Weak Dollar Costs U.S. Economy Its World No. 1 Spot

[DeepModem Mom]

Source: NYT/Reuters

By REUTERS
Published: March 14, 2008

PARIS (Reuters) - The U.S. economy lost the title of "world's biggest" to the euro zone this week as the value of the dollar slumped in currency markets.

Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the euro overtook that of the United States when the European currency surged to a record high of more than $1.56 per euro.

"The curious outcome of breaching this latest milestone is that the size of the euro zone's annual output has now exceeded that of the U.S.," the economics department of Goldman Sachs, the Wall Street investment bank, said in a note to clients.

Taking official estimates of 2007 GDP -- $13,843,800 billion for the United States and 8,847,889.1 billion euros for the euro zone -- the economy of the latter passed the United States once converted into dollars, shortly after the euro topped $1.56.

The dollar sank to $1.5688 per euro late in European trading hours on Friday, at which rate the euro zone's 2007 GDP equates to $13,880,568.4 billion....

Read more: http://www.nytimes.com/reuters/news/news-economy-world-biggest.html

[Lasher]

1. It was only a matter of time.

The economy couldn't hold up against all this trickle-down forever.

[melody]

2. Gosh, how surprising

George did his job.

[Benhurst]

3. We're Number 2 !!!

:patriot:
World's Only Superpower
and Second Rate Nation!

[krkaufman]

23. for now...

(lowering my voice, and singing...)

"How loooow can we gooo?"

[MilesColtrane]

37. U. S. A.! U. S. A.! U. S. A.!

Another Bush legacy...

[Supersedeas]

4. nothing to see here -- feed them more Bush vagaries and Condi platitudes

[saigon68]

36. Condi platitudes

What a Bright smiling face

[inMD]

5. The European Union is a Country now?

Somebody better let them know.

[DavidDvorkin]

8. This refers to the Euro Zone, which is smaller than the EU

Ignoring the question of whether the Euro Zone should be considered as a whole in such a comparison, if the UK, which has Europe's second-largest economy, were included, the US would be even further behind that combined economy.

[inMD]

17. Oh, I'm sorry

now I understand, the Euro Zone is a country.

Lets continue compare apples to oranges. The US isn't even #2. I'm sure the middle east has a larger economy, and I'm pretty sure Asia is ahead of us too. I'm thinking we edge out Africa, but the South America/Canada zone is coming up strong

I hate the dollar is weak and getting weaker. And oil climbing higher and higher. And we are getting squeezed more and more. And it's no secret what moron in the White House is leading they way to economic disaster. But I don't think comparing the US economy to a group of countries combined economy to make a point that should be obvious is needed.

[Selatius]

24. If you wanted to compare currencies and all trade that takes place under it, the comparison is valid

The Eurozone is considered a single entity in that regard because they all use the Euro as a currency. In that regard, we don't separate out the state of Massachusetts from the state of Texas in terms of calculating output the same as you don't separate out France from Germany.

[Ghost Dog]

27. Well, as regards trade you have to be careful, Selatius,

since some statistics refer to trade between EU or EZ countries (Intra-EU or EZ trade), rather than trade between the EU or EZ and the rest of the world. So there's scope for playing around with the numbers there.

As I understand it, it was part of the plan from the beginning to potentiate Europe's relative self-sufficiency and thus resilience in the face of global uncertainties through the establishment of the internal 'common market'.

As well as hoping to reduce the likelihood of us coming again to blows amongst ourselves, of course. The UK, however, still appears to be relatively unreliable.

And as well as improving Europe's position viz-a-vis others.

[tabasco]

26. They are a unified, cooperative competitor to the USA.

What the fuck difference does it mean if it is a "country" or not?

[daleo]

29. Don't worry, be happy. n/t

[Ghost Dog]

12. How many "States", "Commonwealths", etc. in the USA?

The EU(+) has for a while been a united economic area, larger, actually, than the euro zone (as stated below, sorry, above).

As for European Nations, there are rather more of those than there are States... but that's maybe an outdated concept.

But don't worry (for now): Although the EU's population is larger, per head of capita your rich still own and consume more...

[inMD]

18. If our economies are by state

then we never were #1 to begin with.

I'm worried every day more and more. Foreclosures. Gas. Food. Salaries. Jobs. All bad and getting worse. I don't need false comparisons to convince me how bad things are.

Frankly, if you do a GDP per capita (which is a much better comparison) where do we fall then? I don't even know.

[Ghost Dog]

20. I feel for you. See here if you've the stomach for it:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3226076#3226919

:hug: :-(

[no_hypocrisy]

6. Doesn't matter. God loves US more than the rest of 'em.

[politicaholic]

7. We're Number 2! We're Number 2!...

Bush is hitting a plateau of failure not seen in modern times. There are guys that can drag down their friends, families, and coworkers in tail spins into loserness, but taking the US economy with you into "Utterly-pathetic-loserville" is prize worthy. Really, Bush should get some sort of trophy of a dude bowling a globe or something. A truly spectacular non-achievement in a mediocre life of failure after failure. Good job Mr. President.

[DeepModem Mom]

11. Shrub failed upward, all the way to the very TOP! nt

[politicaholic]

14. Spectacular failure doesn't happen without spectacular opportunity. ;-) n/t

[Ghost Dog]

15. A prize? How about:

http://en.wikipedia.org/wiki/Ig_Nobel_Prize

Nah. Too good for him and his cohorts. Here:

http://www.icc-cpi.int/

[Gman]

9. Now what was that about American hegemony in Europe?

oh.. never mind.

