Asia currencies and eurozone rates send dollar to low (FT-scary)

[TexasLawyer]

World / International economy

Asia currencies and eurozone rates send dollar to low
By Chris Giles in London and Jo Johnson and Martin Wolf in Hyderabad

Published: May 4 2006 20:50 | Last updated: May 4 2006 20:50

<snip> {A} tough statement by Jean-Claude Trichet, president of the European Central Bank, warning that eurozone interest rates would almost certainly rise next month, sent the dollar to a new one-year low against the euro later in the London day, leading to further dollar weakness against all leading currencies.

The US currency has been falling since March and its decline accelerated after last month’s meetings of the International Monetary Fund and the group of seven leading economies concentrated on reducing the US trade deficit and the related surpluses in Asia and among oil producers.

Asian ministers have repeatedly tried to limit the appreciation of their currencies verbally and by buying dollars since an annex to the G7 statement said that “in emerging Asia, particularly China, greater flexibility in exchange rates is critical”.

<snip>

“I heard rumours that the US dollar might depreciate by 25 per cent,” he said. “This would have a big impact on countries like China because it would not only affect the value of assets invested in the US.”

<snip>


http://news.ft.com/cms/s/0c495a8e-dba5-11da-98a8-0000779e2340.html

[UpInArms]

1. thanks for the post, TexasLawyer

I have been quite concerned about the dollar for some time now - this is going to make the 80s look good by comparison.

:(

[Skink]

2. Glad I can afford Gold on 7 bucks an hour.

[BooScout]

3. This is soooooo depressing.

I have money in the US I need to transfer to the UK in the fall. I am soooooo gonna get screwed.:-(

[AngryAmish]

14. Hedge

[dipsydoodle]

4. Simple but maybe odd comparison

to help demonstrate the situation.

When I started buying banjos from the USA Feb. '02 the exchange rate was £1=$1.40
Now,150 or so banjos later i.e. today it's £1=£1.85

That is a very dramatic change. In very simple terms a $600 banjo in 2002 would have cost me
c. £ 430 and now it would be only £ 325'ish. As I said it's an odd example because I've used a <sort of> non replaceable product - pre-1899 banjo. Same does however apply to Converse sneekers.

From the above you can deduce that the US$ has already fallen by c. 25% between early 2002 and today. A further 25% drop would reduce it's value to 56% of 2002 value.

The greatest trisk , I would think , would be that in the event of a slide the situation caused China and co. to dump some of their US$ holdings. If so then that would make the whole issue a self fulfilled prophecy.

[DoYouEverWonder]

5. The up side to a devalued dollar

Is that more people will be coming to the US for vacactions and to buy things.

Last time this happened FL was overrun by Germans and Brits.

[dipsydoodle]

6. I agree and hope that will be so.

I love visiting the USA though not FL these days. I used to go to WA and CA etc for swing dance camps but now I don't dance too much it's more likely to be OH and KY where I'm as happy as a pig in shit. Such nice folk in the mid west.

[DoYouEverWonder]

7. There's a huge dance community down here

I play old time fiddle and my husband use to dance with a group that does Appalachian style clogging.

There are so many different dances around here I can't keep track anymore, but I think the swing dancers get together at least once a week. Maybe you might want to rethink visiting FL again?

[dipsydoodle]

10. There wasn't too much if any

swing dancing back in 2000 which was last time I visted FL.

Old time fiddle - good on you. Now you know why I like KY. Nowadays I prefer old time american traditional music mainly cos I've c. 150 banjos - I'm a collector. We had Brad Leftwich here last month - truly excellent. He was playing with Debbie McClatchy etc. I've also got the advantage here that I can listen to Tom Paley almost any Sunday night I chose because he plays in a session at a pub in north London. Nowadays Tom usually only plays fiddle but when he does pick up a 5 string everyone sits there in stunned silence - man's a genius. There's another american guy named Casper who teaches clogging / flat footing at Cecil Sharp house every week. I like watching flat footing but it looks like instant cramp to me so I avoid it. I can see from some of the steps that clogging was probably the true origin some lindy Charleston steps.

Have you seen the Bascomb Lamar Lunsford DVD ? Beautiful old film footage of fiddlers and banjo players in the Appalachians and the history of the Ashe County NC festival.

Good to know we have similar interests outside of DU. My favorite fiddle number is Bonapartes Retreat - the original vesion where the guy says "Here's the boney part"

Fly away pretty little miss........ :)

[mopinko]

21. my brother in law made banjoes for a while. buy one if you see it

his name is george becker. he made miniture furniture, mostly. he made a dozen or so extremely beautiful banjoes, one that he sold to steven stills. lots of pearl, and 40's gibson tone rings. gorgeous.

