Crash course on currency? why is the dollar falling?

[R_P_A_S]

Can someone try to explain to me why the American Dollar is falling and its worth shit more and more next to the Euro, Pound and even now the Canadian Dollar..??? what does this have to do with?

what does this mean for me, a working class person looking for work???

[cyu]

People around the world don't want the dollar as much anymore. Maybe it's because of the huge debts the current regime has run up to fund its militaries. Maybe it's because of the trade deficit. Maybe rich investors in other countries are pulling their money out.

The price of imported goods will go up - such as oil - which can have a ripple effect in the prices of anything that needs oil to be shipped around.

As the U.S. goes on its way toward a third world economy, goods will become cheaper to produce here than in Europe, so European companies may close their factories and open them up here. The profits, of course, will still go to the owners of those companies, regardless of where the production is done. To maximize profits for the owners, they'll ship jobs to wherever they can pay the least to the people who do the work.

[robot lenin]

Its to do with trade. Trade deficits are where the economy imports more than it exports. Because the US has run up a MASSIVE trade deficit, it imports far more than it exports. It needs to pay firms in their own currency, so must sell US Dollars on the foreign exchange market. If there are more and more USD on FOREX, the price will inevitably fall in order to sell all of the dollars. This means that dollars buy less of foreign currencies. My girlfriend is American, but is currently studying in the UK with me, but because of the exchange rate she spends far more money, in real terms, than I do on studying here.

Because the dollar will become cheaper, imports become more expensive, and exports cheaper. This would usually reset the balance of payments, since more would be exported and less imported. However, in recent years the USA has destroyed its manufacturing base, meaning that it has virtually nothing to export. This means that the trade deficit will probably remain high.

For you, this basically means that you can afford less imported goods (electronics, cars, etc) because they are more expensive, and going on holiday outside the USA will be far, far more expensive. I doubt, however, that the US will become a 'third world economy'.

[jake williams]

Currency markets don't make any fucking sense. That seems like the only real honest answer.

[spartan]

Can someone try to explain to me why the American Dollar is falling and its worth shit more and more next to the Euro, Pound and even now the Canadian Dollar..???

You can add the Yen to that list now as well:
http://www.guardian.co.uk/business/2008/mar/13/currencies.marketturmoil

[chegitz guevara]

The U.S. has been deliberately sinking its dollar for some time. Remember, the less the dollar is worth, the less we have to repay. Also, it resets trade more in our favor. A large part of the trade imbalance has to do with oil imports and corporations sending their profits overseas to avoid taxes.

Canada's dollar is rising not so much because ours is falling, but because Canada is now an oil exporting country and is growing quite wealthy. Good pay to be had in Northern Alberta if you can stand the weather.

[Killer Enigma]

The depreciation of the dollar as a legitimate crisis is a red herring. The market works to stabilize any problems which might be temporarily incurred by having a weak currency. Aggregate demand actually increases when a currency depreciates because it draws in foreign investment at a faster rate and makes national exports more attractive to foreign buyers. This shift in aggregate demand equates to a greater amount of capital within our economy, which will eventually cause an appreciation of currency. Thus, while the U.S. may go through a recession because of an increased price in imports, foreign investment into the economy will help alleviate recession.

When approaching economic issues, it is important to (1) look at the long-term effects of a "crisis" and (2) remember the cyclical nature of market economies.

[jake williams]

Good pay to be had in Northern Alberta if you can stand the weather.
And the rednecks.

[cyu]

Another good way to devalue the dollar is just to print more of it.

But you don't even need to print money, as this example shows:

Maynard, Karl, Ayn, and Alan each have 100 g.p. (that's gold pieces for you non-dungeons&dragons economists). Maynard and Karl put their gold in First Bank, while Ayn and Alan put their gold in National Bank. First Bank has 200 g.p. and can now give a 50 g.p. loan to Alan. Alan now has 150 g.p. in his bank account. When Maynard and Karl check their bank accounts, they still say 100 g.p. each. National Bank now has 250 g.p. and makes a 100 g.p. loan to Maynard, who (according to his bank) now has 200 g.p. in his bank account. Back and forth it goes. Money magically appears without a single paper bill being printed. It can't be helped. The question isn't whether money should be created out of thin air, the question is what those people are being paid to do. Producing skyscrapers? Producing palaces? And then Malthusians wonder why there are so many people but not enough food or basic shelter to go around.

[RedStarOverChina]

Because most modern currencies no longer enjoy the backing of gold standard.

Under the gold standard, for every dollar that the central bank prints, it must have a dollar's worth of gold stored in the bank. In the old days, you can always take the American dollar to the bank and exchange it for a dollar's worth of gold.