[sarcasmo]

10. The Free Falling dollar is going to do more damage to this country than many realize.

Kick and Nom. Anyone who tells you this is the land of the free is your enemy.

[PA Democrat]

16. Considering how much of what we now buy is imported, yes it's going to hurt.

The US imports and exports of food are almost equal. We imported $82 billion in food in 2007. That's another reason you are seeing prices rising at the grocery store.

[bikebloke]

13. Venezuela's Moving to the Euro for its Oil

I couldn't find the story in any English sources, but here it is in Swedish.

http://www.dn.se/DNet/jsp/polopoly.jsp?d=3130&a=752253

Hey, what's another invasion of a sovereign nation. :sarcasm:

[Ghost Dog]

19. Uh, I think that sould read "moving to the Euro"

but it's supposed to be hush-hush.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3224350&mesg_id=3225417

After all:

[bikebloke]

21. Oops, thanks.

I fixed it.

[truthisfreedom]

22. Congrats, bush! You brought us down to number 2, and everyone in the world thinks

we're a big number 2 as well!

[magellan]

33. I'd laugh if that weren't the sad truth. n/t

[tabasco]

25. Thanks MBA President!

Thanks republican voters and non-voters!

[maxsolomon]

28. end the pointless iraq occupation & cut the military by 1/3

end the subsidies for the wealthy, tax corporate profits fairly, and watch the dollar climb, peak oil or not.

[lifesbeautifulmagic]

30. yes, but we are number one in peoples incarcerated!

take THAT you cheese eating surrender monkeys! USA USA!

[Zorra]

31. Chalk another one up for the Bu*h legacy. n/t

[Psephos]

32. EZ is 15 countries, 325 million people...and it still took a 50% currency swing to do it.

The US is one country, 300 million people.

Move along here, nothing to see except a slow news day.

[magellan]

34. A 50% currency swing in just nine years

...and you consider it a slow news day. Unbelievable.

[Psephos]

35. What's "unbelievable" is that you think 15 countries = 1 country

Talk about arbitrary comparisons! Look up Euro Zone on, e.g., Wikipedia.

You might also examine the history of the dollar over the past 40 years. You'll see that it has swung several times from powerful to weak and back again. Yes, even more dramatically than the present situation. I remember many of the same chicken-little pronouncements in the early 1980s. By the late 80s, the dollar was again on top and all those same arguments had evaporated like rain puddles in the sun.

Currency valuations are self-correcting over the long run. It's as natural as the alternation between summer and winter, and serves much the same purpose.

I realize that doesn't fit with some current political narratives but then, political narratives are by definition belief systems. Personally, I gauge the value of an argument by the amount of emotion expended on its defense. Lots of emotion (especially the self-righteous kind) = paucity of clear evidence. No one argues over whether the Moon circles the Earth.

Meanwhile, the weak dollar is driving demand for U.S. exports, and making it less attractive to outsource jobs. It's also making the importation of cheap foreign goods less attractive. A good thing indeed, especially if, like me, you see a nasty little recession looming ahead.

The dollar will swing back eventually. If we can put a Democrat in the White House this fall it will happen sooner rather than later.

[MilesColtrane]

38. Nothing lasts forever.

The relative good times and high standard of living that Americans have experienced since the end of WWII are linked to the dollar's status as the world's currency reserve.

As countries shift their reserves to Euros, the enormous United States trade deficit finally begins eating away at its economy.

The world reserve shift was seen coming in 2005.

The paper, released by the National Bureau of Economic Research this week, outlined two key criteria for a change of the current status quo -- where about two thirds of world's central bank reserves are denominated in the U.S. currency.

First was the scope for expansion of the euro zone so that it tops the gross domestic product of the United States and envelops London's dominant international financial center.

Part of the first criterion has now been met with Eurozone GDP surpassing the U.S.'s. The U.K. however has not, as yet, adopted the Euro.

Second is the role of U.S. economic policies and the risk that they might undermine confidence in the dollar through inflation and depreciation.

That's a check on this one too. Huge BushCo budget and trade deficits (including a never ending war) have weakened the dollar, and inflation is just beginning to rise after staying at a relatively low rate for a while. (For what it's worth, I happen to think we're going to see double digits like the 70's}

As long as oil continues to be pegged to the dollar, it will continue to be the dominant reserve currency.

But, there have been attempts to change that.

It's no coincidence that the United States invaded Iraq after it became the first OPEC country to begin pricing it's oil in, and begin switching it's currency reserves to, the Euro. (That's one of the first things that changed after the invasion. Iraq oil is sold for dollars now.)

Iran has already switched it's currency reserves to the Euro and on December 8, 2007 it converted all of its oil export payments to non-dollar currencies. Last month it also opened a petroleum commodity exchange that deals only in non-dollar currencies.

Venezuela has now begun to require Euros for some of it's oil contracts.

Bush and Cheney believe that the United States can bomb and invade enough countries to maintain it's economic status in the world.
In fact, that policy is bringing about it's fall.

on edit: here's a link to the story citing the 2005 NBER paper above

http://www.lafollette.wisc.edu/calendar-news/2005/Chinn_Frankel_europaper_reuters.pdf

[KansDem]

39. Assholes of the Supreme Court: This is why you don't put the loser in the White House!

Savvy?

[unkachuck]

40. and how many....

....troops and bases do we still have in Europe?....the Europeans get Universal Healthcare and we get the tab for our Universal Corporate Military....