Worldwide financial crisis

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Grieg
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Re: Worldwide financial crisis

Postby Grieg » Wed Dec 17, 2008 8:39 pm

Dollar desperately needs to devalue itself in order to fix the economy. Devaluing dollar is a tad trickier tho, so the FED keeps pumping money on the streets. You should be buying your European export cars now, it wont be as cheap in the coming years :)


The value of the US dollar isn't fixed. It floats on the world monetary market and isn't tied to gold or any other standard. How does one go about devaluing it?
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Re: Worldwide financial crisis

Postby Hubsu » Wed Dec 17, 2008 8:59 pm

Grieg wrote: How does one go about devaluing it?


That's the tricky part! :P

edit: well seriously, just do what the FED is doing. Cut down interest rates and pump out as much money as possible. At some point the gates will open, and looking at the dollar vs X-currency and dollar vs gold value, it's happening as we speak. Historically gold has never risen as fast against the dollar as it is doing now and dollar is constantly getting punched by other currencies. So the FED policies at devaluing dollar has some effects at least.

http://finance.yahoo.com/currency-investing

Every single currency has gained grounds against dollar. Gold has a similar trend against the dollar, so the dollar is currently devaluing itself on a rather fast pace.

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Re: Worldwide financial crisis

Postby bf109 Emil » Wed Dec 17, 2008 10:06 pm

Grieg wrote:
Dollar desperately needs to devalue itself in order to fix the economy. Devaluing dollar is a tad trickier tho, so the FED keeps pumping money on the streets. You should be buying your European export cars now, it wont be as cheap in the coming years :)


The value of the US dollar isn't fixed. It floats on the world monetary market and isn't tied to gold or any other standard. How does one go about devaluing it?


I know the Canadian dollar was worth 1.06 US dollars based on Canada's economy and resources, but since falling oil and metals, Canada's dollar is now around .82 US dollars...making it cheaper for the US to buy our goods and Canadians more to purchase US goods, which in the end will help Canadian exports but limit the amount of imports from the US now costing 20% more..

along with the devaluation of the dollar isn't such a bad thing, as it makes imports from China, Japan, Europe more expensive and helps people to spend or support US made goods, while helping the US made products become cheaper for foreign countries to purchase...economically it helps to balance out the trade deficit the US has ran up importing billions of dollars more then exporting and helps to keep the currency to be used at home and bought, sold, and stay within the country rather then going to a foreign country and never returning in the same amounts...simply...China now bolsters a huge growing market and billions worth of businesses and factories...simply which economy or countries dollars led to say China's wealth and prosperity...also Japan has a large industrial economy...who or what nations dollars helped to build Japan into a world power...I am not say it was wholly the US but a great deal of world economies where built with US Dollars..
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Re: Worldwide financial crisis

Postby Hubsu » Wed Dec 17, 2008 10:33 pm

bf109 Emil wrote:I know the Canadian dollar was worth 1.06 US dollars based on Canada's economy and resources, but since falling oil and metals, Canada's dollar is now around .82 US dollars.


Looks like 5 days ago you could buy 0.80 US dollar with a single Canadian dollar. Today you get 0.84 US dollars with the single Canadian one. A 5% leap in 5 days. That's pretty insane rate change when we talk about such a huge economies behind the currencies.

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Re: Worldwide financial crisis

Postby bf109 Emil » Thu Dec 18, 2008 8:12 am

no doubt, when i sold my house back in august before moving to Youngstown the rate was 1.03 US dollars for each Canadian one...when oil started to tank in september i swapped into a US MMF at .99 and just converted back to Canadian at .79 last week to a CDN MMF. This alone gained me 36,000 CDN and have now started to bottom feed back into CDN mining companies and a couple of Oil/Uranium stocks which have been beat badly the last 3 months. Hopefully the 4 companies i have choosen have reached or near hit bottom and i can wait until metal prices return....or at least have settled into a low and can now return within the next 9 to 15 months...
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Re: Worldwide financial crisis

Postby Grieg » Thu Dec 18, 2008 12:57 pm

Hubsu wrote:
Grieg wrote: How does one go about devaluing it?


That's the tricky part! :P

edit: well seriously, just do what the FED is doing. Cut down interest rates and pump out as much money as possible. At some point the gates will open, and looking at the dollar vs X-currency and dollar vs gold value, it's happening as we speak. Historically gold has never risen as fast against the dollar as it is doing now and dollar is constantly getting punched by other currencies. So the FED policies at devaluing dollar has some effects at least.

http://finance.yahoo.com/currency-investing

Every single currency has gained grounds against dollar. Gold has a similar trend against the dollar, so the dollar is currently devaluing itself on a rather fast pace.



You have your terms mixed up. What you describe is not devaluation. Devaluation of a currency only occurs where there is a fixed exchange rate. Inflating the money supply (as you describe) results in depreciation of the currency not devaluation.
If one believes that the state should attempt to regulate the economy ( I don't happen to ) then lowering the federal funds rate (benchmark interest rate)is done not in order to weaken the dollar against other currencies but in an attempt to loosen the tight credit market that appeared to be strangling the economy, not only the US but worldwide.
It is a mistake to follow the week to week fluctuations of the currency market and attempt to equate the relative strength of the currency with the overall health of the economy. There are both advantages and disadvantages to a weak dollar, and the same is true for a strong dollar.
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Re: Worldwide financial crisis

Postby Hubsu » Thu Dec 18, 2008 4:05 pm

Grieg wrote:You have your terms mixed up. What you describe is not devaluation. Devaluation of a currency only occurs where there is a fixed exchange rate. Inflating the money supply (as you describe) results in depreciation of the currency not devaluation.

