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The beginning of the end for the $ ?

Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
Well I'm not surprised there hasn't been much coverage of this in the media, but what does everyone else make of the recent american slump? With their housing economy in a recession it looks like the end of refinancing and free credit for the yanks, the dollar is falling to new lows and it probably won't be long before we see $2 to the pound........

all this amidst speculation of dollar dumping as the governer of the chinese central bank announced that china will start diversifying dollar reserves as they have now passed the $1 trillion mark, with the american trade deficit between the countries accelerating past $150 billion in recent months......until now a lot of this has arguably helped to expand the chinese economy via american imports, but with the inevitable credit crunch on the way and the falling dollar those yanks will be forced to reduce consumption, and when the u.s. government stops you buying their oil companies, then the question has to be asked - what's the point in having all those dollars?

So after years of lax credit and pumping money from nowhere into the economy, hiding real inflation and fuelling the housing boom, the Feds in a bit of a pickle - raise interest rates to protect the dollar and in doing so force the economy into a recession, or reduce rates to stimulate the economy and watch the dollar tumble.....either way it's not pretty, and when it all falls down it's not looking rosy for the rest of the world either.....what's everyone else's take on this? and who's scratching their head thinking, hang on i've not seen this on the news or read it in the paper, lol......merry christmas americans :thumb:
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Comments

  • Teh_GerbilTeh_Gerbil Stalin's Organist Posts: 13,327
    US Dollar has done down before, it's been ALOT lower than currently.

    But yeah, Bush has well and truly put thier economy up the creek.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    i think the last time it was this low against the pound was back in 92 before we crashed out of the ERM, so there were other factors involved there.......fact is their foreign debt has never been higher and it doesn't look like china will keep propping it up for much longer, there's no way they can claw it back either with the accelerating trade deficit, and they can't print their way out of trouble this time as they have done in years gone by......interesting year ahead, for us as well mind.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Put it this way, I'm doing everything I can to bring my spending down and reduce my debts - a credit crunch in the US is bound to be passed on here...
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    US labour productivety is rising faster than any other nation on the planet. Take this into account when low labour costs are the advantage of 2nd world countries. With a lower valued US dollar the US is laughing and will be for some time to come.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Teh_Gerbil wrote:
    But yeah, Bush has well and truly put thier economy up the creek.

    Well unemployment is falling in the US. In Britain it's at a seven year high. And whilst Americans have enjoyed tax cuts that will pay for themselves Brits are paying higher and higher taxes.

    And all that aside, a weak dollar is great for Brits visiting the US. :yes: Not so good for Americans going to Britain though. I know some Americans who live in the UK and work for the US military getting paid in dollars which is pretty harsh.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    These crashes have been predicted for years and the papers are probably a bit tired of running predictions suggesting an immenent recession which hasn't yet come true.

    If I predict that tomorrow will be Christmas on 1st Jan and repeat that claim evryday throughout the rest of the day I'm going to be right on 24th Dec. Same with the predictions of recession...
  • Teh_GerbilTeh_Gerbil Stalin's Organist Posts: 13,327

    Unless you are an American working in say, the Car Industry or the Steel industry or indeed, any industry that can be done cheaper abroad! Blue Collar workers are losing out.
    And whilst Americans have enjoyed tax cuts that will pay for themselves Brits are paying higher and higher taxes.

    Unless you are - supprise - a blue collar worker. Or indeed, poorer than middle class. Then you are enjoying taxes you can barley fucking pay, poor health care, and crap education. They must be loving it, McDonalds style!
    And all that aside, a weak dollar is great for Brits visiting the US. :yes: Not so good for Americans going to Britain though. I know some Americans who live in the UK and work for the US military getting paid in dollars which is pretty harsh.

    Yeah, it's also great for failing businesses yo write off thier debt, sharpish! They use the favourable exchange rate to get thier arses out the fire. Helped Trico Shipping nicley, which is good, as my dad works for them! Although, guess what? They are selling boats... to China! So average guy working in the North Sea... loses out. Big managers... make cash.

