Skid Of The U.s. Dollar

[Tippaporn]

I'm sure that anyone drawing funds/paychecks from the U.S. is hurting here in Thailand. Since July of '05 the exchange rate has dropped from 41.7 baht all the way down to the current 36.6; a drop of over 12%. Ouch!!!

Not being an economist myself the actual reasons are a bit beyond my understanding. Anyone care to explain?

Also, is this trend attributable to Bush? The USD has been losing ground at approx. the same rate against the yen, British pound and Euro, too.

Anyone care to make any forecasts with reasons why?

[johnnyk]

I'm sure that anyone drawing funds/paychecks from the U.S. is hurting here in Thailand. Since July of '05 the exchange rate has dropped from 41.7 baht all the way down to the current 36.6; a drop of over 12%. Ouch!!!

Not being an economist myself the actual reasons are a bit beyond my understanding. Anyone care to explain?

Also, is this trend attributable to Bush? The USD has been losing ground at approx. the same rate against the yen, British pound and Euro, too.

Anyone care to make any forecasts with reasons why?

IME, its cyclical. This time its the $ turn to be low man on the pole.

[Nam Kao]

The Democrats took over the Senate and House and right away told China to help fix

the trade imbalance, China replied by saying they will move their assets out of US dollars

thus the dollar tanked today and beyond.

Leave it to Liberals to mess things up

[bkkandrew]

The reasons are relatively simple and classic economics.

USA has very large trade (difference between value of imports and exports) deficit and equally large balance of payments (difference between Government income and expenditure) deficit. Currencies inevitably fall in these circumstances, corrected by:

1. Currency falling far enough to make imports more expensive (and exports cheaper), to correct trade deficit;

2. The above stimulating the economy domestically, thus correcting thge balance of payments deficoit.

On point 2, the US Government has always been able to ignore balance of payments issues, as, having the World's reserve currency, there has been no shortage of countries and organisations holding the currency, thereby holding up its value. Also there was always a queue of countries and organisations to lend the money to fund the defecit as it was viewed as the safest loan you could make.

Fast forward to now.

The USD would have to fall to 10 baht (for example - more relevant agains the Chinese Yaun) to make their exports comparible in terms ov value, so that is not going to be the limiting factor of the fall..

Many countries are no re-assessing their holdings of dollars and dollar debt, especially Fed debt instuments, as their investments are losing money. Some have already changed into the Euro, for example. If this would be widespread, again without the underlying trade balance to underpin the USD, you could see a real collapse...

Then again, Bush could cut spending, balance the books and restore confidence enough for the music to keep playing...

[samran]

Then again, Bush could cut spending, balance the books and restore confidence enough for the music to keep playing...

A pullout from Iraq in this context would be seen as good for the dollar then. Less money being thrown at defense spending, budget moves closer to balance!

[Barney_the_Dinosaur]

If America stopped buying Chinese products that would be better for the trade deficit.

Defence spending is largely spent inside the USA - i.e no effect on the trade balance, current account deficit - or - consequently the exchange rate.

[Tippaporn]

Then again, Bush could cut spending, balance the books and restore confidence enough for the music to keep playing...

A pullout from Iraq in this context would be seen as good for the dollar then. Less money being thrown at defense spending, budget moves closer to balance!

Defence spending is largely spent inside the USA - i.e no effect on the trade balance, current account deficit - or - consequently the exchange rate.

I can't imagine that the war in Iraq, and in Afghanistan, doesn't put a strain on the U.S. economy.

Add the cost of the war in Afghanistan:

"Even if a gradual troop withdrawal begins this year, war costs in Iraq and Afghanistan are likely to rise by an additional $371 billion during the phaseout, the report said, citing a Congressional Budget Office study. When factoring in costs of the war in Afghanistan, the $811 billion total for both wars would have far exceeded the inflation-adjusted $549 billion cost of the Vietnam War."

