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Thread: Dollar is doing something it hasnt done in three decades

  1. #11
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Libertine View Post
    We never saw this level of export activity in the Obamaconomy.

    Record exports cut US trade deficit to $49 billion
    [Associated Press]
    PAUL WISEMAN
    ,Associated Press•May 3, 2018
    Yes, and there's a reason you don't provide links to articles such as this. Because if folks actually READ the links, they explode much of your hogwash and economic illiteracy:

    https://apnews.com/ea766935a9224d6fa59ecabbd780b70f

    From the link: Despite the reduction in March, the trade gap is up 18.5 percent to $163.4 billion so far this year.

    The president views trade deficits as a sign of economic weakness that can be brought down by more aggressive trade policies. Most economists say they are caused by bigger economic forces, mainly the fact that the United States consistently spends more than it produces.

    LeRoy: In short, your President Trump's analysis of what CAUSES the trade deficit is WILDLY WRONG. And the trade deficit has EXPLODED since he took office, PRECISELY as I TOLD YOU it would. DUH!
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  2. #12
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    Quote Originally Posted by BigLeRoy View Post
    Yes, and there's a reason you don't provide links to articles such as this. Because if folks actually READ the links, they explode much of your hogwash and economic illiteracy:

    https://apnews.com/ea766935a9224d6fa59ecabbd780b70f

    From the link: Despite the reduction in March, the trade gap is up 18.5 percent to $163.4 billion so far this year.

    The president views trade deficits as a sign of economic weakness that can be brought down by more aggressive trade policies. Most economists say they are caused by bigger economic forces, mainly the fact that the United States consistently spends more than it produces.

    LeRoy: In short, your President Trump's analysis of what CAUSES the trade deficit is WILDLY WRONG. And the trade deficit has EXPLODED since he took office, PRECISELY as I TOLD YOU it would. DUH!
    With all the prosperity in the Trumpconomy, we are exporting at at record pace and having to increase imports to meant demand.

    Why do you think this is a bad thing?

  3. #13
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    Quote Originally Posted by bajisima View Post
    CNBC cant stop talking about it today.

    Todd Gordon has seen something in the charts that will have dollar bulls rejoicing. The TradingAnalysis.com founder says that the greenback has broken out of a downtrend that has been in place since the early '80s. On a chart of the dollar index going back to 1983, Gordon points out every big rally and fall in the currency and then connects the peaks of each rally. Each peak over time has been lower, meaning the dollar has made lower highs every rally since 1983, creating the downtrend that Gordon sees.

    But the recent bounce in the dollar shows that it has broken the downtrend line and is actually finding a key level of technical support around the 90.00 level.
    "It looks like we're beginning to find a support shelf here in the overall dollar, and it looks like we could resume higher," he said.

    https://www.cnbc.com/2018/05/01/the-...3-decades.html
    The dollar may be higher, but is it because others are trusting the American currency more than before or just a mechanical consequence of the interests rate raise ? There was still not such adjustments of intersts rates with other currencies. I think that the way President Trump is dealing with tariffs, rejecting trade agreements, increasing the national debt etc... brings more uncertainity and undermines trust from other countries in the US dolalr. It is not something positive on the long run.
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  4. #14
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Libertine View Post
    With all the prosperity in the Trumpconomy, we are exporting at at record pace and having to increase imports to meant demand.

    Why do you think this is a bad thing?
    Tax Cut To Widen Trade Gap That Riles Trump

    Our massive budget and trade deficits are BOTH indicators that America is a profligate nation, living FAR beyond our means. We are now on a spending orgy again, as we were in the 2000's.

    Have you NEVER heard the fable of the grasshoppers and the ants?

    WE are the grasshoppers.
    Last edited by BigLeRoy; 3rd May 2018 at 06:52 AM.
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  5. #15
    Member Arkady's Avatar
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    Quote Originally Posted by bajisima View Post
    CNBC cant stop talking about it today.

    Todd Gordon has seen something in the charts that will have dollar bulls rejoicing. The TradingAnalysis.com founder says that the greenback has broken out of a downtrend that has been in place since the early '80s. On a chart of the dollar index going back to 1983, Gordon points out every big rally and fall in the currency and then connects the peaks of each rally. Each peak over time has been lower, meaning the dollar has made lower highs every rally since 1983, creating the downtrend that Gordon sees.

    But the recent bounce in the dollar shows that it has broken the downtrend line and is actually finding a key level of technical support around the 90.00 level.
    "It looks like we're beginning to find a support shelf here in the overall dollar, and it looks like we could resume higher," he said.

    https://www.cnbc.com/2018/05/01/the-...3-decades.html
    I just pulled up a trade-weighted dollar index. The peak for the dollar, relative to other major currencies, was in February 1985. It then went into an incredible free-fall for the balance of the Reagan years, before more or less being stable through the end of Clinton's first term. Then it climbed pretty steadily until the start of 2002, and then plummeted for years until the global financial panic briefly revived it by scaring people into seeking the perceived stability of the greenback. Then it was fairly steady through mid-2014, rising swiftly until early 2016, and since then is down. I'm really not seeing the pattern CNBC sees. Right now the dollar stands at 87.542 relative to the trade-weighted basket of currencies, which is down from 93.1296 in Trump's first month:

