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The financial press reported last week that the euro, the new currency created only five years ago and used by most European nations, has supplanted the U.S. dollar as the most widely used form of cash internationally. There are now more Euros in circulation worldwide than dollars.

This alone is not necessarily troubling, as the dollar remains the world’s most important reserve currency. About 65% of foreign central bank exchange reserves are still held in dollars, versus only about 25% in euros. And the European Central Bank faces the same inflationary pressures that our own Federal Reserve Bank Governors face, including a growing entitlement burden that threatens economic ruin as both societies age. European politicians want to spend money just as badly as American politicians, and undoubtedly will clamor to inflate-- and thus devalue-- the euro to fund their creaky social welfare systems.

Still, the rise of the Euro internationally is another sign that the U.S. dollar is not what it used to be. There is increasing pressure on nations to buy and sell oil in euros, and anecdotal evidence suggests that drug dealers and money launderers now prefer euros to dollars. Historically, the underground cash economy has always sought the most stable and valuable paper currency to conduct business.

This is what happens when supply-side economics and rampant "shop 'til you drop" consumerism is the dominant economic policy of a nation.  

The US government has run massive fiscal deficits for the last 6 years.  Despite the accounting tricks used to mask the deficit's true size, the Bureau of Public Debt reports that total outstanding debt on September 30 2001 was $5,807,463,412,200.06 and currently stands at $8,593,076,179,156.67 -- an increase of 48% in six years.  At the same time, the US government has cut taxes and gone to war, which has increased discretionary expenditures over 30%.  Here's a graphic representation of the "MBA President's" fiscal policy (the top line represents expenditures):

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The US consumer has continually increased individual purchasing for some time.  This has resulted in a mammoth trade deficit:

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To finance this deficit, foreign governments have doubled their purchases of US Treasuries over the last 6 years:

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Instead of savings, the US consumer has gone into debt to finance US growth.  

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US Savings:

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The end result of these policies is simple: Despite the many protestations of a "strong dollar policy" has come under continued assault in the currency markets.  Here's an 8-year chart of the dollar.

Photobucket - Video and Image Hosting

A devalued dollar leads to several basic economic problems.

1.) The US Federal Reserve's ability to lower interest rates in the event of an economic slowdown is hemmed in.  A devalued dollar means the US has a higher probability of importing inflation.  The Federal Reserve is charged with price stability.  If it lowers interest rates and the dollar is decreasing in value, it may import inflation.

2.) The possibility of the dollar being shocked be a random economic event are higher.  Consider that over the last few weeks Thailand implemented draconian currency controls that sent its markets down 10% in a day.  While the government reversed policy within 24 hours, if they hadn't have done so, it is possible the effects would have eventually bled over into the dollar.

3.) Right now foreign central banks are playing a giant international game  of chicken.  No one want to see their official reserves decrease in value.  So, they all want to slowly sell dollars and buy more euros.  However, by selling dollars they may create a selling panic that further decreases their respective currency reserves.  In the current environment the possibility of one government making the wrong move is higher simply because of the dollar's precarious valuation.  

Originally posted to bonddad on Tue Jan 02, 2007 at 04:55 AM PST.

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Comment Preferences

  •  Oh MY (16+ / 0-)

    Never in my life have I ever thought that the dollar would be worthless.  It has always been so strong.  Now that thought has entered my brain as a future possibilty.

    •  Imagine us in the same position (44+ / 0-)

      as every other nation that has just lost a major war, going to the bank with your wheelbarrow to draw out enough cash to buy some groceries and a tank of gas.

      What makes a currency strong and stable is people believing that the government that backs it is strong and stable. Bush Co. has just made it clear to the rest of the world that the US is now about as strong and stable as the Confederacy after the Civil War.

      Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

      by rktect on Tue Jan 02, 2007 at 05:01:41 AM PST

      [ Parent ]

      •  And That WheelBarrow Rolls Downhill (7+ / 0-)

        much easier than it does up, does it not?

        Kinda like "Juggernaut" from the X3 movie, this bad boy is going to get uglier by the moment if it reaches "critical velocity."

        Hang on tight, folks, bonddaddy's been callin' this one for quite some time now...

        "Uncle Fredo's gone fishing, son...yeah, that's it..."

        by TheManWithNoPoint on Tue Jan 02, 2007 at 05:19:08 AM PST

        [ Parent ]

      •  Imagine a single U.S. employer (11+ / 0-)

        willing to increase its employees' pay enough to fill a wheelbarrow simply because hyperinflation has kicked in.

        I can't envision it; can you?

