The dollar is loonie....

  1. Loonie's rise latest sign of our dollar's fall

    U.S. tumble affects everyone from shoppers to investors

    The American dollar is tumbling around the world.
    On Thursday it reached parity with the Canadian dollar for the first time in 30 years and hit its lowest level yet against the euro, also dipping relative to the British pound and hitting a nine-year low against the Indian rupee.
    Parity means one Canadian dollar buys one U.S. dollar, so a bottle of maple syrup could cost an American as much in Toronto as it does in New York.

    It is even worse:

    They broke out the Moosehead beer Thursday in the Chicago office of BMO (Bank of Montreal) Capital Markets.

    For the first time in nearly 31 years, it look less than one Canadian dollar to buy one U.S. dollar. The loonie, as the Canadian currency is known, broke the greenback.,6422707.story

    Even more troubling is the 1.4/1 euro rate. All the so called uncompetitive social democracies are now considered a better value and safer haven than the American economy.
    Last edit by HM2VikingRN on Sep 21, '07
  2. 15 Comments

  3. by   CHATSDALE
    you don't know whitch was to jump, invest???stick it in your mattress???
  4. by   ZASHAGALKA
    There is a balance to all things, even the dollar.

    A lower valued dollar has some benefits and some disadvantages.

    A higher valued dollar has some benefits and some disadvantages.

    The trick is balance.

    Here's the thing: strict libertarians will dismiss currency as 'fiat money'. It's not exactly true. The world money market creates a balance between currencies that requires each individual currency producer to either adopt money policy that provides the best balance in international floating rates, or, take their currency off market.

    The United States has several distinct advantages with its currency. We have been the economic standard bearer. THAT is why several nations do not even have their own currency; they just use ours (I think I read that is the case in 19 other nations). We have several distinct disadvantages: a trade inbalance and an addiction to debt. That is worrysome, from an international money market perspective.

    In addition, China Yuan isn't free floated at all. They have taken a third route, in between free floating their currency on the international market and taking their marbles, as it were, and staying home. China's solution is to directly link the Yuan to the dollar.

    Indeed, Congress has addressed the possibility of penalizing China's trade relationship in order to encourage them to unlink the Yuan from the Dollar.

    The bottom line is this: been to Disney World lately? It's flooded with foreigners. No, more so than usual. A cheap dollar has been good for attacting business here. It's bad if you are trying to sell YOUR product, produced with relatively higher valued home currency, in the U.S.

    So, if you have a problem with a huge trade inbalance, supply and demand tends to move towards balance. The result of that is monetary floats that push the curve back the other way. A lower valued dollar means that American products are cheaper abroad and foreign products are more expensive here. Doesn't that sound like a recipe to address trade inbalance that goes the other way.

    You make it sound like there is a prestige thing involved with attaining higher relative value. The trick isn't comparative value but a balance of good currency positioning. Your article, complete with celebrating Canadians makes a point. It's just a point not vested in reality. There is a REASON why the dollar has fallen, and it has to do with achieving the best balance considering our trade inbalance.

    It might be a long term problem that the dollar is falling. That, however, is not the direct problem - it's just a symptom. The REAL problems are trade inbalance and runaway debt. If it truly bothers you, there are a few ways we can deal with it.

    1. Stop importing so much. To do that, the gov't would have to dictate spending habits to its Citizens. Impossible outside of tyranny.

    2. Take a knife to the Federal Monster. Reduce the debt. Notice, I didn't say the current deficit; I said the debt. Hold Federal Spending to current levels, for the next 10 yrs, allowing inflation to create budget attrition. Thereafter, freeze annual budgets indefinitely to increases at 0.01% below inflation, creating long term, if slower, attrition. Use the balance to pay on the debt. As Dave Ramsey would say, we should 'snowball' our national debt.

    A serious attack on the debt would do wonders for the dollar.

    Kill entitlements. Or don't complain about the results of them. This dollar thing - it's one of those results.

    Last edit by ZASHAGALKA on Sep 22, '07
  5. by   Spidey's mom
    Quote from ZASHAGALKA

    Kill entitlements.


    Yes, please. And "earmarks" or PORK.

  6. by   HM2VikingRN
    The real answer is to resume responsible tax and spending policies.

    Entitlements and pork are in the eye of the beholder.
  7. by   ZASHAGALKA
    Quote from HM2Viking
    The real answer is to resume responsible tax and spending policies.

    Entitlements and pork are in the eye of the beholder.
    There is nothing responsible about the way the gov't taxes or spends money. It is out of control beyond any reasonable rationality. Responsible tax and spending equals both taxing less AND spending less. Far less.