Total defense budget for fiscal year 2006 was $441.6 billion. The war in Iraq alone comprises 23% of that figure.

If anyone can rationally explain how the wars in Iraq and Afghanistan contribute to a healthy economy, or their effects on the exchange rate, I'd be willing to listen.

If America stopped buying Chinese products that would be better for the trade deficit.

Wal-Mart is a prime example of why that will never happen. Workers have been losing ground in real income for decades and in a growing atmosphere of survival the masses don't care where the product comes from - as long as it's cheap (affordable). Corporations fuel this trend since they profit heavily from it.

Iraq_War_Cost.bmp

Edited November 10, 2006 by Tippaporn

[emwobberlydee]

Successive American governments both Rep & Dem have spent far more than they collect (taxes etc). Check this link to see the Federal Debt just building and building year on year.

http://www.publicdebt.treas.gov/opd/opdpenny.htm

Yes people, that's 8.588 trillion dollars at the latest count! Doesn't sound like much? Take that as $20 bills in a stack and it will more than go aroung the Earth's equator! As a few others have pointed out already there is also the issue of the trade deficit currently at 64 billion dollars per month, that is a lot of money to be haemorrhaging even is you are the biggest economy in the world.

The way out?

A)Balance your budget which will probably lead to a massive recession.

B)Inflate your way out of it which makes it easier to pay back - also fiddle with the inflation statistics to make it look like all is well and claim you are mantaining a strong dollar policy. This is what is currently happening.

C)Default - bloody unlikely (I hope).

Inflation is primarily caused by Central Banks just increasing money supply out of thin air which the US has been doing for quite some time now.

Central banks around the world are diversifying their currency reserves away from dollars, this is all quite calm for now, but if there is a panic then there could be a stampede for the exit.

I will be the first to admit that I am not an economist and I'm sure that there are plenty of people who would like to shoot my summary down in flames but when Joe Six Pack (average US citizen) wakes up in the morning and realises that the US Economy is trouble it will already be too late.

The last thing I want to see is a global economic melt down as it will affect everyone everywhere, have a little gold tucked away somewhere just in case...

[adammike]

so now you know

[backflip]

"Inflation is primarily caused by Central Banks just increasing money supply out of thin air which the US has been doing for quite some time now."

Absolutely false. How can you in good conscience post stuff like this? I imagine your parents told you: inflation is caused by "the Fed printing money", "the Fed increasing the money supply", or "too many dollars going after two few goods". You should have ignored your parents.

[calibanjr.]

The Democrats took over the Senate and House and right away told China to help fix

the trade imbalance, China replied by saying they will move their assets out of US dollars

thus the dollar tanked today and beyond.

Leave it to Liberals to mess things up

I'll take that as a joke, right?

[Tippaporn]

In any case, does anyone think we'll see exchange rates at 40+ baht anytime soon? Or can we expect the rate to decline steadily in the future?

[eljeque]

If America stopped buying Chinese products that would be better for the trade deficit.

Defence spending is largely spent inside the USA - i.e no effect on the trade balance, current account deficit - or - consequently the exchange rate.

It is reflected in the budget deficit which is paid for by the government borrowing, thus creating more dollar instruments out there, and the more there are, the less they are worth.

Euro, Pound, Swiss, Swedish Kroner, Baht, Korean Won, Canadian Dollar, Aussie Dollar have all had great runs against the US dollar since Bush arrived.

[PeaceBlondie]

Also, those figures that are published are flat-out lies. The federal debt is not 9 trillion, but 49 trillion, when you add all the debts by proper accounting. And the annual deficit is far larger as well.

All my income is dollar denominated, and I've lost that 12%. Ouch. But I'll stay in Thailand.

[pumpuiman]

The Democrats took over the Senate and House and right away told China to help fix

the trade imbalance, China replied by saying they will move their assets out of US dollars

thus the dollar tanked today and beyond.

