OPEC nations have been shifting their investments from US dollars to Euros and some people believe that is what has exacerbated the dollar’s slide. Reeder, I think your worries about foreign countries impacting our economy is valid (though I think your theory is shaky).
Cite?
Against the pound, it’s nowhere near a low. In fact the dollar is strong against the pound. It’s weaker than it was a year ago, and much weaker than when it was £1/$1.10; but stronger than when it was £1/$2.40, and much stronger than when it was £1/$4.
Totally dumb question here, but doesnt the US Government also make loans to developing countries, and have some loans still outstanding from earlier? I vaguely remember in history class some mention of loaning a number of countries much $$ to help them restore [in the form of 0 interest loans] did all thse finally get paid or are some still outstanding?
What would happen if the US nailed [frex] Japan for repayment of some postWW2 loan that was just sitting there[if there were such a thing…that is=)]
And instead of sending some sort of aid to some country we didnt just finish fighting in we used that money to pay a chunk of debt, wouldnt we be better off?
[though my personal stance on things like the Christian Childrens Fund, which my great aunt was one of the founders of… stop sending money over seas when we have a homeless and child abuse / foster system problem here. When all our people have homes, all our kids have a place to live, clean clothes, medical care and homes, and people actually have JOBS, then we can send private money over seas. Maybe the whole ‘charity starts at home’ would mean more if we took care of our own first, then saved the rest of the world…]
Japan has a geopolitical interest in propping up the US…letting it fall entirely into the Chinese sphere has to give any sensible Japanese politician shivers.
It seems as if the US is betting no one will stop buying or sell in large quantities because doing so would harm them a great deal as well. But the dollar is losing to the euro and if oil switches over to the euro, it could set off a chain of events that could get ugly.
If both Germany and France decide that the huge sucking sound coming from the US is unacceptable, Europe would lose little from ending US reserve status. America might want to start being nicer to France.
I can see some good coming from this:
-the USA will no longer be able to afford military bases around the world: it is time to pack up and leave!
-WALMART will have to buy its junk from American manufacturers, let’s keep the jobs in the USA
-Europe will finally be forced to shoulder its share of the burdens (of policing the world)
-the USA will finally have to put its financial house in order
As I say, much better that American have jobs MAKING things, instead of just selling stuff imported from China.
Oh, and we(in the USA) won’t be such a magnet for 3rd world immigrants. They might actually be able to find paying-wage jobs in heir own countries.
Dollar at $1.355 now! How long until we see 1.4?
I don’t know, but the euro just hit $1.3625, so it’s getting closer, that’s for sure.
That figure was against the Euro. And from yesterday.
So you’re telling me that the dollar slipped 7/10 of a cent in one day?
Yep. In fact it got a little worse but didn’t close at the bottom. No real new news – just a perception that the central banks are content to let it slide and slow holiday trading, when relatively small trades can push things around.
I’m not so sure it’s foreing countries as foreign people. If such a thing were possible, the worst that would happen is that the U.S. would say “nuts to that” and pay its debts on schedule. As long as people continue to expect the U.S. to pay on schedule and just as reliably, then there really shouldn’t be much effect.
How the hell are they going to collect? We’ve got the big guns. The biggest threat they have is not to trade with us, and in most cases that will hurt them a lot more than it hurts us.
Like I’ve said up there…
It’s not a matter of collecting the debt early…it’s a matter of reducing the demand for US Bonds. That’s a real problem if it happens.
Moderator’s Note: Whatever forum you are in, please don’t make public accusations of trolling.
It’s a hypothetical.
The odd thing is, the lower dollar should improve the trade deficit, as imports get more expensive and exports get cheaper. But this isn’t happening - the dollar is slideing and the deficit is getting worse. The article I read in the Times sais this is because of still strong demand in the US, but I wonder if it is because there are few factories inside the US, so there are no low cost internal alternatives.
Ah. What you’re seeing there is called the J-curve. Briefly, the way the theory works is that currency movements are faster than the search for alternative sources for goods. So initially, a declining currency causes an increase in the trade deficit because the country with the declining currency is buying the same amount of stuff at higher prices (or a little less stuff, but not enough to overcome the new higher prices). It’s said to work the other way, too – other countries import the same amount of stuff at lower prices or just a little more but not enough to overcome the new currency implications.
Only over time will end-user preferences change sufficiently to reduce the merchandise deficit.
It’s something of a controversial theory. One of my friends, an extremely well-regarded international portfolio manager at the time, was known for wandering the halls insisting that the J-curve didn’t exist for days after anyone mentioned it to him. If you look at other depreciations, the evidence is decidely mixed. That’s partly because it’s a relatively small effect and most devaluations occur in a context of much larger things happening that can swamp the effect.
There are some early signs that in this case things are happening as predicted by the theory. If the trend continues international economists will have a lot to chew on at the next few conferences. I kind of hope it doesn’t – devaluation is rarely a good policy choice, particularly for smaller economies, and I’d hate to see pro-devaluation forces get more ammunition for their arguments.
From James Howard Kunstler’s “Clusterfuck Nation Chronicle” at http://www.kunstler.com/mags_diary12.html:
It should be noted that discount retailers have been reporting disappointing holiday sales so far. . .
See related thread at http://boards.straightdope.com/sdmb/showthread.php?t=287264.
What percentage of our debt is held by foreign governments? I had always understood the majority of the national debt was in the form of treasury bonds, and other loans given out by private Americans/American banks/corporations…
Anyways, I seem to recall quite a lot of WWI debt that European Great Power ended up refusing to pay back to the United States (was one huge reason the American public didn’t want to get involved in WWII, those loans that Europe defaulted on hurt us, and bad) before I think we should allow certain countries to call in our debt we should charge them the old debts they refused to pay, with interest.
Of course that’s just as ludicrous as the situation here actually happening.