    Tell me, what exactly, is responsible about a $9,000,000,000,000 debt? If we paid down 90 BILLION a year, assuming we are keeping up with interest in the annual budget, it would take 100 yrs to pay it off. Think about that. See a billion here and a billion there, and pretty soon, we're talking about real money. The current debt is 3 times the annual gov't expenditures. Tell me, how many of YOU have a debt load at 300% of your current annual salary. Is that, reasonable?

    I disagree about the eye of the beholder thingy. The gov't is spending MY money. I'm entitled to have my eye on it. This gov't spending attitude of 'price is no object; I'm not paying for it' has to end.

    It's not too much to demand that the government be extremely frugal with my money.

    As far as the eye of the beholder thing. In MY mind's eye, the gov't wastes most of the money it spends. I think we should kill about half the cabinet level positions and eliminate about 2/3rds of all federal programs, along with about half of federal spending. I didn't advocate that, however, even though I truly believe it. Freezing current federal spending for a decade - what I DID advocate - that was a generous start. Generous in that the gov't would still get too much money under such a scheme.

    I heard Nancy Pelosi defend pork recently. No offense, but I find it offensive when gov't arrogantly dismisses my input into how my tax dollars are spent.

    The entire beast of gov't needs to go on a massive diet. You couldn't really starve the beast, even if you starved it. That being the case, the less, the better.

    Last edit by ZASHAGALKA on Sep 22, '07
  8. by   Spidey's mom

    I jumped up, wooted and started dancing my friend!!!!

  9. by   Roy Fokker
    Quote from ZASHAGALKA
    Here's the thing: strict libertarians will dismiss currency as 'fiat money'. It's not exactly true.
    Sorry, but that is absolutely incorrect.

    libertarians don't dismiss "currency" as "fiat money". libertarians have never had problems with sound money or money backed to fixed assets (ideally precious metals). Most American libertarians simply want government to follow what is outlined in the Constitution, a document which incidentally all citizens claim they love and honor.

    Currency is just a means of exchange - a highly streamlined, "convenient" system of barter. Rather than go back to the days of "Two chickens for your pound of rice", we today say "my certificates of precious substance in exchange for your pound of rice" - the "certificates" of course being currency notes backed by substance.... not government "fiat":

    Fiat money or fiat currency, usually paper money, is a type of currency whose only value is that a government made a fiat (i.e. decreed) that the money is a legal method of exchange. Unlike commodity money or representative money it is not based in another commodity such as gold or silver and is not covered by a special reserve.
    There is only so much credit inflation the Fed can attempt - even credit based monetary systems are limit to ultimate market forces.... forces we have no way of even guesstimating now since the Fed stopped publishing M3 money supply quotes.

    Quote from ZASHAGALKA
    We have several distinct disadvantages: a trade inbalance and an addiction to debt. That is worrysome, from an international money market perspective.
    I think you've left out the biggest worry of all - monetary inflation.

    Inflation that destroys your net worth simply because of dilution of value thanks to an endless stream of "money" created out of "thin air".

    That places the very integrity of the monetary unit in question! Anybody simply has to take a look at government quoted inflation figures and compare it with their monthly expenses over the past 20 years and one can add things up for themselves - the government is simply not telling the truth about our real inflation.

    [Hint: It's not as low as the government says it is]

    Quote from ZASHAGALKA
    It might be a long term problem that the dollar is falling. That, however, is not the direct problem - it's just a symptom. The REAL problems are trade inbalance and runaway debt. If it truly bothers you, there are a few ways we can deal with it.
    Honestly, "trade imbalance" doesn't worry me. And I don't think it's a ingenuous argument to make anyway - no one loses sleep over the trade balance between California and Nevada or me and Apple, Inc.? So why the "big deal" when it's trade balance between nation-states?

    So that politicians can bang the protectionist drum and earn votes during elections (a related theme is the "Make jobs not money"/Make-Work Bias).

    The fallacy is not treating all purchases as a cost but treating foreign purchases as a cost. Anyone who consistently equated money with wealth would fear all outflows. In practice, human beings in times past and present commit the fallacy of trade balance only when countries enter the picture. This stems from the fundamental misunderstanding and misidentification of money and wealth.

    To continue this argument further (and also to illustrate the point that it's often politics, not economics that drives the "Trade Balance Bogeyman"): Trade with Canada or the UK generates only mild alarm when compared to Mexico or Japan (or China). US imports from and trade deficits with Canada exceeded those with Mexico every year from 1985 to 2004. During the mass anti-Japan hysteria of the 1980s, British foreign direct investment in the US always exceeded that of the Japanese by at least 50 percent!

