How Elizabeth Warren will kill the stock market

Mar 2012
55,301
36,843
New Hampshire
#1
Business community seems very nervous about her.

Presidential hopeful Elizabeth Warren has a plan for the U.S. currency that will likely kill the stock market.

The problem is that what she proposed, which effectively involves devaluing the greenback, won't be beneficial for investors, an analysis of history shows. In a written piece, she called for “more actively managing our currency value to promote exports and domestic manufacturing.”

That is code for trying to get the value of the U.S. dollar to sink against other currencies. The wrong-headed idea behind such a policy is that it will help make U.S. exports cheaper when compared to the prices of products from other countries. "It sounds like what she means is print money and cause inflation and weaken the dollar then pretend like the weakening dollar is a good thing," says Robert Wright, professor of political economy at Augustana University in Sioux Falls South Dakota.

The problem is that such weak dollar policies don't work to help exporters for long if at all.

What happens is that temporarily the weaker currency value will make U.S. exports cheaper. But then quickly the devalued greenback will make the input materials costlier so driving up inflation. Remember that U.S.-based manufacturers import a lot of components to make things, and a weaker dollar makes their costs go up. In a short time the competitive edge is lost.

A weak dollar policy generally coincides with poor stock market performance as history shows.

How Elizabeth Warren's Weak-Dollar Plan Will Crash The Stock Market
 
Likes: Madeline
Jun 2014
60,490
34,750
Cleveland, Ohio
#2
Business community seems very nervous about her.

Presidential hopeful Elizabeth Warren has a plan for the U.S. currency that will likely kill the stock market.

The problem is that what she proposed, which effectively involves devaluing the greenback, won't be beneficial for investors, an analysis of history shows. In a written piece, she called for “more actively managing our currency value to promote exports and domestic manufacturing.”

That is code for trying to get the value of the U.S. dollar to sink against other currencies. The wrong-headed idea behind such a policy is that it will help make U.S. exports cheaper when compared to the prices of products from other countries. "It sounds like what she means is print money and cause inflation and weaken the dollar then pretend like the weakening dollar is a good thing," says Robert Wright, professor of political economy at Augustana University in Sioux Falls South Dakota.

The problem is that such weak dollar policies don't work to help exporters for long if at all.

What happens is that temporarily the weaker currency value will make U.S. exports cheaper. But then quickly the devalued greenback will make the input materials costlier so driving up inflation. Remember that U.S.-based manufacturers import a lot of components to make things, and a weaker dollar makes their costs go up. In a short time the competitive edge is lost.

A weak dollar policy generally coincides with poor stock market performance as history shows.

How Elizabeth Warren's Weak-Dollar Plan Will Crash The Stock Market
The impression I have is Warren is excellent on one important topic (consumer protection) but has no demonstrable competence on other policy areas.

Ultimately, not qualified.
 
Likes: johnflesh
Sep 2014
4,631
1,386
South FL
#3
Just freely float currencies. I am not adherent to 'strong' or 'weak' dollar. If country devalues, export prices do see a relative decrease, but what do foreign investors see? From their point of view their investments have decreased in value relative terms to their home currency.
There are reasons why we can borrow in our own currency at approx 3% for 30 yrs and that's because the currency is perceived as a store of value. Undermine that with devaluation, I don't care if you're in DC or Buenos Aires, you will inject some risk premium into that equation. Anybody here champing at the bit to invest in Argentina? Work for a dollar you want that dollar to be as valuable as possible. Governments have been playing this funny money game since the emperors were debasing the denarius.
 
Likes: johnflesh
Feb 2007
25,470
17,930
Colorado
#5
Just freely float currencies. I am not adherent to 'strong' or 'weak' dollar. If country devalues, export prices do see a relative decrease, but what do foreign investors see? From their point of view their investments have decreased in value relative terms to their home currency.
There are reasons why we can borrow in our own currency at approx 3% for 30 yrs and that's because the currency is perceived as a store of value. Undermine that with devaluation, I don't care if you're in DC or Buenos Aires, you will inject some risk premium into that equation. Anybody here champing at the bit to invest in Argentina? Work for a dollar you want that dollar to be as valuable as possible. Governments have been playing this funny money game since the emperors were debasing the denarius.
Large scale, short cost printing machines did the trick in the US.
 
Sep 2012
3,783
3,684
California
#6
Just freely float currencies. I am not adherent to 'strong' or 'weak' dollar. If country devalues, export prices do see a relative decrease, but what do foreign investors see? From their point of view their investments have decreased in value relative terms to their home currency.
There are reasons why we can borrow in our own currency at approx 3% for 30 yrs and that's because the currency is perceived as a store of value. Undermine that with devaluation, I don't care if you're in DC or Buenos Aires, you will inject some risk premium into that equation. Anybody here champing at the bit to invest in Argentina? Work for a dollar you want that dollar to be as valuable as possible. Governments have been playing this funny money game since the emperors were debasing the denarius.
Well, if I had a billion dollars to lend Argentina and they needed it badly, I would lend them a billion backed by collateral. Most banks would as well. That is how a bank can end up owning assets after defaults.
 
Sep 2014
4,631
1,386
South FL
#7

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