I'm sick of the dollar losing value!

[Colonâ„¢]

And is it dogmatic too believe that sellings dollars creates a downward pressure on its value? Sure, Americans may trade with foreign partners in dollars, but presumable the trading partner still pays its employees in local currency, pays its taxes in local currency, pays its suppliers in local currency, so somewhere along the way dollars will be sold.

[Chemical Ollie]

Let teh good times roll

[Master Zen]

Originally posted by Colonâ„¢
There indeed isn't a point in using Bretton Wood era data but that doesn't mean that the time period is long enough to draw firm conclusion about the relationship (the nature of which I am not commenting on BTW).
Also, your assumption is that if the relationship isn't immediate and 1-to-1 it doesn't exist. If you'd draw a graph comparing the fed's funds rate with GDP growth there wouldn't be an apparent relationship either, unless you consider lag and a variable impact.

I'm not saying there has to be a 1-to-1 relationship but most pundits take it as a fact, which isn't the case as you can plainly see. There are periods in the range when the relationship is obvious but there are others (most) in which it seems to be the complete opposite. My conclusion is that there are many more factors explaining the relationship than just those two indicators.

And is it dogmatic too believe that sellings dollars creates a downward pressure on its value? Sure, Americans may trade with foreign partners in dollars, but presumable the trading partner still pays its employees in local currency, pays its taxes in local currency, pays its suppliers in local currency, so somewhere along the way dollars will be sold.

I'll let people from the Fed explain it better:

http://economistsview.typepad.com/economistsview/2007/07/frbny-why-a-dol.html

[Colonâ„¢]

I haven't read the article throughly yet, but I think it's necessary to differentiate between short-term factors and long-term factors. While exporters may choose to take a hit in profits margins when the USD falls, they may not choose to do so indefinitely (alternatively, overseas firms may be deterred from trading with US partners, achieving the same end-result). It'd be interesting to see the exercise in table 1 repeated after a 5 years period, or 10 years.

[DAVOUT]

Originally posted by Master Zen

I'll let people from the Fed explain it better:

http://economistsview.typepad.com/economistsview/2007/07/frbny-why-a-dol.html

Interesting.

Either import demand will have to become more responsive to exchange rate movements or adjustment will have to take place through other developments that would affect demand. These other developments might include increases in U.S. public or private saving (with related declines in U.S. consumption of all goods)

I am happy to see that this is not different from my above post n° 20

[Lancer]

Just break all this mumbo jumbo down for me. If I knew what it meant would I feel better?

[Victor Galis]

Nah, the USD is going lower

[notyoueither]

Originally posted by Lancer
Just break all this mumbo jumbo down for me. If I knew what it meant would I feel better?

Buy pesos.

Canbucks would be better.

Euros would be best.

[Lancer]

It could be though that the flight from dollars is a manufactured event by the ultra rich to make more money. Like the asian economic crisis. Or, that could be completely wrong!

[Master Zen]

Originally posted by Lancer
Just break all this mumbo jumbo down for me. If I knew what it meant would I feel better?

The reason we economists talk in jibberish is because if you knew what it meant, you would NOT feel better.

[Master Zen]

Originally posted by Lancer
It could be though that the flight from dollars is a manufactured event by the ultra rich to make more money. Like the asian economic crisis. Or, that could be completely wrong!

Well, if you believe that deficits can be financed with a depreciated exchange rate then the conclusions should not be that hard to figure out: the Bush administration is using the exchange rate to finance the war on terror.

In short, the Europeans are paying for Iraq

[Colonâ„¢]

I wonder whether anyone even remembers how widely the Euro was derided when it fall from about $1.15 to about $0.78 a euro after its launch (IIRC). Now it's at $1.38.

[Master Zen]

I do

[Colonâ„¢]

Apparently, the EMU is viable after all. Iaiaiaiaiaiaian. (inside joke)

[Lancer]

deeeeepressing!