[dipsydoodle]

31. Sounds like

a bluegrass banjo if it's got a Gibson tone ring. I'm into +100 year old time open backs but I've made a note of his name. Thanks.

[mopinko]

32. yup, bluegrass

i can't remember who else bought them, but there was a big blue grass player. he hung out with a bunch of players in denver. this was back in the early 80's i think.
his miniatures were spectacular, especially his miniature instruments. he has a harpsichord in colleen moore's fairy castle. but he just got tired of doing it. mostly got tired of the road, shows and all that.

[DoYouEverWonder]

27. OMG, your not going to believe this

I'm going to be hosting Tom Paley at my home in Dec for a house concert and a workshop. I'm am so excited because he's one of my big old time heros. Lucky you to get to see him whenever you wish.

I'll have to check of the Bascomb Lamar DVD - Sounds like something that is a must see for us old time freaks.

As far as fiddling, I've always been drawn to WV fiddling, especially Wilson Douglas. They can keep that Tommy Jarrell stuff.

Fly around my daisy....

[dipsydoodle]

30. He really is a lovely fella

He's a pal of my mate Dave Stacey who is both a luthier and player. Dave supercharged the Bacon ff Pro he made from a tenor for Debbie McClatchy - it's her workhorse. Couple of weeks back there was a lot of leg pulling going on in the pub because Tom was doing a stint the next day at an Ikea furniture store and as he left they were all shouting out "enjoy the meatballs !"

I got my Lunsford DVD from here : http://www.customflix.com/204610 and I think my CD came from Folkways. There is also another film you might like called Songcatcher. Details are here : http://us.imdb.com/title/tt0210299/

Stay in touch - us old timers just gotts stick toghether !

[amandabeech]

19. If you like the Midwest, you might explore it a bit more.

Here are a few ideas.

Drop by Cleveland for the Rock and Roll Museum.

Keep going west down the Ohio turnpike to Sandusky for the Cedar Point amusement park. It has plenty of rides to make you dizzy.

The Henry Ford museum in Dearborn is worth a day, if you love everything that has an internal combustion engine. The accompanying Greenfield Village recreates a 19th century village, but also has the labs of Thomas Edison, for example. Then check out the Detroit Institute of Art for the magnificent Diego Rivera mural, among other goodies.

The eastern Shore of Lake Michigan has gorgeous beaches of clean golden-tan sand. It's Chicago and Detroit's version of the Hamptons. Try Saugatuk for art galleries, Pentwater and Ludington for the small town experience, and Traverse City for a crowded yuppie paradise.

Then there's Chicago. Blues and food, food and Blues. Plus the Art Institute of Chicago for one of the best collection of impressionist and post-impressionist collection outside Paris, IMHO.

PM me if you wish.

Yes, I'm a native.

[1932]

9. Two other up-sides:

It might help US exporters, which could reduce the trade imbalance (but it's going to make it expensive to import things, like oil). It will make it easier to pay off existing debts to foreign countries/it will screw people who hold US debt overseas (but will make it hard to get any further lines of credit/sell more t-bills).

[dipsydoodle]

13. I agree entirely

but to export you've gotta make stuff and a lot of your goods are now made abroad. I'm obviously not including grain etc in that statement. It horrifies me that, for example, Converse Jack Purcell sneakers are now made in China. What a sick farce.

I suppose you know the history of why a load of stuff was origally moved out to Indonesia - the multis said here's the money but this is what you'll pay for labour. Hence their sweatshops, child labour and definately no unions.

I guess the reason that things moved on and China became predominant was they undercut Indonesia.

Little fleas have smaller fleas upon theier backs to bite 'um and smaller fleas have smaller fleas and so ad infinitum............

[BooScout]

12. Not gonna happen...

With the new Biometric passports and vis requirements people are going to go elsewhere. The US loses all the way around.

[dipsydoodle]

18. I'm not too sure

about those passports. Having one wouldn't really bother me and neither would an ID card of some sort. The visa requirement if they stop using the onboard waivers is a different matter although I've actually still got a multiple entry indefinate visa from 1981 which apparently remains valid as long as I carry the original passport in which it is stamped.

What you doing in Wales ? Sheep farming ? :)

[BooScout]

37. Hey!

Don't diss our sheep!:9

Moved to Wales because I married a Welshman.

