 |
|
Bereta_Eder
|
|
Kicks dollar's ass man.
|
|
| |
|
|
|
Kidicious
|
 |
Diety of Kidiverse
Mar 2003
time: 21:27
|
|
When are you going to read that principles of econ book I told you to buy Imran?
First you have to be familiar with the principles. Then you can worry about proving them.
Last edited by Kidicious on 04-05-2003 at 11:50
|
|
| |
|
| |
|
| |
|
| |
|
|
|
Kidicious
|
|
Diety of Kidiverse
Mar 2003
time: 21:27
|
|
quote:
Originally posted by el freako
On point is that a lower dollar will surely lead to lower return on dollar denominated asset's won't it?
And as the US is enormously dependent on foreign financing for the increase in it's living standards (domestic savings in the US is only high enough to keep the capital stock stable - which would translate into a long-term growth rate of only 0.5% a year, foreign financing bumps that figure up to 2.5%) then any change in the perception of the profitablilty of US investments could have large consequences. |
I knew sooner or later someone else would come in here and say something intelligent.
I agree el freako, and thank you.
Last edited by Kidicious on 04-05-2003 at 12:29
|
|
| |
|
| |
|
|
|
DrSpike
|
 |
Enthusiastic member of Apolyton
Sep 2001
time: 05:27
|
|
Regarding the earlier debate:
This was the initial material:
"The United States occupies by far the largest share of both global trade and foreign currency reserves, which means that other countries are forced to ensure that their own currencies trade at stable rates against the US dollar. Because of this constant pressure, American financial and fiscal policy has the power to affect other countries as well."
I think the problems start with the vagueness and imprecision here. It is of course true that the state of the US economy impacts elsewhere, but it most definitely is not due to countries "being forced to ensure that their own currencies trade at stable rates against the dollar".
Posters that interpreted this as a country that lost 'key currency' status as losing control over domestic monetary policy are forgiven given this information, but of course it is not the case. Giving a concrete example US monetary policy will always be directed at domestic (not exchange rate) issues, since trade is a very small proportion of GDP. Despite talk by officials the exchange rate pretty much falls where it does........you can only hit one target with monetary policy and it is a domestic inflation target not an exchange rate target. This will not change no matter what happens to the value of the euro, I promise you.
Tbh this 'Key currency' material smells a little fishy to me, but I will try to interpret it so that it has some intellectual credibility.
Now in recent years domestic savings in the US have not been sufficient to cover domestic investment. The gap is covered through capital inflows from the rest of the world, with a corresponding (exactly offsetting) trade deficit. The dollar has remained strong in the face of this deficit because the appetite of investors for US assets has not waned.........yet.
In retrospect the strong currency (though as Fez and other correclty pointed out export dominated sectors like manufacturing will usually suffer when the currency is strong) has been a huge boon to the US, since it has allowed monetary policy to be looser than it otherwise would have been due to the reduced cost-push inflationary pressures. I would also like to respond to Fez and others here to mention that there is little or no correlation between exchange rates and domestic unemployment (though there may be redistribution).......monetary policy breaks the link, so it is incorrect to draw the link between a strong currency and unemployment changes.
So the strength of the dollar has largely been beneficial.......so is this the same as saying when that strength ends (as it may well do) the dollar loses key currency status and may suffer? Well personally I think its a generous interpretation, but if you want to peddle the key currency stuff the arguments above are the ones you are going to have to make.......the ones given in the initial quote and some made afterwards have little or no credibility. Furthermore a weakening of the dollar at present provides a small push to aggregate demand at a time when AG is reluctant to use all his monetary firepower so close to the dreaded 0% nominal interest rate. I guess to close I'll say that neither strong nor weak currencies are always bad.......and usually they are strong or weak to reflect market conditions.
Last edited by DrSpike on 04-05-2003 at 17:53
|
|
| |
|
| |
|
|
|
DrSpike
|
|
Enthusiastic member of Apolyton
Sep 2001
time: 05:27
|
|
Oops. Mispost.
Edit: my mispost..........not directed at you GP.
Last edited by DrSpike on 04-05-2003 at 19:04
|
|
| |
|
| |
All times are GMT. The time now is 05:27.
Apolyton Time is 00:27. |
top of page
|
| archivepost |
|
Forum Rules:
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
|
HTML code is ON
vB code is ON
Smilies are ON
[IMG] code is ON
|
|
|
|
|
|
04-05-2003 09:04
.
), would the perception of profitability change all that much? You may have some people invest in Europe because of a higher percieved return, but I'm not sure the US investments will be hurt that badly by it (assuming they have the same profitability as investments did in early boom times).
|