Bush administration acquiescing to weaker dollar-WSJ (SHHH! Don't Tell!)

[UpInArms]

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-05-15T002638Z_01_T181866_RTRIDST_0_ECONOMY-US-DOLLAR-WSJ.XML

TOKYO, May 15 (Reuters) - The administration of U.S. President George W. Bush is "quietly acquiescing" to a weaker dollar, the Wall Street Journal reported over the weekend.

U.S. Treasury Secretary John Snow and other members of Bush's economic team see dollar weakness and stronger growth abroad as helping to curb the U.S. trade deficit, the Journal reported, citing people familiar with the administration's thinking.

Administration officials are not calling attention to their stance for fear of causing a dollar plunge if investors believe the United States is trying to engineer a weaker currency, the newspaper said.

...more...

I guess no one will notice :eyes:

[FloridaPat]

1. Actaully they've been doing that for year though quietly. The dollar

was $1.15 against the Euro when I first started noticing it about 2-3 years ago. Now it's 77 cents. It's down about 7 cents in the last 2 weeks. Lowest I've seen it was 75 cents.

[tsuki]

7. Since my business pushes products from the US, Canada &

Europe, I have been watching very closely. I remember when the Euro was .87 against the dollar, and the Canadian Dollar was .6. Quality goods are getting very expensive. And the Chinese shit is getting shoddier.

[Tellurian]

9. Well, yes..

They have slowly been taking the old printed money out of circulation,
trading it for Euros, and replacing it with this new worthless monopoly money.

[ret5hd]

10. what made the old money more valuable?

answer: nothing. absolutely nothing. trading one version of worthless fiat money for another changes absolutely nothing.

[cantstandbush]

22. Screw the home base!! The rich can invest in foreign economy while

the middleclass and poor in the US have to take whatever the neocon-Republican-Christian-theocracy hands out.

[4_TN_TITANS]

26. You got that right - investing in foreign economies!

I've been making way over 20% interest on my investments by betting AGAINST the dollar. Sad but true - the future isn't with this country.

[pooja]

2. economics

Now that the world is so emmerced in trade and globalization, the true economics of all countries must co-exist under one denomination. Otherwise, there will be a true breakdown globally.

[UpInArms]

4. Welcome to DU, pooja!

:hi:

[RufusEarl]

6. Hi pooja, and welcome!

If i've read this article correctly, Iran's plan is to start selling oil via the Euro come June. If the US permits this the collapse of the greenback is eminent, me thinks this will be the beginning of the Iran conflict.

http://informationclearinghouse.info/article12356.htm

[Critters2]

13. I've read this about Iran selling in euros, too,

and have come to the same conclusions.

[LisaM]

3. I had some money I brought back from Canada before the hockey lockout

and took back afterwards - it had appreciated a fair amount, and that was as of last November.

[Monk06]

5. The CDN dollar passed par with the $US dollar.............

When that happens it is viewed as a crisis in
Canada. The last time the Canadian dollar was
was par with the US interest rates on mortgages
went to 16.5% and inflation was 12% per year.

[tsuki]

8. I remember, 1975, the Canadian was $1.10. nt

[susanna]

33. Yep...

...I live near the Canadian border and I'm not currently traveling there for bargains...and that tells me all I need to know. Seriously, I bought my wedding dress there for a LOT less than I would have paid here a few years back, but now we're near par and there is no real reason.

[TreasonousBastard]

11. Not the first time some jerk tried this...

I think Nixon thought a cheap dollar would help exports.

It didn't, and it won't.

Playing with exchange rates just doesn't cut it when much larger trade forces are in play.

[NYC]

12. It will raise the price of imports.

All that cheap Chinese stuff won't be so cheap anymore, though it will remain poor quality.

[TreasonousBastard]

14. Sure it will, but...

although the "theory" is that we'll buy more domestically, it won't work. Often there are no domestic substitutions, and much of the foreign stuff affected is already under contract and on the way here. You can't change buying habits overnight with financial trickery.

We've got three major currencies competing in a worldwide market, with the Yuan just entering the fray. The dollar is the biggest, and the Euro, Sterling, and Yen are the other players. Currency traders have some ability to manipulate the markets, as do governments, but the values always try to return to equilibrium, and there's too much money out there for anyone, or any government, to control it for more than a short time.

Purchase agreements for everything from cheap Chinese cell phones to Japanese Cameras, French wine, and BMWs are contracted in some currency, with the buyers and sellers hedging their bets on currency futures. The actual price you pay here may have nothing to do with exchange rates.