[amandabeech]

16. Most of what they buy will be made elsewhere, unfortunately.

We don't produce many consumer goods here, unfortunately.

However, if they eat like crazy and drink U.S. boutique beer, California wine and Kentucky bourbon, we might be able to make a little dough on tangibles.

Let's hope that they use lots of room service, spend at ton at Disney and on Broadway shows.

[mopinko]

17. we love it in chicago

it's great for the art market.

[Nomen Tuum]

8. You ain't seen NOTHING yet folks!

Just wait for the Republicans to add ANOTHER trillion dollars of red ink next year, and the year after that and the year after that...

[gordianot]

25. I can't stand those tax and spend ,no rich tax Republicans.

I used that line on my wifes' brother, (I do not use the term brother in law for pukes) to good effect.

[DUHandle]

11. How can you balance the check book when you don’t write in the numbers?

M3 isn’t published anymore and the accuracy of the GDP has been questioned.

Good looking numbers are simply that and nothing you can take to the bank.

[AngryAmish]

15. This is not scary, this is good

[ItsTheMediaStupid]

20. Would you please explain.

Right now, I'm terrified of a 50% or more drop in the dollar. That would double gas prices.

How is this good? Yes, our exports might increase some, but that is not a big item in the grand scheme of things.

[AngryAmish]

26. Short answer

Imports cost more, exports cost less.

We are spending too much money in this country. This will put an end to it.

The dollar has been overvalued for a long time. It is overvalued because it allows cheap loans to US (US Gov't and consumer lending) and we like it. It is overvalued because people that import stuff to US (Japan, China, Middle East) want a place to sell their stuff. Everyone is happy, right? Well it can't go on forever and there needs to be a correction. It is happening now and slowly which is how it should be done.

There are so many doom-sayers around here. As I write this is see stock market is near a record high. If the economy is crashing why would everyone be investing in American companys?

[ItsTheMediaStupid]

33. The stock market is up because of corporate profits

Corporate profits are up because the workers in the US are being squeezed.

Wages adjusted for inflation are actually down over the last year. This is reflected in other areas of the economy. The savings rate in the US is now negative. People aren't able to save, they are pulling money out of their homes and out of savings accounts to live.

Something else makes me panicky. Oil is going to be traded in Euros soon and the government has stopped publishing some of their macroeconomic data, M3 to be precise. I suspect we may be printing money to cover some of the huge debts this admin has run up.

[TexasLawyer]

29. Yes-- gas prices!!!

A lot of people don't realize that the shrinking dollar is a huge part of higher gas prices.

One third of US crude is supplied from overseas. Saudis, Nigerians, etc.. want more dollars just to stay even with what they were paid last year. Domestic suppliers get a free float on their own US sales prices, because they get to base their own domestic US crude sales prices on world prices.

Combine this with OPEC cartel restrictions, international tensions esp. in the Middle East, and increased demand in China (because the Chinese are flush with American dollars and now want to spend them) and you have the recipe for sustained high oil prices.

[amandabeech]

22. Euroland and Canada are upset with the Asians.

They want the dollar to decline against ALL currencies, but the Asians don't want to cooperate. It will be interesting to see how that battle is waged.

[gordianot]

23. If so there goes my retirement plans in a flash.

No travel for Gordianot. I ALSO KNOW WHO IS RESPONSIBLE FOR THIS MESS.

[gordianot]

24. Self delete duplicate

[Kailassa]

28. When I started playing Magic Online in 2002,

digital packs cost nearly twice what I could buy "real" ones for, in Australian dollars.

Now they cost a little over half as much.

[spinbaby]

34. Against the yen

112 yen per dollar today. Not a month ago, you got 119 per dollar. The dollar is plummeting.

[Fiendish Thingy]

35. Does $ falling 25% = 25% inflation?

Can any of you business econ types answer this?

[Robbien]

36. On consumer goods imported from countries who do not base

their money on the dollar, yes it does. Almost all our consumer goods are imported so some will cost more, such as cars. By the way China is pegged to the dollar so Walmart shoppers are safe.

[aint_no_life_nowhere]

38. What will this do to the price of oil (since it is traded in dollars)?

I have read that the dramatic rise in oil prices has been due to the falling value of the dollar (oil producing countries must keep raising the price per barrel to keep receiving the same value as the dollar falls against other currencies). And also I have read that the falling dollar has been due in part to the massive budget and trade deficits run up during the Bush Presidency as the U.S. must keep printing up money non-stop to keep servicing its massive debt.