Calling an economist please

[sandnsea]

So I read an article yesterday that the low dollar actually helps US multi-nationals who earn more overseas than they do here. When they transfer their profits to US dollars, somehow they get a hidden profit in the exchange.

Then I was just reading that because of the low dollar and oil prices, other countries aren't feeling the oil squeeze the way we are. Meaning multi-natioanls's costs aren't what they are here, giving them even more of a profit edge.

Can somebody put this in simpleton's terms so I can fully grasp it. Because this would explain why the stock market is still doing okay, right? This is where the profits are coming from, right? This is the great economy that the economists are talking about, the corporate economy, not the pocketbook economy.

And it's all just more Enron-style game playing, right?

[Tempest]

1. And that's the reason why...

U.S. companies are setting up shop in tax haven countries.

They are not taxed on the overseas profits until the money comes into the U.S.

By incorporating overseas, the money never comes into the U.S.


But these same companies receive tax breaks and other favorable benefits thanks to the Repugs.

[smirkymonkey]

5. So what are the long term implications for the US Economy?

not the stock market necessarily, but the economy as a whole? It seems that, sooner or later, the whole house of cards is going to collapse. I don't see how this can be sustainable...am I missing something?

[Tempest]

6. Check out today's DU stock market watch thread

There's a lot of good information and links regarding this issue.

http://tinyurl.com/6njz4

[scurvy_n_disastrous]

2. touchdown! How long? Not Long.

also thus far they have been reliant on us consumers and foreign purchasers of our debt. However, 2 things: how long can it last (see greenspan's word on deficits) and read today's nyt article on credit cards + pbs tuesday evening next.

also, they are much funded by monies invested in the us (and therefore $$$) by foreigners who see their values decline and dwindle.

There's more, but that's already plenty to consider the current situation unsustainable.

How long? Not Long.

[Tempest]

3. Also take into consideration the mortgage bubble

Very soon the mortgage industry bubble, the lynchpin of the U.S. economy, will burst as interest rates are raised to keep foreign investors from bailing out on the U.S. treasury debt instruments.

Things are going to get very ugly, very soon.

[Robert Oak]

4. give a link?

Probably because all of their money is tied up overseas and the
dollar is declining means they get a higher return for their initial
dollar investment.

Oil is traded in dollars, yet because the dollar is declining against
other currencies the true "value" of the dollar is less and thus
oil costs "more" in comparison to other currencies who's "value" has
increased.

In other words, 1 year ago 1 dollar = .98 Euro...they put all of their
cash into Euros so now when they do to exchange, they get 30% more
dollars than 1 year ago.

Plus on an international market, they can get more "value" for
their goods because those markets are buying those goods in Euros,
Yen or whatever, which have now increased in value against the dollar.
which in the US domestic market, looks like their profits increased
because they have made "more dollars".