In a case where the US importer contracts to pay "X" dollars per shipment, the cost here isn't affected whether the dollar goes up or down. It's the other guy who has to pay, or profit, the difference. If we contract to pay in Yuan or Euros or whatever, we have to "buy" the other currency, and we get to cover the difference.

A dollar that's too strong or too weak is a problem-- equilibirium is out of whack and something, usually something very bad or at least not good, will happen to bring it back to it's proper value.

Now, if the world really, really, thinks that the US economy is about to tank, the dollar will fall of its own accord. And that will be very bad. Very, very bad.

[NYC]

15. Re buying more domestically:

It's very hard. I always try to buy American products, but in some cases, they just don't exist.

I recently bought a rodent repelling device (electromagnetic pulse). The one I bought was the only one made in America. I saw 5 other devices, all of which were made in China. Had I not found one made in America, I would still be living with the rodent, while continuing the search. I made sure I told each store that I wanted an American product.

Re contracts with agreed prices, they won't last forever. Eventually, there will be new prices, higher to reflect the devalued dollar.

I find that most people don't care where products are made. They choose as though all products have equal consequences. I annoy people by constantly pointing out to them where things are made. I honestly don't think most people are trying to buy American made products.

[TreasonousBastard]

17. Even if you "buy American" many of...

the components were made somewhere else and it was just assembled here.

At any rate, I can't see any way we are going to get back to the old days-- global manufacturing is probably here to stay and we can't moan about it, we just have to find some way to survive it and come out ahead.

I really don't know what that way is, but I suspect it won't be very easy for us.

[NYC]

18. In addition to moaning about it, which I will continue to do,

I will do my best to buy American products (or assembled in America products).

After not finding the American products, I buy products made in countries that pay a living wage. I aim for Canada first, then move on to Europe.

If I can't afford it, I'll live without it. I can't live with myself if I contribute to the loss of jobs.

[Viva_La_Revolution]

19. global manufacturing will only work until the shipping costs get too high

those ships bringing all that crap from China don't run on wishes, they run on oil.

We will have to create new manufacturing here, or we will just have to do without.

[Art_from_Ark]

24. Reagan also pushed for dollar devaluation

in the Plaza Accord of 1985, under the naive assumption that a lower dollar would increase US exports and reduce imports. However, even then there were many things American consumers wanted that simply were not made in the US, while America had little to offer the world's consumers that would be more attractive with a cheaper dollar.

[susanna]

34. ...but it might forestall the inevitable

until after the midterm elections.

[lovuian]

16. It looks like to me the way the Republicans are going to handle

the debt is printing more money and devaluing the dollar...

I can't wait to see Inflations numbers...

[NYC]

20. That's why they discontinued the money supply report.

If they don't tell us, we won't know how much money they have printed.

[SlipperySlope]

21. LOL - Which inflations numbers?

You mean the numbers that the government publishes?

The ones that exclude fuel and food since they are so volitile?
The ones that are fudged for "hedonics"?

Those numbers tell you only what they want to tell you.

[0007]

23. John Snow was on tv last week telling us that it doesn't get

any better.

We're so screwed.

[ChairmanAgnostic]

25. Old school econ. If the value of the dollar falls, huge debts

mean much less. Of course, the damage done to the lowest income earners is just a side-effect. not to mention much higher interest rates, inflation and instability in foreign relations.

[Kolesar]

27. That link crashed my web browser--twice

An omen?

[KittyWampus]

28. Can An Economically Savvy DU'er Explain This In Everyday Terms

as if they were talking to an idiot (Me!) :)

[DavidMS]

29. Weakening the dollar

isn't a bad thing (in and of itself). It will hurt but is necessary to increase american competativeness as an exporter an reduce imports. It also will force reductions in govermental debit.

That said, we are still going to be in trouble and it still will hurt. Hopefully american banks are suficently solvent as are major companies. A suden decline in the dollar (the bush admin messes up managing it) will put alot of stress on the dollar and can cause highly leveraged companies and those with shaky alance sheets to fail.

The other benifit is that as the Yuan apreicates agains the dollar cheap junk from China will become more expensive junk from China and products made in the US will be more competative.

This was needed some time ago. It will hurt more now (IMHO).

[the other one]

30. This doesn't make sense to me

If they want a weaker dollar, then what is wrong with a plunge?

[daleo]

32. They want a controlled fall

The rich will be able to take advantage of their parachutes that way. Everyone else will pluuuuuuuuuunge.

[VegasWolf]

31. Of course. He knows that he has an automatic Pretzeldental Pardon! nt