Leave it to Liberals to mess things up

The Bush team is responsible for keeping the dollars value so low, not the democrats. It is the republicans who have created this mess, and now the dems will see if they can salvage anything from the wreckage that moron from Texas has created.

[I Go With You]

The Democrats took over the Senate and House and right away told China to help fix

the trade imbalance, China replied by saying they will move their assets out of US dollars

thus the dollar tanked today and beyond.

Leave it to Liberals to mess things up

Yeah, I couldn't agree more, libs are going to give us the shaft of a lifetime as always. Demos are the party of the filthy rich, just take a look at your Pelosi biatch, she's worth 92 mil! You think she cares about regular middle class people? These scums want only filthy rich and dirt poor. They make Taksin look good

[pumpuiman]

Dollar falls on China diversification talk

Greenback hits two-month low after China's central bank governor discusses plans to diversify $1 trillion in currency reserves.

November 10 2006: 8:03 AM EST

LONDON (Reuters) -- The dollar sank to a two-month low Friday after further comments from China's central bank governor Zhou Xiaochuan on the bank's plans to diversify its $1 trillion in currency reserves, while European and Asia shares fell amid soft economic data.

Already under pressure after a weak reading of U.S. consumer sentiment, the dollar extended Thursday's losses after Zhou said China had a clear plan to diversify its FX reserves.

INTERNATIONAL

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Zhou, speaking at a meeting of central bankers in Frankfurt, said diversification would include different currencies and investment instruments.

Although Zhou said there was no change to China's long-standing diversification policy, many traders took his comments to mean China might buy fewer dollars as the country's massive current account surpluses swells its coffers.

"Undoubtedly, the dollar has weakened on the comments. But on the basis of the comments in and of themselves, I wouldn't expect the dollar to continue weakening," said Todd Elmer, currency strategist at Citigroup.

"I'd expect the trend of reserve diversification to be unfavorable for the dollar over time, but we have to be cautious. I'm not sure this rhetoric means you should chase the dollar weakness, but I wouldn't expect significant dollar rebound in the near term," Elmer said, citing interest rate differentials in the coming weeks that are unlikely to be dollar-positive.

The dollar hit its lowest level in more than two months against a basket of major currencies and touched a 2-1/2 month low against the euro at $1.29 per euro.

The dollar and other currencies also came under pressure against the yen overnight after Bank of Japan Governor Toshihiko Fukui said he was concerned about a sharp unwinding of carry trades in which investors borrow the low-yielding Japanese currency and buy higher yielding currencies.

The dollar was buying ¥117.35 yen.

This is not something new but occured on the republicans watch.

Edited November 10, 2006 by pumpuiman

[lannarebirth]

The Democrats took over the Senate and House and right away told China to help fix

the trade imbalance, China replied by saying they will move their assets out of US dollars

thus the dollar tanked today and beyond.

Leave it to Liberals to mess things up

The Bush team is responsible for keeping the dollars value so low, not the democrats. It is the republicans who have created this mess, and now the dems will see if they can salvage anything from the wreckage that moron from Texas has created.

With any luck, ill will between the two parties will continue and gridlock will ensue. Republican legislation will get beaten down in Congress and democratic spending bills will get vetoed. Good for everybody.

[pumpuiman]

The Democrats took over the Senate and House and right away told China to help fix

the trade imbalance, China replied by saying they will move their assets out of US dollars

thus the dollar tanked today and beyond.

Leave it to Liberals to mess things up

The Bush team is responsible for keeping the dollars value so low, not the democrats. It is the republicans who have created this mess, and now the dems will see if they can salvage anything from the wreckage that moron from Texas has created.

With any luck, ill will between the two parties will continue and gridlock will ensue. Republican legislation will get beaten down in Congress and democratic spending bills will get vetoed. Good for everybody.

I would rather have gridlock, than to let Bush continue his quest.At least he is leashed now.