    Does anyone remember boycotting Canadian goods? Or crying foul about the British? Or does foreigner only mean "those who don't look like us and don't speak English" ? Think I'm making this up? You're free to look it up.

    I find debt - particularly as a young adult - to be far more insidious. You are living your life today but spending my money. All the consumption and spending of today will show up tomorrow as bills I will have to pay. It's essentially the same as robbing from the cradle - all this is simply an extra tax burden on the youth (and work force) of tomorrow's America.

    I'm not stupid enough to say "All debt is bad". Prudence with credit can be a good thing - in fact, it can be stimulating if used right.

    But as Timothy rightly pointed out - which household will remain solvent when it's debt is over 300%? That is absolutely unsustainable - and was also the reason I believe fiat currency was not chosen when the Republic was founded: to prevent limitless credit expansion and prevent the explosion in the size, shape and function of the Federal government.

    Last edit by Roy Fokker on Sep 22, '07
  10. by   agent66
    I rejoice at this news only because I am travelling to Syracuse to shop this weekend and will get more for my dollar. However, when our dollar is worth so much, that means less americans travelling here to spend money , where it used to go further. As well as far as free trade goes, our resources and products are the same price so your gov't will buy (or should buy) its own. As a consumer in Canada and I guess Europe it is great, but in the long run not good for our economy. When our dollar was only worthy 67cents American, it was the best year ever for tourism which trickles down to many smaller businesses also. But I have to say , I hope it stays at par at least until after next week-end!
  11. by   HM2VikingRN
    [font=millertext-roman][color=#231f20]when big entrepreneurs take big risks
    [font=millertext-roman][color=#231f20]that fail, it’s amazing how often they
    [font=millertext-roman][color=#231f20]get bailed out. the history of modern
    [font=millertext-roman][color=#231f20]american business is littered with federal
    [font=millertext-roman][color=#231f20]bailouts, loan guarantees, and noquestions-
    [font=millertext-roman][color=#231f20]asked reorganizations: the
    [font=millertext-roman][color=#231f20]chrysler bailout of 1979, the savings and
    [font=millertext-roman][color=#231f20]loan bailout of 1989, the airline bailout
    [font=millertext-roman][color=#231f20]of 2001. most bailouts, however, occur
    [font=millertext-roman][color=#231f20]in the relative dark, such as the 1998
    [font=millertext-roman][color=#231f20]rescue of giant hedge fund long-term
    [font=millertext-roman][color=#231f20]capital management, the not infrequent
    [font=millertext-roman][color=#231f20]bailouts of under-funded corporate pension
    [font=millertext-roman][color=#231f20]plans by the government’s pension
    [font=millertext-roman][color=#231f20]benefit guarantee corporation, price
    [font=millertext-roman][color=#231f20]supports for big agribusinesses facing
    [font=millertext-roman][color=#231f20]market downturns, or the current bailout
    [font=millertext-roman][color=#231f20]of wall street being engineered by
    [font=millertext-roman][color=#231f20]bernanke’s fed.

    [font=millertext-roman][color=#231f20]ceo[font=millertext-roman][color=#231f20]s get away with stupid mistakes
    [font=millertext-roman][color=#231f20]all the time. some, like robert nardelli,
    [font=millertext-roman][color=#231f20]the former [font=millertext-roman][color=#231f20]ceo [font=millertext-roman][color=#231f20]of home depot, drive
    [font=millertext-roman][color=#231f20]their company’s stock so low that their
    [font=millertext-roman][color=#231f20]boards eventually oust them. but they
    [font=millertext-roman][color=#231f20]leave with eye-popping going-away
    [font=millertext-roman][color=#231f20]presents nonetheless. (nardelli got a
    [font=millertext-roman][color=#231f20]$210 million severance package.) if
    [font=millertext-roman][color=#231f20]you’re an average american who gets
    [font=millertext-roman][color=#231f20]canned from your job, even through no
    [font=millertext-roman][color=#231f20]fault of your own, you probably won’t
    [font=millertext-roman][color=#231f20]even get unemployment insurance (only
    [font=millertext-roman][color=#231f20]40 percent of job losers qualify these
    [font=millertext-roman][color=#231f20]days). conservatives tell us that unemployment
    [font=millertext-roman][color=#231f20]insurance reduces workers’
    [font=millertext-roman][color=#231f20]incentive to find a new
    [font=millertext-roman][color=#231f20]job quickly. in other
    [font=millertext-roman][color=#231f20]words, moral hazard.

    the biggest entitlement programs are for the very well to do....
    Last edit by HM2VikingRN on Sep 23, '07
  12. by   ZASHAGALKA
    Quote from Roy Fokker
    libertarians don't dismiss "currency" as "fiat money". libertarians have never had problems with sound money or money backed to fixed assets (ideally precious metals). Most American libertarians simply want government to follow what is outlined in the Constitution, a document which incidentally all citizens claim they love and honor.
    A few points.