Since the value of Gold is relatively constant, currencies in the old days do not depreciates by much. And that also means there is less "wiggle space" for currency manipulators. Therefore, the bankers of the past tried and succeeded in abolishing the gold standard.

Now that the gold standard is abolished, they practically control the price of currency, because they can print as much or as little currency as they wish, regardless of the gold reserve. If they decide tomorrow, that the American currency is too cheap, they would stop printing money and the value of it would rise. If they decide it's too expensive, they would print more money and the value would fall.

(Remember that the federal/central government does not have the right to print its own currency. Only the Central Banks---called the Federal Reserve in the US, can print money, and they are in most cases, privately owned. In the US, 6 or 7 groups of people, including the Rockerfeller family, secretly own the "Federal" Reserve)

So at this point, we are all at the bankers' mercy.

[R_P_A_S]

im fucking more confused now... =/
is there any way we can like make a top 5 reasons with nice definitions??

[RedStarOverChina]

LOL

think about it this way: The more money the Federal Reserve prints, the cheaper the currency is.

I've heard of reports of the Federal Reserve massively printing money to pay for Congress's deficit spending. And that's why the dollar is cheap.

[robot lenin]

We need a distinction between those who know economics and those who don't. To us who do it seems alright, andwe know what's being discussed. The thing is, to understand currency, you need to know economics. Maybe we need a seperate forum offering a seperate course on economics for beginners, maybe under learning??? I could put my uni lecture notes up if you guys want?

[Comrade-Z]

Try this website:
http://theautomaticearth.blogspot.com/

Basically, the banks are all freaking out because they don't have enough money to cover their debts now that the mortgage market is tanking, so they are running to the Federal Reserve to give them lots of cheap credit to bail them out (capitalism, of course, can be described as socialism for the rich and a pile of shit for everyone else), which the Federal Reserve is happily doing, but meanwhile that is causing the market to be flooded with lots of dollars, thus debasing the currency.

And you know it's bad when even the capitalists themselves use phrases like the ones below:


Ilargi: I'm strongly inclined to call today, March 7, for the record, "the day the wheels are coming off". Look at these quotes, all from professionals in the world of finance:

"Everything is telling you the financial system is broken"
"The markets have become "utterly unhinged""
"All the lights are flashing red''
"The gears of capitalism are pretty much grinding to a halt”

[Guerrilla22]

Inflation. If there is a large amount of a particular currency in circulation and a corresponding decrease in the amount of goods being purchased with that particualr currency than the value of the currency with fall.

[Zurdito]

Can someone try to explain to me why the American Dollar is falling and its worth shit more and more next to the Euro, Pound and even now the Canadian Dollar..??? what does this have to do with?

what does this mean for me, a working class person looking for work???


It means the money in your pocket is worth less. Devaluation usually serves to protect domestic industry for a time by making imports more expensive and domestic produced goods/exports cheaper. Therefore, employment is protected to an extent. However it acheives this by devaluing the wages of workers.

[Sendo]

I was reading an economist

www********
.counterpunch.
org/roberts03132008.html


And he was saying we're fucked. A cheaper dollar usually results in the US exporting more, restoring a favorable balance of trade. However, we have nothing to sell, so to sepak, since so much manufacturing had been moved overseas. Additionally, we still enjoy being "the gold standard" for the rest of the world. What if China stops pegging its currency to ours? What if OPEC adopts Euro as its standard?

I don't know enough economics of currency to evaluate it, but it sounded like there is at least some cause for concern (for Americans that is)

[R_P_A_S]

thanks to all of you who took the time to answer my question...

If there was a complete market crash and melt down.. would the conditions be good for a revolution? or no?

[Faux Real]

Yes, there will always be conditions for revolution under capitalism due to the 'inherent crises' of the system. That doesn't mean there would be a revolution - or even a successful one at that. Also, that doesn't mean people will become 'class conscious' on their own, but they will be more apt to the idea of class war when seeing their living conditions plummet via this rupture.

[Enragé]

I'll make the same point i just made in college.

The capitalists are denying the real economy, that's why they are failing, FALLING. Postmodernism, the Cultural Hegemony (Gramsci) of our day has Manufactured Consent (Chomsky) through the use of Denial, the Breaking Down of Words, as did Débord with Situationism.
Débord did so in order to make revolution, to make a new Situation.
The Capitalists do so in Order to JUSTIFY that which CANNOT be justified since it has NO BASIS IN MATERIAL REALITY.

The contradictions within capitalism have never before been so great.
The Revolution Must Come, if not Today then Tomorrow, or Next Year, or the Year after That.
Class struggle will end either in the victory of Those Who Have Nothing But Their Children (and even the Family has been BROKEN), OR IN THE MUTUAL RUIN OF BOTH CLASSES.