[I Go With You]

Lannar, listening to you is exactly like reading a Bloomberg biz report on the elections. You gotta stop the media feed into your brain as it does much damage

[lannarebirth]

Lannar, listening to you is exactly like reading a Bloomberg biz report on the elections. You gotta stop the media feed into your brain as it does much damage

That's funny as I don't have a TV.

[cclub75]

The party is over : elections are behind us.

And, you'll notice that's : gold and oil are going up again. Striking coincidence, isn't it ? And the dollar will resume its fall.

As other people said here : we can just hope that it won't be a free fall.

[I Go With You]

I'm not talking about TV, just regular internet reads

[Tippaporn]

The party is over : elections are behind us.

And, you'll notice that's : gold and oil are going up again. Striking coincidence, isn't it ? And the dollar will resume its fall.

As other people said here : we can just hope that it won't be a free fall.

Even with the devalued USD I feel I'm still better off in Thailand. The dollar would have to take a disastrous plunge before my standard of living here becomes comparable to that in the U.S. Still, it always hurts to lose 12% and my gut feeling is it's going to get worse. And, I don't think a free fall will be good for the rest of the world, either.

Unfortunately, I don't think either party will make meaningful corrections since I don't view anyone prominent in the U.S. government, republican or democrat, as having the personality traits required to lead the country out of it's mess.

[PeaceBlondie]

Even with the devalued USD I feel I'm still better off in Thailand. The dollar would have to take a disastrous plunge before my standard of living here becomes comparable to that in the U.S. Still, it always hurts to lose 12% and my gut feeling is it's going to get worse. And, I don't think a free fall will be good for the rest of the world, either.

Unfortunately, I don't think either party will make meaningful corrections since I don't view anyone prominent in the U.S. government, republican or democrat, as having the personality traits required to lead the country out of it's mess.

That last point, Tippaporn, is exactly what the chief CPA of the American government, the comptroller general, admitted at theLondon School of Economics, earlier this year: the biggest debt or deficit of all, in American politics, is the lack of leadership and courage (also, in the corporate-executive sector). And that's why our American income will not recover to an exchange rate of 41 baht per US dollar.

....Does anybody need a part-time English teacher?

[bkkandrew]

If America stopped buying Chinese products that would be better for the trade deficit.

Defence spending is largely spent inside the USA - i.e no effect on the trade balance, current account deficit - or - consequently the exchange rate.

No. Defence spending is directly Government expenditure. Every $1 spent domestically or abroad contributes to the budget defecit.

[eljeque]

Debt as a percentage of GNP

It goes up when the Republicans have the presidency.

The Reagan Bush 12 years were the worst, and then we got this new Bush who continued the expansion of the US deficit.

[ray23]

In any case, does anyone think we'll see exchange rates at 40+ baht anytime soon? Or can we expect the rate to decline steadily in the future?

Anyone want to take a shot at this a it is certainly beyond me

[Naam]

If America stopped buying Chinese products that would be better for the trade deficit.

Defence spending is largely spent inside the USA - i.e no effect on the trade balance, current account deficit - or - consequently the exchange rate.

No. Defence spending is directly Government expenditure. Every $1 spent domestically or abroad contributes to the budget defecit.

*****

trade deficit and budget deficit are two different animals Gentlemen!

[bkkandrew]

If America stopped buying Chinese products that would be better for the trade deficit.

Defence spending is largely spent inside the USA - i.e no effect on the trade balance, current account deficit - or - consequently the exchange rate.

No. Defence spending is directly Government expenditure. Every $1 spent domestically or abroad contributes to the budget defecit.

*****

trade deficit and budget deficit are two different animals Gentlemen!

Er...

Thats what I was alluding to... The BUDGET deficit is the Government income and expenditure imbalance. The TRADE deficit is the imbalance of goods imported and exported.. Defence spending directly affects the BUDGET deficit, as it is spending by the Government...

Which word were you stuck on??