    Poor bloody US Forces guys though... Thier wages won't go far here, not with the super-tax we put up with. One guy I was chatting to at USAF Mildenhall had to sell his Camaro, he just couldn't afford the Petrol!
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Teh_Gerbil wrote:
    Unless you are an American working in say, the Car Industry or the Steel industry or indeed, any industry that can be done cheaper abroad! Blue Collar workers are losing out.

    The US car industry has been in trouble for years, ever since Japanese firms started making better cars cheaper. (Although, I would love a big old Cadillac).

    These days though Ford and GM make some of their cars and parts in Mexico whilst some of the Japanese car companies have factories in the US. I don't think protectionism would solve Ford and GM's problems and I don't think you can blame President Bush. Regardless, at least the US still has a car industry.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Teh_Gerbil wrote:
    Unless you are an American working in say, the Car Industry or the Steel industry or indeed, any industry that can be done cheaper abroad! Blue Collar workers are losing out.

    And the car industry in the US has only been going down hill since Bush?
  • Teh_GerbilTeh_Gerbil Stalin's Organist Posts: 13,327
    budda wrote:
    And the car industry in the US has only been going down hill since Bush?

    Nope, but recently it has got worse.

    And I don't see the US Govt doing anything to help people who lost thier jobs.

    Dis - The UK still has a great Car Industry - TVR, Caterham, Noble, Westfield. All top cars.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Teh_Gerbil wrote:
    Dis - The UK still has a great Car Industry - TVR, Caterham, Noble, Westfield. All top cars.

    Well yes and there are still quite a lot of cars made in the UK, a few of the Japanese car firms in particular.

    TVR, Caterham, etc are specialist cars mainly for enthusiasts. Since Rover went Britain doesn't have its own mass production car manufacturer.
  • Teh_GerbilTeh_Gerbil Stalin's Organist Posts: 13,327
    Well yes and there are still quite a lot of cars made in the UK, a few of the Japanese car firms in particular.

    TVR, Caterham, etc are specialist cars mainly for enthusiasts. Since Rover went Britain doesn't have its own mass production car manufacturer.

    Would you calss Jaguar as British still, becuase Ford essentially gives them a free hand and they are produced in the UK...

    Or don't you, because it is owned by the Yankees? What about Aston? Or Land Rover?

    Admitadley we don't have a mass-market car manufacturer. But whose fault is that? Rover's own. If you don't make what people want, capitalism says you fail. I wish it wern't the way, but Rover is now a Chinese asset. They are going to make something like 750,000 Rover 75's for thier home market now.:eek2: Those fuckers must like them or someshit.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Teh_Gerbil wrote:
    Would you calss Jaguar as British still, becuase Ford essentially gives them a free hand and they are produced in the UK...

    Or don't you, because it is owned by the Yankees? What about Aston? Or Land Rover?

    I don't know, I've not really thought about it. Foreign ownership of most things in Britain doesn't really seem to concern many people, at least not compared to France/Italy where their governments will often block foreign takeovers of big companies. (The Italian govt would not allow Fiat to be foreign owned, ditto with the French and Renault. And if Fiat or Renault got into the trouble Rover did they would have got a lot more help from their governments. Indeed, Fiat and Renault would have went the same way as Rover years ago were it not for such handouts...Not that Rover didn't get it's fair share over the years though).

    Ford have been pretty good to Jaguar I guess but it looks like they might sell Jaguar...
    Teh_Gerbil wrote:
    Admitadley we don't have a mass-market car manufacturer. But whose fault is that? Rover's own. If you don't make what people want, capitalism says you fail. I wish it wern't the way, but Rover is now a Chinese asset. They are going to make something like 750,000 Rover 75's for thier home market now.:eek2: Those fuckers must like them or someshit.

    I guess since America, Japan, France, Germany and Italy all have their own mass market car manufacturers it's a shame to see Britain out of the picture.

