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What's the benefit to a 'strong dollar'

Old 11-22-04, 05:16 PM
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What's the benefit to a 'strong dollar'

Seems like Bush is giving lip service to world leaders in his committment to a 'stong dollar'. Unless I'm missing something huge, I see a weak dollar as a huge benefit to the US economy.

Our exports are very cheap in the marketplace therefore decreasing our trade deficit. By boosting our exports, we create jobs IN the US.

So, why should be really back a 'strong dollar'. I'm totally missing it.
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Old 11-22-04, 05:17 PM
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Re: What's the benefit to a 'strong dollar'

Originally posted by ChiTownAbs, Inc
So, why should be really back a 'strong dollar'. I'm totally missing it.
Because strippers demand it

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Old 11-22-04, 05:30 PM
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You probably know more than other Chi, since that is your industry. The only thing I saw is Greenspan was warning that Europe/wherever else wouldn't always be interested in our assets even with a weaker dollar.
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Old 11-22-04, 05:31 PM
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What strip clubs do you go to? Strippers in my 'hood want a strong twenty dollar
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Old 11-22-04, 05:33 PM
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So exporters to the US (say Europeans) dump our bonds because they feel that they won't be selling to the US as much as they used to ... by dumping the bonds, prices go down, rates go up. That is bad for the US economy as new business ventures are more expensive to start.

Ok, I see that part pretty well ... but *if* the US savings rate would increase at the same percent that foreigners were dumping bonds, it would offset.

...sigh... I wish we weren't such a consumption society.
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Old 11-22-04, 05:34 PM
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A weak dollar makes it a riskier investment relative to other currencies giving people in other countries and foreign governments less incentive to invest in it (i.e. fund our trade and budget deficits).

It potentially also increases the trade deficit if Americans keep insisting on buying foreign goods for more amounts of dollars. But it is good for American exports.
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Old 11-22-04, 05:36 PM
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Originally posted by ChiTownAbs, Inc
What strip clubs do you go to? Strippers in my 'hood want a strong twenty dollar

Living on the edge of civilization has its benefits

Of course I'm sure the quality is 20x better in your 'hood, as well
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Old 11-22-04, 05:43 PM
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A weak dollar is good for growth because it increases exports and limits imports. It is especially important to a country that is emerging from a recession.

A strong dollar on the other hand makes imports cheap. While not beneficial for domestic producers it does keep prices (and inflation) down. A strong dollar curtails inflation by allowing cheap foreign competition to hold down prices in the United States. A strengthening dollar can help stretch out economic good times.

At the top of a business cycle a strong dollar will help extend the boom by limiting inflation. At the bottom of the cycle the weak dollar will help spur growth. A weak dollar lifts slow growth and a strong dollar holds growth in check.

Policy makers need to analyze two factors when setting desired currency strength, level of economic growth and amount of inflation permitted.
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Old 11-22-04, 09:07 PM
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A weak dollar makes foreign vacations more expensive. Fewer Americans abroad = better international image for America. It's win-win baby.
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Old 11-22-04, 09:22 PM
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Originally posted by Nutter
A weak dollar makes foreign vacations more expensive. Fewer Americans abroad = better international image for America. It's win-win baby.
Well, depends if the particular Americans going on vacations happen to be jerks.

Are you American?
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Old 11-22-04, 09:26 PM
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I'm going to Italy in May*. Strong dollar sounds good to me, at least for those two weeks.

<font size=1>*I'll let Bushdog define whether I am a jerk or not in this case</font>
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Old 11-22-04, 10:18 PM
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Originally posted by ChiTownAbs, Inc
So exporters to the US (say Europeans) dump our bonds because they feel that they won't be selling to the US as much as they used to ... by dumping the bonds, prices go down, rates go up. That is bad for the US economy as new business ventures are more expensive to start.

Ok, I see that part pretty well ... but *if* the US savings rate would increase at the same percent that foreigners were dumping bonds, it would offset.

...sigh... I wish we weren't such a consumption society.
There is a major flaw here.. Exporters don't own the bonds. Exporters convert the foreign currency back to the local one. Central banks in the countries with the USD wind up with the dollars. Why would they dump US bonds? There has to be a place to go as the numbers are too big. They could buy less or sell some, but there are limited places to go (size of US markets is huge compared to others).

Higher rates aren't necessarily bad for the economy as they act as a brake. Marginal business investment won't be made and companies will focus on projects with better expected returns. You can easily make the argument that easy money allows for ventures with poor prospects to get funded. Also, higher rates should encourage people to save more and leverage less. So it's a tradeoff. Just remember that unless the people with the bonds and stocks have a place to go with the proceeds, the effect will be muted.

In the end it is all a balancing act.. A weaker dollar should help curb the current account and trade deficits, but may very well result in inflation and making it more expensive to fund the government deficit. The 'strong' dollar has helped finance the national debt at lower rates than you might otherwise expect given its magnitude.
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Old 11-23-04, 01:05 AM
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Originally posted by matchpenalty
There is a major flaw here.. Exporters don't own the bonds. Exporters convert the foreign currency back to the local one. Central banks in the countries with the USD wind up with the dollars. Why would they dump US bonds? There has to be a place to go as the numbers are too big. They could buy less or sell some, but there are limited places to go (size of US markets is huge compared to others).
Well, I didn't mean to imply the exporters *themselves* owning US bonds, but the countries as a whole owning our bonds, but your point is well taken.
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Old 11-25-04, 06:13 AM
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Originally posted by Nutter
A weak dollar makes foreign vacations more expensive. Fewer Americans abroad = better international image for America. It's win-win baby.


