WASHINGTON, July 6, 2008
Dollar Doldrums: Low Value Has High Impact
The Declining Value Of A Dollar Is Fanning Inflation And Driving Up The Cost Of Oil And Gas
-
(AP)
-
Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
-
Interactive Gas Prices State-by-state averages, tips to improve mileage and a look at what fuels prices at the pump.
Mark Zandi, chief economist at Moody's Economy.com, said expanding exports due to a weak dollar are "an important source of growth, but it doesn't add a lot to jobs, it doesn't mean very much for the average American household. For the average American, for the average consumer, these are pretty tough times."
The loss of the dollar's purchasing power and international respect has some experts worrying that the euro might one day replace the dollar as the so-called primary reserve currency. And that could trigger a dollar rout as foreign governments and international investors flee from U.S. Treasury bonds and other dollar-denominated investments.
Making matters worse: The gaping U.S. current-account deficit - the amount by which the value of goods, services and investments bought in the U.S. from overseas exceeds the amount the U.S. sells abroad - and the low levels of domestic savings means that foreigners must purchase more than $3 billion every business day to fund the imbalance.
Since roughly half of the nation's nearly $10 trillion national debt is held by foreigners, mostly in Treasury bills and bonds, such a withdrawal could have enormous consequences.
Yet Washington finds its options limited.
President Bush asserts longtime support for a "strong" dollar, and made that point again Sunday in a news conference in Japan with Prime Minister Yasuo Fukuda. "In terms of the dollar, the United States strongly believes - believes in a strong dollar policy and believes that the strength of our economy will be reflected in the dollar."
But not once in his presidency has the U.S bought dollars on foreign exchange markets - called intervention - to help prop up the greenback. There's no telling where the buck will stop these days, although for the past few weeks it seems to be in a holding pattern. Even as three Bush Treasury secretaries in a row spouted the strong-dollar mantra, the dollar kept tumbling against the euro, the pound, the yen, the Canadian dollar and most other major currencies.
The Federal Reserve could prop up the dollar by increasing interest rates under its control. Increased yields would make dollar-denominated investments more attractive to foreigners. But that could undercut the already anemic economic growth in a frail U.S. economy rocked by soaring fuel costs, falling home prices and rising unemployment - and the lowest reading of consumer confidence in 16 years.
The Fed must do a balancing act between keeping the domestic economy from going into recession and keeping inflation at bay.
Furthermore, no Fed likes to raise rates aggressively in a presidential election year. It seems more inclined to hold interest rates low for now to give financial markets time to recover from the housing meltdown and credit crunch. It did just that in its meeting on June 25, leaving a key short-term rate at 2 percent. The rate reached that level in April after a series of aggressive cuts that brought it down 3.25 percentage points since September. Those cuts helped ease the housing and credit crises - but drove the dollar further down.
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
More From U.S.
Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
- 1
- 2
- 3
- 4
- next
See all 64 CommentsPosted by copyat5 at 05:42 PM : Jul 07, 2008
Are you a religious person? Do you ever wonder why, in the last days the bible says those in the Churches will be persecuted, hunted down and killed--that they will be hated? Because of decisions like yours.
Those who voted for Bush and failed to see the writing on the wall even when the man attacked people who had done nothing to us and was caught in so many lies--is really fueling the rage of all of us who NEVER voted for him. In the end, as things really go to hell in a hand basket, the main thing our children and those of us who are left will remember is the idiocy and stupid short sightedness of those who voted for Bush twice and put us here. That is a lot to pay back. Obviously your judgment svcks a big one. Next time you want to vote--stay home or at least choose the candidate you like and believe in the least--that way, maybe you have a chance in picking the right one. Just saying "I told you so" to all the Bush clusterfvck voters--does NOT cut it anymore. You all are despicable.
Posted by Edward1975 at 01:11 AM : Jul 07, 2008
It still will take years for those jobs to return and when/if they do--we will have to work for less than they do in China, India, Mexico, etc--so you can cheer yourself on, when you are on the high road making 3.50/hour and can add another wing onto your cardboard box that replaced the house you used to own.
maybe some foreigner will buy your home and let you work in it. If you are male, you can do the gardening and your wife can take care of your old house and the kids of the new owners. Get a clue. LOL
And just what would our government buy our near worthless currency with? Oh yeah--MORE of our worthless currency. Since Nixon stopped tying the value of the dollar to gold and we got rid of that standard, the value has been tied to our gross national output--not anything tangible. Since that is sinking due to outsourcing, the war and insourcing--we are a victim of our own greed and our own web. The worse the economy is, the more our government desperately tries to bail us out.
The more they try to bail us out, the less the dollar is worth and the higher inflation gets--the higher it gets with a weak dollar--the less jobs--and round and round and round. Save yourself--it''s what our politicians have been doing.
Dude, give it up, will you? Hillary is NOT running for President. What part of this do you not understand and refuse to accept? If you really want to help the world, go out and buy a Toyota Prius and install solar energy panels on your roof.
"I want the American people to understand that I had every intention to not attend the Olympic opening ceremony. But then I got a call from the Chinese leaders, saying ''Yoo must go, yoo hear?'' What am I supposed to do?"
Posted by ToolMangler at 12:18 PM : Jul 07, 2008
Don''t forget there is Palladium in there too.
Hey Toolmanger!
Source: United States Comptroller General
August 15, 2007
Decline and Fall
U.S. comptroller general: America is Rome
Is America going the way of Rome? David Walker, the comptroller general of the U.S., has issued a report that basically answers in the affirmative: "The U.S. government is on a "burning platform" of unsustainable policies and practices", Walker avers, including "fiscal deficits" and "overseas military commitments" threatening a crisis if action is not taken soon. "If we continue on our present course, Walker warns, we are in for "dramatic" tax hikes, a radical reduction in government "services", and "the large-scale dumping by foreign governments of holdings of U.S. debt." The Chinese certainly concur with that last prediction.
On the Positive side: the Bush/Cheney Crime Cartel is Flush with $Trillions$ in War Profiteering Cash....
The Federal Reserve System has taken all of the copper and nickel out of your pennies and quarters and replaced them with Reynolds Wrap aluminum.
Why? Because copper and nickel cost too much to mint for worthless Federal Reserve Notes.
Wake up America!
The Federal Reserve System is a scam!
This is what happens when you double the deficit in 7 years. Thanks Bushies!
Now step aside while the rest of the country rallies to fix everything that you''ve broken.
''Hey, Meester, you want to buy my seester?''
It is amazing that we had a candidate who stood for the Constitution and getting rid of the Federal Reserve Bank, yet no one wanted him and those who did were called lunatics on the fringe.
Clinton and Daddy Bush killed this country with NAFTA and CAFTA is being invoked too...?
So what are we as a people to do? Let''s hear from those informed peoples as to a solution. Maybe we can overthrow those who have sold us out and take our country back. Remember... They are our servants, not us.
- 1
- 2
- 3
- 4
- next
See all 64 Comments