    It's not entirely Rover's fault, the unions did their best to wreck Rover and inflicted a lot of long term damage and successive governments could have done a lot better. Still, at least some of the cool MGs are pretty cheap second hand...MGBs, Triumph Spitfires, etc. So much cooler than a Fiesta, just need to save up a bit more. :)
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    No it's alright, sure all that gold reserve at Fort Knox will keep the US dollar propped up for eternity. :yeees:
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Teh_Gerbil wrote:
    If you don't make what people want, capitalism says you fail. I wish it wern't the way

    :lol: gold
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Been studying politics for 2 years now and one thing I've realised is that all this shite about communism, anarchism is just complete bollocks. Not that I'm an advocate of neo-liberalism or globalisation. Keyenes sort of had the right idea. Maybe there's no such thing as a perfect system of governance? Though socialist capitalism is the only logical way forward!
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Jim V wrote:
    Put it this way, I'm doing everything I can to bring my spending down and reduce my debts - a credit crunch in the US is bound to be passed on here...

    I agree, if you look at it from another angle take the official UK inflation (~2.5%) which is well below the real figures, M4 money growth is running at 14% this year (the money supply flowing into the economy which has been funding all this easy credit), which gives you some idea of the figure fiddling going on at the Treasury......wage inflation isn't in line with the increasing cost of living these days, so it's only a matter of time before it all goes tits up, interest rates will have to keep rising into the new year to reflect true inflation, making borrowing more expensive which will in turn discourage consumers and FTBs in the housing market, which is when things start to get interesting and we can look to the US to see as their cycle is a little ahead of ours.....

    the US decision to stop publishing M3 figures earlier this year (coincidentally at the same time as the opening of the iranian oil bourse?) and the resulting lack of transparency has reduced investor faith and is probably just one factor contributing to the current slide, $1.98120 to the pound as we speak......it's only natural china will become less and less willing to buy dollars if america keeps inflating away their real value to keep consumption going, when this reaches the tipping point then we are in trouble.....

    there is an interesting article on some of this, which also explains why rising manufacturing and labour costs in china will have a ripple effect on global inflation.....
  • Teh_GerbilTeh_Gerbil Stalin's Organist Posts: 13,327
    MGBs, Triumph Spitfires, etc. So much cooler than a Fiesta, just need to save up a bit more. :)

    The only problem for me being, the insurance company would laugh me off the line. :(

    So, Ford Capri it is. Another British jem!
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Yerascrote wrote:
    Keyenes sort of had the right idea.

    How so ?
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    I agree, if you look at it from another angle take the official UK inflation (~2.5%) which is well below the real figures, M4 money growth is running at 14% this year (the money supply flowing into the economy which has been funding all this easy credit)

    Are you saying the rate of money growth = the rate of inflation?

    the US decision to stop publishing M3 figures earlier this year

    is a result of them saving time and money. They are no longer attempting to control the money supply so whats the point.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    minimi38 wrote:
    Are you saying the rate of money growth = the rate of inflation?

    no it's not that straightforward, but money supply is inflationary when it exceeds GDP growth, are you saying GDP growth is 14%? What is your point? And when Basel II comes into effect it will only get worse because the banks minimum reserve requirements will drop from 5% to 2.5%, making it even easier to expand the money supply = even more lending etc, but it's just not sustainable is it....

    is a result of them saving time and money. They are no longer attempting to control the money supply so whats the point.

    lol well it's fairly obvious they lost control a while ago, you can't tell me the world's largest economy stops publishing its financial data to save a few quid, please.

    ETA: i don't think the dollar will collapse just yet but it's more a case of when than if......
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    no it's not that straightforward, but money supply is inflationary when it exceeds GDP growth, are you saying GDP growth is 14%? What is your point? And when Basel II comes into effect it will only get worse because the banks minimum reserve requirements will drop from 5% to 2.5%, making it even easier to expand the money supply = even more lending etc, but it's just not sustainable is it....quote]

    I asked whether you were saying that.
    but money supply is inflationary when it exceeds GDP growth
    put "velocity of money" into google
    lol well it's fairly obvious they lost control a while ago, you can't tell me the world's largest economy stops publishing its financial data to save a few quid, please.