    https://fred.stlouisfed.org/series/DTWEXM

    That 6% decline in the last 15 months isn't particularly alarming, but neither is it a bounce. It's just noise.
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  6. #16
    Member Arkady's Avatar
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    Quote Originally Posted by bajisima View Post
    Yea I had always thought it might not be a good thing. But CNBC is touting this like the invention of the wheel. Doesnt it also make fewer people come here and buy things?
    I think it's good to have minimal volatility in the value of the dollar, either up or down, because when it moves swiftly you wind up with lots of malinvestment one way or the other (e.g., enterprises that threw a lot of money into investments that don't make sense any more after the value of the dollar jumps or falls suddenly). But I don't have strong feelings about high or low dollar values in themselves, because they each have their advantage. A strong dollar gives Americans a lot of purchasing power on the global market, which effectively makes Americans richer -- if I've got $2 million sitting in my retirement funds and I plan to do a lot of traveling abroad in retirement --or purchasing a lot of foreign goods and services-- I want a strong dollar, because it'll make my money go a lot farther. But a strong dollar also makes it hard for American-produced goods and services to compete with international competitors and it's a heavy burden on the tourist trade domestically. As you point out, it means fewer foreigners come here to spend money.... but it also means more Americans go abroad to spend money. For example, if I have a choice between vacationing in Italy and vacationing in Florida, and I can live like a king in Italy because of a strong dollar, I'll take my money there rather than buying overpriced equivalents stateside.

    There's also the impact on debt. If the dollar weakens, we effectively owe less money in real terms, making it easier to pay off. If it strengthens, then essentially we owe more money to our creditors than we otherwise would have. But, again, that has a flip side. If the dollar is weakening, new debt will cost us more (foreign creditors will demand higher rates), whereas if the dollar is strengthening, we can attract purchasers for our treasuries at lower rates.
    Last edited by Arkady; 3rd May 2018 at 07:04 AM.

  7. #17
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    Quote Originally Posted by BigLeRoy View Post
    Yes, and there's a reason you don't provide links to articles such as this. Because if folks actually READ the links, they explode much of your hogwash and economic illiteracy:

    https://apnews.com/ea766935a9224d6fa59ecabbd780b70f

    From the link: Despite the reduction in March, the trade gap is up 18.5 percent to $163.4 billion so far this year.

    The president views trade deficits as a sign of economic weakness that can be brought down by more aggressive trade policies. Most economists say they are caused by bigger economic forces, mainly the fact that the United States consistently spends more than it produces.

    LeRoy: In short, your President Trump's analysis of what CAUSES the trade deficit is WILDLY WRONG. And the trade deficit has EXPLODED since he took office, PRECISELY as I TOLD YOU it would. DUH!
    Not so. A trade deficit does not imply that we consume more than we produce although the unfortunate conventional description of trade deficits as resulting from shortfalls of domestic savings over domestic investment fuels this fallacy. What a trade deficit does indicate is that intl investors find the America to be an relatively attractive place to invest. With a net inflow of global capital, our capital stock grows. In turn, production here rises accordingly.

  8. #18
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    Quote Originally Posted by galatin View Post
    The dollar may be higher, but is it because others are trusting the American currency more than before or just a mechanical consequence of the interests rate raise ? There was still not such adjustments of intersts rates with other currencies. I think that the way President Trump is dealing with tariffs, rejecting trade agreements, increasing the national debt etc... brings more uncertainity and undermines trust from other countries in the US dolalr. It is not something positive on the long run.
    Well why wouldn't the very same retaliatory tariffs levied by the EU last year do likewise?

  9. #19
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    Quote Originally Posted by Arkady View Post
    I think it's good to have minimal volatility in the value of the dollar, either up or down, because when it moves swiftly you wind up with lots of malinvestment one way or the other (e.g., enterprises that threw a lot of money into investments that don't make sense any more after the value of the dollar jumps or falls suddenly). But I don't have strong feelings about high or low dollar values in themselves, because they each have their advantage. A strong dollar gives Americans a lot of purchasing power on the global market, which effectively makes Americans richer -- if I've got $2 million sitting in my retirement funds and I plan to do a lot of traveling abroad in retirement --or purchasing a lot of foreign goods and services-- I want a strong dollar, because it'll make my money go a lot farther. But a strong dollar also makes it hard for American-produced goods and services to compete with international competitors and it's a heavy burden on the tourist trade domestically. As you point out, it means fewer foreigners come here to spend money.... but it also means more Americans go abroad to spend money. For example, if I have a choice between vacationing in Italy and vacationing in Florida, and I can live like a king in Italy because of a strong dollar, I'll take my money there rather than buying overpriced equivalents stateside.

    There's also the impact on debt. If the dollar weakens, we effectively owe less money in real terms, making it easier to pay off. If it strengthens, then essentially we owe more money to our creditors than we otherwise would have. But, again, that has a flip side. If the dollar is weakening, new debt will cost us more (foreign creditors will demand higher rates), whereas if the dollar is strengthening, we can attract purchasers for our treasuries at lower rates.
    When I was an exchange student in the US I needed Swiss franc 4.30 to buy one US dollar. It was 50 years ago. And now it is one to one. It is the US dollar which lost more than any other Western European currency toward the Swiss franc. Did it do something good to American exports to have such a big drop as far as exports are concerned ? The US proportionally export much less than other developped Western European countries, which currencies did not loose as much value over the last 50 years. So where is the cause and why the US are exporting so little still proportionally ? Is it structural ? Has it to do with something special in American culture etc....? Why others who did not benefit of what are competitive devaluations are still able to export ?

  10. #20
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    France exports to Germany, it counts, TX exports to FL, it doesn't extra-EU exports are $1.9tn in 2015, $1.42tn from the US. Difference of about $480bn which is a big number but expressed as a percentage of GDP we're talking something on the order of 3% of GDP.

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