Re: Who is buying dollars, or is the US economyt coming to a grinding halt ?

On Mon, 13 Oct 2008 16:19:00 +1100, Rod Speed wrote:

Michael Coburn <mikcob@xxxxxxxxxxx> wrote
Rob Dekker wrote

I'm new here, so forgive my ignorance. Why is the dollar getting so
strong ?

I can only say that in a worldwide panic (and that is what we have)
people seek safe harbor. The housing bubble came and went, the
oil/commodity bubble the same. All the players are putting their
franks and euros and pesos and yen into dollars because they have no
safer harbor. The dollar stinks, but it stinks less.

Mindlessly silly. If that was what was happening, they'd be putting
their money in the countrys that havent seen any banks imploding, and
they clearly arent doing that.

You're just another fool that can spout the economic jargon, but doesnt
have a fucking clue about the basics.

This is really stupid. The moron believes that the currency is actually
tied to the bank. The dollars are held in ALL THE BANKS. The oil is
still traded in DOLLARS. If and when there is a different "reserve
currency" and if and when oil is traded in something other than dollars
on a world wide basis, then you might have some sort of leg to stand on
as you criticize my understanding of the fundamentals. Until then you
will still just be a virus.

There will be a much larger commodity bubble.

There in no commodity bubble.

The reason commodity prices have dropped significantly is because there
is quite a bit of evidence that the credit/liquidity crunch will produce
at least a world wide recession and maybe even a full depression.

The oil price as measured in dollars has produced a destabilization in
the real world economy. But prior to that, here in the USA we had a tech
stock bubble and then a much more severe housing bubble and that is a
very large part of what caused the commodity bubble. Unlike the
silliness of the prices of shares of stock and the ridiculous run up in
real estate prices, the rise in oil prices had/has a major effect on the
cost of actual production. Such was the economic "shock" that caused the
current slowdown/panic. The ridiculous oil prices were caused by money
seeking safe harbor after the housing bubble and now the economies of the
world have actually been damaged. The money has no place else to run.
We have people and institutions with more money than they can find any
use for and they will simply keep it; nice and safe in a true bank that
does nothing other than store money.

Amidst all the financial turmoil in the US banking system, US
government sticking itself deeper than ever into debt, the nosediving
stock market, and the prospects of a stalling economy, you would think
that few people abroad have much confidence in the US dollar.

Still, the dollar rose 6% in the time since the *** hit the fan in
September and even more since it's low point in July. It even rose 2%
in the last two days. The US dollar is now stronger than it has been
since Jan 2007. Oil prices (linked to the dollar) drop accordingly.
The Euro drops the most, but the Yen seems closer linked to the
dollar.

What on Earth is happening ?
I'd like to know if this is a short-term effect, or if there is some
structural effect happening.

One explanation is that foreign investors (Chineese or Saudies?) are
buying up dollars by the billions, but that seems bizarre. They for
sure don't invest in the US stock market, nor are they buying
realestate. This seems to affect only the currency exchange rates, and
the international commodity prices, so it must be a cash flow issue.
What reason would foreigners have to buy cash dollars ?

I had macro-economics in high school, but that's a long time ago. I
have forgotten what the relationships are between currency exchange
rates, inflationary and deflationionary effects, interest rates and
debt/assert ratios.

So I have to rely on common sense.

The only common sense explanation for such a steep rise in the dollar
in such a short period of turmoil seems to be that possibly the US
economy is actually stalling. When businesses do not have short-term
money, they will start by reducing their inventory. Just cancel an
order for new (foreign) goods, or stop buying oil (and rely on the
short-term reserves). That means that dollars will not flow out of the
US as fast as it normally does, which means that from abroad it looks
like the US is not consuming anything. That means that there will be a
shortage of dollars abroad, which means that the dollar rises in
value.

Does anyone have a better explanation ?

There is no shortage of dollars. The Fed can, and will (if the Fed
does not wish to be stormed as the Bastille) monetize a lot more debt
at ridiculously low interest rates. But so too will the foreign banks.

More utterly mindless silly ***.

The entire world has been indulging in "stupidity economics" for the
last 30 years.

Yeah, yeah, and only you have seen the light eh ?

I never went into the darkness....

"stupidity economics" is called "supply side economics" so as to appear
to be something other than stupid.

A hell of a lot of the real world hasnt been into supply side economics,
fool.

Yet the world's largest economy HAS been.

It is has been aided and abetted by neoclassical non-economists. The
reality is that the dollar denominated assets of the world are
horrendously overvalued as measured in dollars and in labor. And the
only rational cure is a much further dollar devaluation against
commodities such as oil and metals and real estate.

Taint gunna happen, you watch.

Yet such a claim is irrelevant to the efficacy of the thesis.

The rest of the currencies will follow. The world should have learned
a lesson from this but they have not done so yet.

And it wont ever, you watch.
.

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