        "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

        by Geenius at Wrok on Tue Jan 02, 2007 at 06:09:04 AM PST

        [ Parent ]

      •  "Just lost a major war" (4+ / 0-)
        Recommended by:
        Shockwave, bronte17, rktect, daisycolorado

        You aren't seriously comparing America's experience with Iraq to the experience of defeated countries in World War I or World War II, are you? Am I misreading or are you making that analogy?

        It wasn't just lack of confidence that caused hyperinflation then. It was a financial drain to war operations, damage, or reparations that was 100% or more of pre-war GDP. We've squandered a lot of goodwill and some treasure in Iraq, but you're strongly exaggerating its effect on the U.S. economy--and the effect of confidence in the dollar on its essential value.

        •  We just lost everything in this war (8+ / 0-)

          The closest analogy probably would be what happened to the Ottoman empire when it got divied up by what are now the permanent members of the UN security council.

          Because we have lost our ability to control the decision making process and to be the decider we no longer can cut the deals so they work out favorably for us alone.

          We have lost our reputation for being the guys in the white hats, the defenders of truth and justice and the little guy.

          Even if you aren't the most powerful kid on the block being out there collecting for a good cause will occassionally get you a few coins in your kettle, but who wants to be associated with kidnapping torture, murder and holding without rendition?

          Now that we have lost our status as a superpower, Russia and China and Iran can quite legitimately view us as a paper tiger and ignore our sabre ratteling.

          We lost control of the oil in the mideast. Thats the Three days of the Condor Scenario, with aftershocks that may be worse than a nuclear war. America is simply not prepared for running out of energy and we are already past peak oil meaning gas prices are going up now and there is no ceiling in sight.

          Now that we have bankrupted ourselves, the little signs of having the credit shut off are begining to appear on the horizon.

          The euro being viewed as more stable as the dollar should be frightening to everyone because its clear that if China decides to invest in Euros insted of dollars we are totally screwed.

          The financial drain comes mostly from entitlements (read that as established industries with employees who would be out of work if we redirected our spending). We can't change course or make corrections without putting people out of work.

          I'm hard put to see how we even have an economy after gas prices rise beyond the point where people can afford to commute to work, and there is nothing in the stores to feed your family with because truckers can't afford the gas to get it to market, and the stores that have nothing to sell and no one to sell it to and no employees coming to work begin to go bankrupt and shut down.

          Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

          by rktect on Tue Jan 02, 2007 at 06:40:18 AM PST

          [ Parent ]

          •  I'm sorry I don't see it. (6+ / 0-)

            The closest analogy probably would be what happened to the Ottoman empire when it got divied up by what are now the permanent members of the UN security council.

            Really? We're losing our sovereign territory to stronger and wealthier powers, working in concert to dismantle our country? Will Norwegian troops be arriving in Boston to enforce their Mandate shortly?

            We've lost no territory, almost no people, and a fraction of our wealth. I am not trivializing the emotional loss of 3,000 people, but compared to losing 25% or more of men in certain age cohorts (the Confederacy, WWI France, WWII Soviet Union), our labor force and ability to fight future wars given some government investment or a draft is not going away.

            We're not bankrupt. We've got some imbalances, and we're thriving on borrowed cash, but ask any Briton over 50 what a country in true economic decline looks like. We ain't it. Extrapolating from charts is fun but it's not a subtitute for true analysis.

            •  You're right - more like Britain in 1916 (4+ / 0-)
              Recommended by:
              Shockwave, rktect, Aquarius40, blueoasis

              That would be about the time that Wall Street surpassed The City as the world's lender, the British Treasury was bare, and the Royal Army had reached the ends of its reserves.

              Good thing the Lusitania sunk when it did.

              Or, maybe more like 1946.

              •  Really? (2+ / 0-)
                Recommended by:
                Fast Pete, rktect

                What were government expenditures as a share of GDP, on defense or otherwise, like in Britain in 1916 or 1946? What are they like in the U.S. now?

                •  As a share of GDP, no ... but defence spending .. (5+ / 0-)

                  ... as a share of government spending, there's a lot of similarities there.

                  Don't forget that there were periodic efforts by the British to make the Empire pay a share of the cost of its defense ... the US Imperial system relies on deficit spending to keep a network of military bases open around the world. While the sun never sets on the US Empire, it is definitely a system for channelling government spending into the military-industrial complex.

                •  That's an interesting question. (8+ / 0-)

                  There are several ways to answer that.   I can't immediately find a single source for UK defense expenditures/GDP, but what we're talking about here is debt and the cost of the Iraq war.  The bottom line is that $400 billion to $1 trillion in total Iraq war costs is comparable in terms of percentage of GDP to WW1 and WW2 British external war debts, even though the United States GDP is now above $12 trillion.  By comparison, the 1917 U.S. GNP was about $50 billion, and the cost of WW1 to the American taxpayer was around $35 billion.