    1. The Constitution does entitle Congress to authorize a federal reserve, much as I - like you - disagree with having such a beast.

    Article 2, Section 8
    The Congress shall have Power:

    To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

    That Congress has passed its power to the federal reserve is worrysome, but within its right. Just as the War Powers Act dumped Congressional responsibility upon the Executive. In BOTH cases, Congress has chosen to exercise its Constitutional authority by farming it out. That is a form of exercise of power, in this case a power specifically granted it as an enumerated Power.

    2. Milton Friedman, in his book, Money Mischief, goes to great lenths to point out the positive and negative aspects of monetary valuation. Fiat money has advantages, and disadvantages. So does backed currencies. Friedman points out that backed currencies can be manipulated, as well - and have been.

    He points out the inherent dangers of fiat money - namely, YOUR concern that a liberal printing press creates inflation.

    He also points out the limitations on current fiat money: the international linking of currency serves to put pressure on each individual currency producer to maintain policies that favor the international money market. In Friedman's opinion, this fact makes current 'fiat money' less manipulative than in the past.

    Look at it THIS way: your concern is that the printing presses are churning out so much money, the fed wants to hide this fact - and hide the inflation that results. However, you cannot hide this fact, for long, in the international markets. They react not only overt monetary policy, but the symptoms of such a policy. Hence, the devaluation of the dollar.

    The fed is NOT getting away with a hidden printing press. THAT is the problem. I will submit that inflationary growth is a third disadvantage of fiat money.

    I believe that the best policy would be NO federal reserve, NO control on interest rates, and a growing monetary supply set to a fixed standard, say growth at 3%, a year, fixed. I am sorry to say, however, that the current system is entrenched.

    3. Regarding trade inbalances. I will submit that such an animal is arbitrary, at best. However, because the control of fiat money lies within the international market, international trade is going to be an issue. I also pointed out that there was no real method by which to control such trade, short of tyranny, and so, I focused instead on what CAN be controlled - debt.

    The bottom line is this: I understand the inherent dangers of fiat money. Having said that, I am not a believer in the fact that backing the currency would be a better course of action. A BETTER course of action is removing the fed and fixing the growth of money to an immovable standard. Money MUST expand, or else, the economy cannot expand. Both should be allowed to do so at a reasonable, and fixed rate.

    A consistent and fixed rate of growth would go far to reduce the number of recessions and downturns. You don't need a fed for that, only a Congress with the resolve to do its duty. Unfortunately, there is no such animal.

  13. by   fergus51
    Screws me over. I use American money to pay on Canadian debt.

    It's also changed my travel plans for the spring. No european vacation when the dollar is so low. We're going somewhere in Asia instead.
  14. by   ZASHAGALKA
    I know some of you just love me quoting from the Heritage Foundation . . .

    November 6, 2007
    Tax Code Is Big Reason For Weak Dollar

    "Currencies rise and fall against one another in international exchange markets on an almost daily basis and for a variety of reasons — including the recent expansion of the money supply by the Federal Reserve.

    But the long-term weakness of the dollar is fundamentally the result of two failings.

    First, we Americans do not save enough to meet the economy's requirements for capital investments."

    . . .

    (Second,) "Federal budget deficits are dissaving by the government in the same way that individuals dissave when they spend more than they earn. Most Americans follow the government's example.

    Those who rebel and who do save and invest are punished with extra taxes. The government has for decades deliberately taxed income that is saved and invested far more heavily than income that is immediately consumed.

    Gross private savings has been less than gross private investment for 26 of the past 30 years.

    Not only do taxes on savings and investment weaken the dollar, they slow the growth of the private economy — often costing Americans $3 billion in lost incomes and jobs for every $1 billion of revenue yield to the government. The total cost of tax-induced collateral damage to the economy is about $2.5 trillion per year."

    Both problems (overconsumption, and undersavings) with dollar weakness, cured by replacing the IRS with a FairTax (consumption tax) that serves to discourage consumption and encourage savings. Make all savings tax free. Kill the IRS. Every other nation in the world will be scrambling to catch up - and will be worrying about the value of THEIR currency, as a result.

    Last edit by ZASHAGALKA on Nov 7, '07