We must expect a drive for war from the ruling classes everywhere in order to overcome these contradictions. We must by ANY MEANS NECESSARY sabotage this drive to war, but we must do so without becoming ALIENATED from the other Alienated. The revolution was started in Paris in '68, coinciding with the Anti-Bureaucratic revolts in Prague and Shanghai and the "Summer of Love" in the US.
The REVOLUTION WAS never beaten, it has merely been Recuperated (Débord) by the System and SOLD AS MERCHANDISE.

ITS TIME TO WIN

[Reuben]

OK my explanation will be so clear it rocks.

The dollar iws a floating exchange rate that means it goes up in value according to supply and demand on the foreign exchange arket. IE If people wish to buy dollars in exchange for their own currency they will be demanding dollars. When people sell dollars for another currency they are saupplying dollars to the foreign exchange market.

Now there are a number of reasons why dollars are demanded and supplied.

There are imports and exports. When Americans import goods they are supplying dollars to the foreign exchange market. WHen america exports goods people are demanding dollars (so as to purchase US goods). In this area simports are far exceeding exports. The suppply of dollars is exceeding the demand causing the price of dollars to fall.

The demand and supply for a currency also comes from international savers. These are people who move their large savings around the world trying to get the best interest rates. When the Fed recently cut interest rates that may have caused many very large savers to move their money to banks in other countries. To do this they may have had to change their dollars for another currency- therefore the supply of dollars to the foreign exchange market increases and the price falls.

Finally the demand and supply of a currency is affected by speculation. If people think the dollar is going to fall they will sell their dollars in exchange for another currency. Since this will increase the supply of dollars to the foreign exchange market it will cause the price of the dollar to actually fall.

Hope this helps.

Reuben

[Ferryman 5]

Which all means that we are heading for more wars, international and civil. Our job it to turn all this chaos into revolution.

[cyu]

Quoting from http://www.infoshop.org/rants/yu1.html

Your nation may still have in its treasury the remnants of the capitalist financial structure - gold, other precious metals, paper money from nations around the world. Spend it - as soon as possible. Buy commodities - those things you need to survive and buy any equipment you need to produce the goods you need. That is the real wealth to people who actually have to do the work.

What happens in the rest of the world as the people of your nation are suddenly flooding it with various currencies and "precious" metals, while snapping up real goods? The supply of those currencies and "precious" metals go up, while the supply of real goods go down. These goods become more and more expensive, while "money" becomes more and more worthless. Thus, there is all the more reason to exchange your money as soon as possible for real goods you will need.

When all the old money has been spent, you are free to live, work, and produce the things you need. Self-reliance is the only secure form of wealth. Trade with other nations can still be conducted, but do not hold on to their money - money is mere promise of future wealth, promises that can be broken whether from malice or from inability to fulfill them. Exchange any money for real wealth as soon as you can.

[dez]

I've seen people claiming that libertarians always beat communists in internet debates.
And now i see why.
Most people on this thread don't read the news; and who knows what else don't they read.

Hell, it's all over the place, some people have been claiming this could be like 1929 again.


Try this website:
http://theautomaticearth.blogspot.com/

Basically, the banks are all freaking out because they don't have enough money to cover their debts now that the mortgage market is tanking, so they are running to the Federal Reserve to give them lots of cheap credit to bail them out (capitalism, of course, can be described as socialism for the rich and a pile of shit for everyone else), which the Federal Reserve is happily doing, but meanwhile that is causing the market to be flooded with lots of dollars, thus debasing the currency.

And you know it's bad when even the capitalists themselves use phrases like the ones below:

This man speaks the truth; thus, i quote him.


I was reading an economist

www********
.counterpunch.
org/roberts03132008.html


And he was saying we're fucked. A cheaper dollar usually results in the US exporting more, restoring a favorable balance of trade. However, we have nothing to sell, so to sepak, since so much manufacturing had been moved overseas. Additionally, we still enjoy being "the gold standard" for the rest of the world. What if China stops pegging its currency to ours? What if OPEC adopts Euro as its standard?

I don't know enough economics of currency to evaluate it, but it sounded like there is at least some cause for concern (for Americans that is)

Although a lot of companies have been moved overseas, the profit still goes to your country.
A brazilian president/dictator, in a nationalism outburst, tried to limit the amount of money multinationals could send back to their countries. It limited less than 50% of the money, and the bill was taken down in less than a year and the guy was persecuted for the rest of his life, which ended in a suicide that was actually a political move to screw american supporters in brazil. Needless to say it only delayed their military coup in 10 years, and all that they wanted done was done.


The US are not really the gold standard anymore, the euro has, since saddam started selling oil in euros, gained a lot of importance.



