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View Diary: Dollar Still Falling, Nears All-Time Lows (169 comments)

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  •  Natural dollar about $0.25 (0+ / 0-)

    We can only hope it achieves its real market value in a steady, slow market adjustment vs. a sudden crash that would trigger a world recession.

    Trade deficits and budget deficits/debt are the real factors.

    They are ones the next president can fix.

    1. Taxes=spending...whatever it is...tax rates adjust accordingly. Add some progressivity, take the upper income limits off of SS and Medicare and that's fixed.
    1. Cut US oil imports, now pushing 50% of US deficit and cause of $1T in deficit/debt spending in military efforts to secure oil.

    As long as US does not need to borrow dollars, it can weather the dollar's decline to actual market value.

    •  Natural? (0+ / 0-)

      The best approximation of natural price is the PPP. The dollar looks fine there. The problems are all on the fiscal side. The supply of dollars outside the US is exceeding the demand for them, which is causing the dollar to fall. Now, eventually, people will find things to buy from Americans to help balance this out, but China hasn't done the world any favors by pegging its currency as it has.

    •  I'm also wondering what you meant by that (0+ / 0-)

      What is the 25¢ dollar a measure of, or more precisely, what economic/political factors would you have to remove to put us there & how did you come to that amount?

      It at least sounds plausible that the dollar is 400% overvalued because of this country's historical superpower status and special trade relationships, but give some references.

      •  Dollar is worth about 25% of current value (1+ / 0-)
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        terafnord

        once US debt and dollar imbalance are squeezed out.

        In other words, if holders of US dollars from trade deficit and budget deficits required US to pay back in Euros vs. dollars.

        The flip side is inflation, a 75% inflation rate would be created.

        "give some references"

        US Statistiscal Abstract which notes US Debt is $6T about $2T held overseas. If we figure just the overseas owners sell (not likely since the wealthy who own US debt would want out also) that clips US economy for about 25%. The accumulated trade deficits of last 10 years are another $4T so another 50% there to get 75% of current dollar value, $0.25 per dollar.

        Just rough approximations, if there is a run on the dollar (China dumps dollars to stop US from invading Iran) the value of the dollar could go even lower but just taking the trade and budget deficit dollars out gets you to $0.25/dollar.

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