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Why isn't the US$ crashing to new lows?
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In 2005 which was the last time the US Federal Reserve Bank acnowleged the Total U.S. Dollars in global Circulation at anypoint in time the number was $760,000,000,000 (760 Billion)with 2/3 rds of that being held by foreign states such as China, Saudi Arabia and Japan.
The Federal reserve has been printing US dollars like they've got no tomorrow since 2005 and thats why the Bush administration has gone shy of telling even Congress how much they are printing. As of November 08 Total U.S. Dollars in global Circulation is estimated to be 7 Trillion $, thats a 9 fold increase in 3 years. Last night the US Federal Reserve threw another surprise $US800 billion ($1.2 trillion) lifeline to Wall Street's fractured credit markets in the latest sign that Washington has been stunned by the speed and severity of the American recession. Thats a 16% increase in $ in circulation, so why isnt the US $ crashing to all time lows. Since August the US $ has strengthened against all othe global currencies except the Japanese yen. Even the former Fed reserve Chairman Ben Benanke acnowleges on the 21 Nov 2002 "that like Gold the US Dollar has value to the exten that they are STRICTLY limited in supply." and "By increasing the number of U.S. Dollars in circulation, or even by credibly threatening to do so, the US Government can also reduce the value of the dollar in terms of goods and services, which is the equivelent to raising the prices in dollars of those goods and services. Are hey printing $ to avoid deflation ? If so there will come a time when the man in the streets spending ability breaks because he doesnt have enough money/resources to continue spending, and everything spirals out of control into total uncontrol / crash that will dwarf what we have already seen. It seems to me that the US Govt are playing a game that is becoming increasingly more and more risky. I would not like to see it go totally pear shaped as this would destroy foreign trade in the short term and we would see a mirror globally at national levels of distrust and protectionism, not wanting to trade lest they dont get payed. Fires go out of control when you put to much fuel on it too quickly, especially when novices play with fire. http://books.google.com.au/books?i...#PRA1-PA142,M1 Posted on 11/27/08, 07:11 am |
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I think that the big banks are just sitting on the money. That is why they would rather bail out banks than common people. Common people are the root of the problem. They actually purchase goods and services that keep companies in business. Those are things a bank would never purchase. They would just buy up other banks. In reality, very little of any of that money will get into circulation.
I would be bold enough to say, the domestic circulation of today is less than 2005. That is why we haven't seen any inflation. The problem is Wall Street Bankers see all inflation as evil, and you can't have growth without inflation. I think they actually like deflation. It makes what is in the bank worth more, and puts the borrower further in debt. 
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The US$ wont crash here, atleast for now. Yes, next year after 20th Jan. when Mr Obama takes over and announces his financial polices, and the media plays to its usual role of painting a ROSY picture and the investors (who have shied away coz of recurring losses and the holiday season) come back in swarms and the volumes pick up and the dollar suddenly shows abnormal strength (forcing the bears who have short sold dollars to cover) - that would be when hell will break loose. That fall will shake the global markets to their very roots but that would be the time to buy - when weak hands will sell out of fear and strong hands waiting to encash on the panic.
I see all this happening after 20th Jan. 2009
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If we divided the economic stimulus money, distributed it to the general population, we would have an economic stimulus - they would spend the money and keep people employed by doing so!
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Yes KatieBee, sounds good on paper - but would lead to an inflation of phenomenal levels....
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we borrow from china. to allow us to print more money. so that like you said, were not justing making paper money that has no value. I believe we owe china quite a bit, which is why we accept so much of their imports. as a way to help us pay off their debt, and keep good relations. we also share oil with them now, which is why fuel rose so high, so quickly.
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Listen to Athinking...I think he has his thumb on the pulse of the economic crises...sure, buy, buy, buy. Who can buy when you are in a personal economic crises? But he is right...this will all turn around, who knows when. I sometimes think we "need" a recession or even a depression to wake us up to the reality that we, as consumers and as a nation, overspend. I have always known sacrifice and creative cooking, LOL, just to make ends meet, so none of this will be new to me. I think unanimously we are in for a great shock about tightening up the belt...I think most people don't even have a clue what it is to go without, to cut down, to give up luxuries. It may be time to learn! I don't wish it on anybody, but I do believe it will get worse before it gets better, and if you don't know how to cut back, you will soon learn!
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I think a depression is the least of our worries. A year from now, we will see the beginnings of WW3. If for some reason it does not happen, the following year you will see a new American Civil War.
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Since writing this on the 27 Nov the USD has been devalued by 8.1% against the Euro which is the main trading pair in world currencies.
Its likley it will further devalue by the same amount in the next 30 days which will cause it to retest its all time low against the Euro. I expect it to go to altime new lows worldwide. aThinking mind you were proved absolutly wrong in what you wrote. gramcrackers are you still listening to aThinking mind?
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I am in finance and I calculate variances all the time Alistar and you are wrong about the % decrease.
Here's the calculation for your information. 11/27/09 .7710 01/03/09 .7183 (.7710-.7183)/.7710 = (6.8%) Unfavorable http://www.oanda.com/convert/fxhis... I suggest reading Paul Krugman, The Return of Depression Economics to get an understanding of what economic policies are driving these numbers. I do know that for 30 years the right have been taking us down the wrong path and have worked very hard to dismantle The New Deal. They convinced us of trickle down and global economics but we have to now look at what is truly going to get us out of this trap we are in and I for one am reading everything I can get my hands on, from the right sources to understand what we need to do. Livable wages would be a start. Americans are finally waking up to realize that without a middle class this country will not survive. I have always believed that the world is a better place when prosperity is shared and not concentrated in the hands of a few.
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Sorry ProgressiveLiberal, but you are actually wrong.
My US/Euro cash quoats (from Tradestation at a New york close)for the days previously stated are 0.77531 (Nov 27) and 0.7166 (Dec 31) (.7753 -.7166)/.7753 = 0.08207 (8.20% to be exact) Unfavorable If you trade through an Oanda platform then its obvious that oanda are doing you for about 1.4% slippage. I'd find a better deal with tighter spreads if I were you. Al
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