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The beginning of the end for the $ ?
Former Member
Posts: 1,876,323 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:
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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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.
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...
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.
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!
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!
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.
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.
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.
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...
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.
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.....
The only problem for me being, the insurance company would laugh me off the line.
So, Ford Capri it is. Another British jem!
How so ?
Are you saying the rate of money growth = the rate of inflation?
is a result of them saving time and money. They are no longer attempting to control the money supply so whats the point.
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....
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......
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.
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.
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...
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
this is why increases in broad money do not cause larger increases in inflation.
minimi38,
Could you tell me how you would define "inflation" ?
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.
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.
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.
Mainstream definition.
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?