Originally posted by Bushdog
Well, depends if the particular Americans going on vacations happen to be jerks.
Have you been to popular American tourist destinations?

Thor -- Where in Italy? Please say Venice is one of your destinations.
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Old 11-26-04, 03:24 PM
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Originally posted by Thor Simpson
I'm going to Italy in May*. Strong dollar sounds good to me, at least for those two weeks.

<font size=1>*I'll let Bushdog define whether I am a jerk or not in this case</font>
This should be a poll






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Old 11-26-04, 11:16 PM
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Originally posted by ChiTownAbs, Inc
What strip clubs do you go to? Strippers in my 'hood want a strong twenty dollar
The strip clubs where they fart in your face. Or maybe that is the reason they do!
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Old 11-27-04, 12:25 AM
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I would say at this point that Bush is giving lip service to the strong dollar policy (ie he wants a weaker dollar, but doesn't want to piss off Europe and Asia). Personally, I agree with this strategy at this point. Perhaps the dollar will get too weak, but right now, our trade deficits are very large and American goods need a fighting chance in foreign markets too.
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Old 11-27-04, 11:57 AM
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Originally posted by DarkElf
Thor -- Where in Italy? Please say Venice is one of your destinations.
Possibly Venice, though that may be a little too far north. Still planning though. I need to get the train travel times to make sure we can get everywhere in a reasonable amount of time.

This will be my 8th or 9th trip to Italy, so I will be spending a lot of time with family down south, but will travel to other parts for 5-6 days with the wife (it's her first time there). Have to go to Rome, and to the hilltown I studied abroad in over there. Other than that, things are still open and depend a little on what the family plans are over there and when we can stay at their house etc. I'll leave the extra travel destinations up to the wife. I can give pretty good suggestions since I've been to most of the major cities there, but ultimately the travel part of the trip will be for her to decide. I would guess Florence and Venice would be high possibilities. We have the South pretty well covered while staying with family in Naples, down to the Amalfi coast, Capri, etc.
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Old 11-27-04, 12:31 PM
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Originally posted by kvrdave
This should be a poll











btw I vote yes

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Old 11-27-04, 01:07 PM
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Originally posted by Thor Simpson
Possibly Venice, though that may be a little too far north. Still planning though. I need to get the train travel times to make sure we can get everywhere in a reasonable amount of time.

This will be my 8th or 9th trip to Italy, so I will be spending a lot of time with family down south, but will travel to other parts for 5-6 days with the wife (it's her first time there). Have to go to Rome, and to the hilltown I studied abroad in over there. Other than that, things are still open and depend a little on what the family plans are over there and when we can stay at their house etc. I'll leave the extra travel destinations up to the wife. I can give pretty good suggestions since I've been to most of the major cities there, but ultimately the travel part of the trip will be for her to decide. I would guess Florence and Venice would be high possibilities. We have the South pretty well covered while staying with family in Naples, down to the Amalfi coast, Capri, etc.
Venezia to Roma is around 6 hours by Eurostar

Venezia to Fierenze is around 4 hours

There is a train that leaves Venezia at around 5:30am and gets into Fierenze by 9am I think. It's been a few years and I forgot the exact schedule. I can get you the name of a nice hotel in Fierenze 10 minutes walk from the train station.
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Old 11-27-04, 10:18 PM
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dumb question for my own sake

What can Bush (or Greenspan most likely) do to influence the dollar?
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Old 11-28-04, 01:28 PM
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Re: dumb question for my own sake

Originally posted by mosquitobite
What can Bush (or Greenspan most likely) do to influence the dollar?

A great many divergent factors affect the strength/weakness of the dollar. Further, there are significant disagreements over what is the most influential factors, as illustrated by the belief held by some that currency values are determined by market factors. These make answering your question not so simple. However, I will feebly attempt to. Sorry in advance if I confuse you more.




One major determinant of the Dollar's value is the number of US$ floating out in the world. Like anything, the more or less there is, value changes. The Federal Reserve, Greenspan, are directly responsible for this aspect.

What foreigners and foreign nations do with these specific extra dollars, and to a lesser degree their own currencies, also has a great influence on the value of the dollar. When more of these dollars are invested back into the United States, the US$ generally strengthens. More dollars are invested back into our nation when the expected returns are higher. The Fed and Greenspan directly influence this through the manipulation of interest rates.

As for the President and his adminstration, the influence can be the result of mere words, actions undertaken, and policy decisions. When the President, or one of his cabinet members, speak about America's dollar policy, the world reacts. This has happened on at least two occassions during the Bush Presidency. Usually, the reactions are short term, as they were when the value of the dollar declined due to statements by Secretary O'Neill, but the risk is out there.

The policy direction of the adminstration however has a much longer effect on the value of the dollar. How the adminstration decides to finance the twins, for example, has a profound influence on the value of the dollar, as does tax policy, and the growth rate, which is influenced by basic economic policy. The economic choices made by the President influences everything, the US$ is no different.

Keep in mind, that for the last twenty years or so, the United States has actually pursued a selective dollar policy, strong in some areas, weak in others, sometimes even differentiating between various foreign currencies. Also, our government has greatly hedged against a serious run against the Dollar and its devaluation.

Sorry if I mucked things up too much.
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Old 11-29-04, 12:23 AM
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Well, seems like ECB is leaning towards raising rates, thereby sagging the dollar once again.

It might very easily be $1.45 by the end of the year. It's at $1.3329 right now.
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Old 11-29-04, 07:37 PM
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weak dollar makes international funding of the national dept risky and less profitable.
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Old 11-29-04, 07:50 PM
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Originally posted by bfrank
weak dollar makes international funding of the national dept risky and less profitable.

It's not that simple. They don't have all that much choice.
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