A cheaper dollar means that your product will be more competitive internationally. In contrast, foreign products will be more expensive, something that will incredibly encourage americans to buy american products, but it will also discourage people from buying (things in general) and make the economy less dynamic.
Japan managed to recover its economy in ww2 with a policy like that, and so did a good bunch of the asian tigers.
But they relied on an "exportation platform", and their products largely went to the US...

[cyu]

I've seen people claiming that libertarians always beat communists in internet debates.



When someone says a capitalist won a debate, it probably just means he was already a capitalist to begin with. When someone says a communist won a debate, it probably just means he was already a communist to begin with.


Although a lot of companies have been moved overseas, the profit still goes to your country.

It goes to the people who are part of the owning class - those who already have too much money, thus widening the gap between the rich and poor. The wider this gap gets, the more economic resources within your own country are devoted to industries that produce luxury goods and services, and the less resources are devoted to producing things for the average person. There's simply more profit to be made serving the rich when they have so much more money. All it means is more misery for the people doing the work.

And then Malthusians wonder why there are so many people, but not enough food or decent shelter to go around. The answer is obvious. Those people are busy serving the rich instead of producing things for themselves to use.

[dez]

When someone says a capitalist won a debate, it probably just means he was already a capitalist to begin with. When someone says a communist won a debate, it probably just means he was already a communist to begin with.

I've seen people in revleft claiming that.
Some time ago.
=/




It goes to the people who are part of the owning class - those who already have too much money, thus widening the gap between the rich and poor. The wider this gap gets, the more economic resources within your own country are devoted to industries that produce luxury goods and services

Your own country?

Economic resources being devoted to industries that produce luxury goods and services usually means more jobs...

The money from the multinationals that goes back to its original country is often invested on the area the multinational acts, either by buying competitors, expanding their own company or ????? (:P). It enlarges the gap between the companies on the developed economies (they get richer and more competitive) and on the underdeveloped/developing ones(they get screwed). If you need to know what does that imply, just compare life quality and income between those two groups.
Of course, it's not completely unilateral, come companies manage to bend that "rule", but that's pretty much what it happens.




, and the less resources are devoted to producing things for the average person. There's simply more profit to be made serving the rich when they have so much more money. All it means is more misery for the people doing the work.
Not necessarily, income and access to resources has been increased progressively over time in many countries, US being one of them.


And then Malthusians wonder why there are so many people, but not enough food or decent shelter to go around. The answer is obvious. Those people are busy serving the rich instead of producing things for themselves to use.

I would say that people are busy trying to get resources for themselves, not to serve the rich, rich people have them and don't really feel like sharing with everyone. Also that the current system needs people to starve in order to raise productivity.

[MarxSchmarx]

While trade deficits and massive debt obligations don't help, the collapse of the American mortgage-backed securities has been a real kicker.

Mostly Chinese wealth was stashed away into these securities on the theory that they were conservative places to park money. When property values started going down and debtors fell into default, the mortgage-backed securities looked like a bad deal. So the Chinese started selling them and converting them to securities in other countries, selling dollars in the process.

[ArabRASH]

Basically a weak dollar helps create growth, but raises the prices of imports for consumers.

A weak dollar means its more expensive to import things, but it also means its cheaper for other countries to import from america. Thus america will export more creating more growth. Yet the weak dollar means a BIGGER amount of dollars is needed to buy the SAME amount of goods from abroad. Thus the price of anything imported(From china, italy france) will go up. Also for American tourists going to Europe, it will become more expensive. Therefore basically a weaker dollar helps increase GDP. But it also hurts consumers alot if alot of the products they buy are imported.

[cyu]

Economic resources being devoted to industries that produce luxury goods and services usually means more jobs...


The "creating more jobs" excuse is a fallacy used by pro-capitalists. It's not whether there are more jobs, it's what the jobs are doing. For example, you could create plenty of "jobs" by enslaving everyone and having them build pyramids for you. They all get something to eat, and you get a big pyramid.

The problem is how resources in your economy are allocated. If more of it is allocated to producing pyramids or luxury goods, less of it is producing food or other goods the average person uses. This means the supply of food goes down, and their prices go up, which hurts the average person.



I would say that people are busy trying to get resources for themselves, not to serve the rich


Sure, the average person isn't trying to help the rich on purpose. However, under a market economy where there's a large gap between rich and poor, the average person will be paid much more if they did something that served the rich, because the rich have more to spend. So that's the trap they fall into - even if they wanted to serve the poor, it would be difficult to make ends meet if your customers can't afford to pay you.

A market economy only works if the people participating in it have relatively equal amounts of spending power. Each unit of money spent is like a vote for what's needed and should be produced. When everyone has relatively equal amounts of money to spend, this approaches economic democracy. The problem with capitalism is that some people have much more spending power than everyone else, so they have many more "votes" than everyone else, in deciding what the economic output of the society will be. This is what leads to palaces being built by people who can barely afford a place of their own.