to do the day after 9/11. No kidding. "Go shopping" was his response to what we should do) and a credit industry that makes it just about impossible for people with limited financial resources to ever get themselves out of debt.

[randallscott35]

Originally Posted by SentToStud

Sometimes the dollar weakens and it has nothing to do with domestic factors. It happened in the mid and late 90's mostly due to the very high growth of the Japan and European economies, especially Germany. It's a different part of the world these days, but the concept is the same.

And when the dollar is strong, it's not correct to generalize that's 100% positive. When the dollar is hot, it makes it more difficult for US corps to compete in foreign markets. With increased globalization of world economies, this tempers the effect of a weak dollar. A weaker, or weakening dollar also make US investment more attractive to foreign markets.

It's hard to generalize. But I do agree that it makes a lot of sense to be increasingly invested in certain foreign markets and in securities of US firms with larger exposures to foreign markets.

I have no idea why people save so little in the US. With all the bills people have to pay it's insane they do not pay themselves first (savings). I don't get it at all.

While I agree we shouldn't generalize we should be aware that the asset inflation in the stock market right now is a direct result of money being too cheap.....And in the past, our economy was simply stronger than the others and we could get away with borrowing at will and still have a strong dollar....This is different. If the Euro ever gets to 1.40 people will take notice and it could have a more rapid decline....Also, I don't think we get there anytime soon strictly because what will happen is that the FED will raise, not lower, interest rates to defend the dollar and weaken gold....If it works, it won't work for long. Excesses take a long time to wring out and I firmly believe we are headed for a very ugly recession within 16 months.