It is a mistake to follow the week to week fluctuations of the currency market and attempt to equate the relative strength of the currency with the overall health of the economy.


Thank you for the correction. Devaluation and depreciation got me confused, as after all the end result is exactly the same.

And you're right about the second thing also. In a ten year time scale, the dollar is back on track: continuing the depreceation. The last few months seemed to be an anomaly in the ten year trend. However, have you ever seen a 2-3% daily depreceation of the dollar for a longer time? Yes, there has been quick changes before, but as far as I can see, dollar has never changed its value against other currencies in such a fast pace.

We have seen the bottom in the stock prices in the US. Cash is king when stocks are low, thus the dollars were scooped up from the market -> dollar gets stronger. Now that the money is back in the streets, rates are down and FED is pushing out more money -> inflation and depreceation. This will hold for the next 1-2 years until the next down rally of the stocks.

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Re: Worldwide financial crisis

Postby ram » Fri Dec 19, 2008 6:27 am

In my country people are not affected by the financial crisis because we're immune of it :lol:
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Re: Worldwide financial crisis

Postby Hubsu » Sun Dec 21, 2008 12:05 am

Hubsu wrote: However, have you ever seen a 2-3% daily depreceation of the dollar for a longer time?


The first knockback just happened, dollar went from 1.47 to 1.39 in just a couple of days. Volatility is huge. No one probably though that there wouldn't be any backslash for the dollar from a ~18% sprung in a 2 week period. The foreign loan givers to the US would be really upset if that pace would be kept up for a longer time :)

Now the real question is, will there ever be a full payback of the (current) US loans without a massive dollar inflation & depreceation? That remains to be seen.

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Re: Worldwide financial crisis

Postby TISO » Mon Dec 22, 2008 12:54 pm

It seems that banks that got bailout funds are really generous to their exec's who messed up i the first place:
http://www.nytimes.com/aponline/2008/12/21/us/AP-Executive-Bailouts.html?_r=1
Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits in the calendar year 2007, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.
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Re: Worldwide financial crisis

Postby Ricky » Tue Dec 23, 2008 8:39 am

To be fair, you couldn't take away their regular pay withut some big legal issues.

But it really does seem outragious - particularly the bonuses. 'Trimmed'? Why not 'removed'?
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Re: Worldwide financial crisis

Postby Hubsu » Tue Dec 23, 2008 9:25 pm

Ricky wrote:'Trimmed'? Why not 'removed'?


The government that gave the bailout "forgot" what that kind of money giving also needs: control. Is there really even a person that believes the official reason for the lack of control? It was said to be lack of time for the bailout. Yeah, right.

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Re: Worldwide financial crisis

Postby Grieg » Tue Dec 23, 2008 9:58 pm

Hubsu wrote:
Ricky wrote:'Trimmed'? Why not 'removed'?


The government that gave the bailout "forgot" what that kind of money giving also needs: control. Is there really even a person that believes the official reason for the lack of control? It was said to be lack of time for the bailout. Yeah, right.

"Here you go Ricky, take this £20.000 and buy yourself a new car. No, we don't actually check if you used the money for your car, you could have given some of the money to this weird Internet nick 'Hubsu', but we don't care". -Office of whacky financing.


Not necessarily so.As long as they are required to repay the loans then it isn't necessarily required or even desirable that the state determine how the money should be spent. The government(any government) isn't known for expertise in the marketplace nor for fiscal responsibility.
Here is a loan: Pay it back according to the requirements of the agreement.
Not... here is a loan: Now allow me to take over and run your business.
Just because the US government decided to temporarily abandon free market principles and dabble in socialistic practices doens't mean they will nationalize private industry and convert to a quasi socialist economy. At least let us hope not. :(
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Re: Worldwide financial crisis

Postby Hubsu » Wed Dec 24, 2008 8:16 am

Any idea of the interest rates and time of the payback for the TARP loans? Do you know if the rates are at least some way tied to inflation?

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Re: Worldwide financial crisis

Postby Ricky » Wed Dec 24, 2008 8:39 am

Grieg wrote:Not necessarily so.As long as they are required to repay the loans then it isn't necessarily required or even desirable that the state determine how the money should be spent. The government(any government) isn't known for expertise in the marketplace nor for fiscal responsibility.
Here is a loan: Pay it back according to the requirements of the agreement.
Not... here is a loan: Now allow me to take over and run your business.
Just because the US government decided to temporarily abandon free market principles and dabble in socialistic practices doens't mean they will nationalize private industry and convert to a quasi socialist economy. At least let us hope not. :(


There is a difference between:

1) "Here is some money. Spend it on what you like - maybe a holiday in the Bahamas?"

2) "Here is some money. Spend it on rebuilding your business."

3) "Here is some money. $x go to this, $y go to that, $z go to the other."


1) is what Hubsu is afraid of, 3) is what Grieg is afraid of, and 2) seems to be the sensible option. ;)
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