Does lower confidence in the dollar mean that investors see the US as less stable?

[Kidlicious]

Originally posted by Dissident
you see, it disgusts me that these commies want the U.S. to fail. They want to see starving people on the streets, just so they can say. "See, this wouldn't happen under communism."

Some of these people are the same people who wish for more death and mayhem in the middle east just to prevent Bush from being re-elected.

Predicting and wishing are two different things rockhead.

[Kidlicious]

Originally posted by DAVOUT
Alan Greenspan two days ago explained quite convincingly that we are now in an era where unbalances are smoothly corrected.

It's his job to convince people to invest in the dollar. If he is saying these things it is apparent that he sees that some confidence in the dollar has been lost. Now how convincing is he really?

[Kidlicious]

Re: Re: Does lower confidence in the dollar mean that investors see the US as less stable?

Originally posted by Tingkai
The dollar is weak because the US gov't has to largely borrow money and most of the money it borrows is from other countries. So it has to sell the US dollar and that pushes the price of the US dollar down.

I think the US govt still borrows most of it's money from US citizens, but more and more money is borrowed from foreigners. The amount that we borrow from foreigners is directly related to the trade deficit. When the economy slows the amount of imports the US buys will shrink and so will foreign investment. The larger the trade deficit and amount of FDI the greater the risk to the dollar and the US economy. It's never been too bad in the US, but generally around the world when foreign investors lose confidence in your currency and your FDI is very high it is disasterous to your economy.

Originally posted by Tingkai
The money the US gov't borrows from US citizens means less money available for spending and investment. That weakens the econmy.

Hmmm... At a period where there is unemployment this isn't true. It depends on how that borrowed money is spent though too. Spending money on Iraq is going to take away from what can be spent in the US.

Originally posted by Tingkai
So the low dollar is very much the result of the Republicans spending money like there is no tomorrow.

True, but mostly because the trade deficit is increasing as a result of the increase in spending.

Originally posted by Tingkai
The Iraqi freedom fighers/Terrorists/banditos also push the dollar down. Everytime they attack, the US is forced to spend more money to fight them. That means the US has to borrow more money.

True, but it's also because they increase the risk of investment. Terrorism has the real potential to affect economies, and investors see that.

[Kidlicious]

Originally posted by Tingkai
Nah, I'm just being a good ol' American capitalist. The more attacks on the US, the more I can make money off of betting against the US economy. And the guys who are really making money off the US are the Saudis. The price of oil has shot up after a bunch of Saudi terrorist attacked the US and the Saudis are laughing at the US all the way to the bank.

Seems to me that the EU and Japan, whom don't produce oil, are hurt the most. But the price of oil is the biggest factor in the world economy. The Saudis are increasing the price only because the world economy is growing right now. When the world economy starts contracting they will lower the price again.

[DanS]

It's his job to convince people to invest in the dollar. If he is saying these things it is apparent that he sees that some confidence in the dollar has been lost. Now how convincing is he really?

No, that's John Snow's job. Greenspan is precluded by a gentlemen's agreement from making any comments directly touching the relative value of the currency. I thought somebody with an economics degree would know this.

[Kidlicious]

Originally posted by DanS
No, that's John Snow's job. Greenspan is precluded by a gentlemen's agreement from making any comments directly touching the relative value of the currency. I thought somebody with an economics degree would know this.

Hehe, technically you are correct, but the fact is, and this is an example, that people don't give a crap what Snow says, only what Greenspan says, so Greenspan is left with the responsibility.

[Case]

Originally posted by POTUS
A weak dollar just means that the US economy is weak, not our entire nation.

Actually, it just means that the supply of $US is slightly higher then the demand for them at the current price Don't read too much into currency valuations - the Australian economy was recently booming at the same time that the $A was reaching new lows against the $US.

[DAVOUT]

Originally posted by Kidicious


Hehe, technically you are correct, but the fact is, and this is an example, that people don't give a crap what Snow says, only what Greenspan says, so Greenspan is left with the responsibility.

You should read the text on the FED site. In fact Greenspan made a point that a protectionnist policy would be adverse to the smooth correction of unbalances.

[Kidlicious]

Originally posted by DAVOUT


You should read the text on the FED site. In fact Greenspan made a point that a protectionnist policy would be adverse to the smooth correction of unbalances.

So. My point was that he's going to be very carefull not to say anything that would make the impression that the dollar was unstable or that would reduce confidence in the dollar.

[chequita guevara]

Weak dollars are good for American jobs. Strong dollars are good for American tourists.

[Bosh]

Originally posted by chegitz guevara
Weak dollars are good for American jobs. Strong dollars are good for American tourists.

And most importantly, weak dollars are good for expats (your friendly countrymen who get to vote without paying taxes ).