    They can't target the money supply when they use interest rates so what is the point in publishing something out of their control?
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    minimi38 wrote:
    I asked whether you were saying that.

    put "velocity of money" into google

    They can't target the money supply when they use interest rates so what is the point in publishing something out of their control?

    Yes thanks I know what money velocity is :thumb: my point is still valid, with all these people remortgaging their houses to fund their new car/holiday/xmas pressies etc the velocity keeps on growing, in the UK we effectively treat HPI as a second salary.......

    it's simple, you don't target money supply with interest rates, you eliminate fractional reserve banking, which is inflationary because the people in control are too greedy.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    my point is still valid

    What point. Failing to show why 14% growth in money has failed to translate into more than 2.8% inflation and blaming it on a conspiracy of fiddling isn't making a point. More like rambling.

    it's simple, you don't target money supply with interest rates, you eliminate fractional reserve banking, which is inflationary because the people in control are too greedy.

    What? They can't control the money supply and they know it, hence the current regimes in central banks all over the world (except the ECB, ha). This is why they can't be bothered to publish M3 anymore...
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Have you been reading prison planet.com or something?
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Yes thanks I know what money velocity is :thumb: my point is still valid, with all these people remortgaging their houses to fund their new car/holiday/xmas pressies etc the velocity keeps on growing,


    With minor steady increases in GDP and inflation larger increases in the money supply are offset by decreases in velocity.

    These two charts for the euro (i cant find data on the UK) should briefly illustrate that for you

    euro-m4.jpg

    euro-m6.jpg

    this is why increases in broad money do not cause larger increases in inflation.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    minimi38 wrote:
    this is why increases in broad money do not cause larger increases in inflation.

    minimi38,

    Could you tell me how you would define "inflation" ?
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    minimi38 wrote:
    What point. Failing to show why 14% growth in money has failed to translate into more than 2.8% inflation and blaming it on a conspiracy of fiddling isn't making a point.

    Well you obviously missed it so let's go back.....a large proportion of the 14% growth in money in the UK comes from house price inflation, here's a pretty graph so I don't feel left out.

    graph-house-prices-1975-2006.gif


    When house prices rise, people's assets go up on paper......now if all the value is kept in the house then yes the velocity is low, and inflation will remain low. in practise, people have been 'releasing equity' i.e. refinancing and taking on more secured debt to buy lots of pretty things, this increases the liquidity and velocity as it funds consumer spending into other areas of the economy, what makes people in the UK so comfortable with taking on so much debt is because they think they are sitting on an infinitely growing asset, but the fact of the matter is you can't have boom without bust....as we are seeing with the US housing market right now.

    the reason why official CPI is so low is precisely because it doesn't take into account mortgages, council tax, the rising cost of living etc.....getting the point yet? there's no conspiracy it's how labour and gordon brown have managed our miracle economy. Haven't you noticed the interest rates creeping up recently, record insolvencies/bankruptcies, rising unemployment, banks writing off record amounts of debts....not exactly what you'd call a great economy.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Here it is, M4 velocity up to 2004 (there is no data up to 2006). I don't care where the money supply growth comes from, mortgages, liquidating stored wealth, bankrupcies etc but here is proof the velocity has been declining as broad money increases for years. Money growth is not translating into near equal measures of inflation.


    m4.jpg

    Also, there are alot of different indexes for inflation. The CPI for example excludes mortgage payments because of the positive relationship with interest payments. There is no fiddling the figures by Brown...the BoE run the economy.
    Could you tell me how you would define "inflation" ?

    Mainstream definition.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    the chart seems to refer to household money specifically whereas M4 is a measure of all money in public circulation outside the banks e.g. private sector etc, what's the source?

    in any case it doesn't seem to reflect the spendthrift society we live in and suggests we are a nation of savers..?? you say there's lots of inflation indexes so i'm curious, do you think that CPI is the most accurate way to measure real currency inflation?
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