Re: Excuse me while I call this shot Fair enough. I'm on. This is one prediction I'd like to be wrong on.
Re: Excuse me while I call this shot I want to bet 10 bucks against you too. Sounds like a sure thing. The Dollar will stay the reserve currency until the US loses a major war.
I am not certain, but I believe that most of the domestic plants operated by foreign automakers employ non-union labor. The Mercedes plant in Alabama is one of them.
So the dollar will rise, it will be cheaper to export, the number of jobs will rise, it will be more expensive to import, goods will become more expensive . . . . . . . . I'm missing the part that is a surprise.
That itty bitty thing about the US debt being covered by foreign investments. Oh yea, that little issue.
Re: Excuse me while I call this shot What if they use those dollars to buy our stuff? Full employment! WhoHoo!
So how long ago was it that US debt being covered by foreign investments? Since '81 I believe. I find that the ignorance of the BS poster pool is clearest when discussing monitory issues. Nothing is more devoid of emotional content that currency exchanges yet the posts are exactly the opposite. Most of you project like hell on a 1% change in rates. I hope you work for a living and don't invest. I hope you have a company retirement plan and don't have a 401k because most of you can't objectively analyze a thing. It's simple really. The US is a monument of stability. Foreigners want to keep their cash here because it's safe. That means we have lots of foreign cash. That makes foreign goods cheap and it's hard to employ Americans. Other countries, like China and formerly Japan, think that dollars are valuable in and of themselves. They aren’t valuable except to keep reserves. So they over-accumulate dollars, thinking it "makes them stronger". This over accumulation leads to US unemployment and cheep imported goods. Eventually they realize they've been working for us (US) for free, getting nothing in return, except for mythical "strength". Then currency rates adjust. Americans go back to work and their countries then have a problem with unemployment. Simple. Remember, the goods consumed have to be produced in the year in which they are consumed. Capitol is used to create the means of production. So, the past four years, the US has been consuming AND using capitol to create new technologies. Win-win for the US.
My portfolio actually shows average returns 12-19% above well performing mutual funds. I appreciate your concerm for my retirement fund though. The US has been a monument of stability. However the economic actions taken during the war and just plain poor spending habits have put this in doubt. Raising the spending ceiling and promising tax cuts while the dollar slides is pure stupidity. With the dollar is more volitile at this point that in has been for a long, long time. Foreign nations will be wary of picking up US debt till the dollar reaches a low. At that point they will begin to buy up the debt again. There will, however, be a point between the two that stands to affect the economy. I'm not saying there's gonna be a crash, simply that there will come a point where a natural adjustment is going to take place...unless Bush raises taxes and curbs spending a bit. This has been true in the past, but the debt and spending of the US has never been so high in the past. Couple that with a horrendous foreign policy, war on two...technically three fronts and possible more and you come away with a situation the US has never been in before. It's going to affect the economy, the question is, how much.
They aren't "over accumulating" as a strategy. If you send stuff to America, we give you US dollars. They can't help but have lots of US dollars. It won't be that simple. Americans are living large because we take in mountains of stuff and send out green paper. Right now there are 80 ships parked outside San Francisco Bay because there aren't enough port facilities to unload all the Chinese Christmas crap. When foreign nations no longer want our green paper, it means the standard of living in the US is going to go way down.
When China no longer wants green paper . . . . . . . they'll wonder why their leaders wasted a lot of their time getting green paper by giving us a lot of $5 Christmas toys.
If you someone has a broken foot, would you suggest that they "just grow out of it?" Overall our economy will get by just fine, but there will continue to be "adjustments" that we certain sectors must prepare for. The United States has been able to run both a large trade and government deficits due to our large economy and the strength of our financial institutions. They make it attractive for foreigners to reinvest our net foreign asset deficit. However the more the EU and Asia gets our their acts together, the less of a competitive advantage we will enjoy. Our manufacturing will continue to suffer, but look for our services to keep on growing. What needs to be done to avoid dramatic adjustments are increased savings and increased purchases of domestic goods. However these changes are tough (nearly impossible) to force on people until after the pain is felt. It sounds trite, but what needs to be done is save more and buy American. And yes, saving more includes the government running a smaller deficit. Raising taxes may be in order.
I would, if it were the right remedy. But I'll leave that for a MD to decide. On an unrelated topic, raisng taxes now will stall our eco into possibly another recession. Deficits not only won't come down, it will go way up because decreasing eco activities means decreasing tax revenues. Don't forget we're still fighting an open-ended war and wars are costly. On the other hand, pro-growth policies promote more eco activities and help bring in more tax revenues. Which one is the right remedy for our little eco problem at hand? The latter.
You are right that when the green paper goes down world wide, it will be less good for doing things like buying Middle Eastern oil. However, it will still be good for buying things in the United States. Those hundreds of billions will go a long way towards buying companies and real estate. It is us that are selling our nation in the future for $5 Christmas toys now.
Lower dollar= More money invest at home rather than abroad. Lower dollar= Better at getting more revenue from exports and making domestic goods cheaper to purchase than imports. Biggest problem in the US= Deficit control Biggest problem in the EU= Defecit control Biggest problem in Asia= Corrpution issues.
You're confusing money with power. When they buy those factories and land they will take them . . . . where? The land stays here and we get our money back . . . . so? The factories could be moved to China where they will be used to make more $5 toys? Seen the real estate market in Hawaii lately? The japanese often don't bother to show up for the forclosures.
Back to Greenspan: He was preaching deficit reduction through reduced spending way back in '96 when there was a large amount of cash coming into the government bank. However, Congress chose to ignore him and continued spending. All the while, Greenspan continued to say that the best way to insure the future stability of the US economy was to reduce the deficit. That philosophy has been mirrored by many other economists as well. Now under Bush, he has continued to say the same thing. Unfortunately, we adopted a bi-partisan Medical Care program for seniors that is the largest entitlement program in the history of the country. Nobody really wanted it after it was signed but 90% of the Congress raved about it while it was being discussed. Other programs have been much of the same. Love him or hate him, under Bush, we have spend more of domestic programs than at any time in the history of the country. Now throw in 911 and subsequent military actions and you have a big problem. And guess what. Greenspan still thinks we need to reduce spending. Those here blaming Greenspan for the lack of cahones in Congress should do some more research. He is generally considered to be one of the most sound FR chairmen in history.
By law, the Fed is charged with the task of fighting inflation. Greenspan preaching deficit reduction is like a doctor preaching good health. You find some sign of genius in that?
Suicidal? What, he won't be elected to a third term? He can do whatever he wants now with little reprocussions. He has to raise taxes sometime during the next four years. If he doesn't he is completely ****ing over the next 8 years worth of presidents (Rep or Dem).
Reagan's pro-growth policies resulted in record deficits at one time too. Guess who got to enjoy the meat of the eco prosperity? Clinton, who got elected 4 years after the Reagan presidency.
An over-simplification, but pretty much correct. But raising taxes isn't going to be suicidal for Bush.
Over-simplification is the only way to be always correct. Just ask Greenspan. I was talking about being suicidal for the eoconomy, the whole country.