                  Here's some raw data for UK external, public war debts for WWI and WWII.

                  WWI: Total allied wartime public loans from US - $10 billion (about 60% to UK)  - Source, Chernow, House of Morgan, 227)

                  WWII: $5.5 billion (@$60 billion in current dollars)

                  These figures do not include private lending or Lend-Lease grants.

                  Britain pays its last installment on World War II debt
                  The Associated PressPublished: December 29, 2006

                  LONDON: Britain paid the last installment of its World War II-era debt to the United States and Canada on Friday, making its final US$100 million (€75.91 million) payment to its allies.

                  Britain was left with a debt of US$4.3 billion to the United States and US$1.2 billion to Canada more than 60 years ago, when London took out loans to finance reconstruction.

                  Annual payments on the loans, taken out at 2 percent interest, have since totaled nearly US$10 billion, or about twice the original debt in dollar terms.

                  "This week, we finally honor in full our commitments to the U.S. and Canada for the support they gave us 60 years ago," Economic Secretary Ed Balls said in a statement. "It was vital support which helped Britain defeat Nazi Germany and secure peace and prosperity in the postwar period."

                  Most American assistance to Britain came through the Lend-Lease program — which gave away nearly US$27 billion worth of equipment, food, weapons and fuel to the British war effort. When the program ended in 1945, Britain took out loans for reconstruction.

                  Britain agreed to repay the money over 50 years, but the loan's terms allowed deferred payments when economic conditions were difficult. Britain deferred payments six times during the 1950s and 1960s, when unfavorable exchange rates and low currency reserves made them onerous.

                  The total amount borrowed is equivalent to about US$60 billion (€45 billion) in terms of today's purchasing power.

                  I found some data for WWI economic effects on the US economy, and it was obviously a real shot in the arm for the banking industry.  The volume of wartime lending to the UK works out to about 4-5 percent of US GNP, but that figure was dwarfed by the total cost of World War One, which almost twenty times as large.  The total national debt during WWI rose about eight times to $26 billion in just two years.

                  By comparison, in ten years, the New Deal more than tripled the national debt from $22 to $72 billion, which was by any measure the largest peacetime increase in American history.  The 1941-45 war against Japan and Germany caused the debt to reach $260 billion, another three-fold increase.


                  From a crude dollar-and-cents point of view it is hard to justify the [First World] War based on the trade lost to the United States. U.S. exports to Europe rose from $1.479 billion dollars in 1913 to $4.062 billion in 1917. Suppose that the United States had stayed out of the war, and that as a result all trade with Europe was cut off. Suppose further, that the resources that would have been used to produce exports for Europe were able to produce only half as much value when reallocated to other purposes such as producing goods for the domestic market or exports for non-European countries. Then the loss of output in 1917 would have been $2.031 billion per year. This was about 3.7 percent of GNP in 1917, and only about 6.3 percent of the total U.S. cost of the war.[2]

                  On March 21, 1918 the Germans launched a massive offensive on the Somme battlefield and successfully broke through the Allied lines. In May and early June, after U.S. entry into the war, the Germans followed up with fresh attacks that brought them within fifty miles of Paris. Although a small number of Americans participated it was mainly the old war: the Germans against the British and the French. The arrival of large numbers of Americans, however, rapidly changed the course of the war. The turning point was the Second Battle of the Marne fought between July 18 and August 6. The Allies, bolstered by significant numbers of Americans, halted the German offensive.

                  The initiative now passed to the Allies. They drove the Germans back in a series of attacks in which American troops played an increasingly important role. The first distinctively American offensive was the battle of the St. Mihiel Salient fought from September 12 to September 16, 1918; over half a million U.S. troops participated. The last major offensive of the war, the Meuse-Argonne offensive, was launched on September 26, with British, French, and American forces attacking the Germans on a broad front. The Germans now realized that their military situation was deteriorating rapidly, and that they would have to agree to end to the fighting. The Armistice occurred on November 11, 1918 – at the eleventh hour, of the eleventh day, of the eleventh month.

                  Mobilizing the Economy
                  The first and most important mobilization decision was the size of the army. When the United States entered the war, the army stood at 200,000, hardly enough to have a decisive impact in Europe. However, on May 18, 1917 a draft was imposed and the numbers were increased rapidly. Initially, the expectation was that the United States would mobilize an army of one million. The number, however, would go much higher. Overall some 4,791,172 Americans would serve in World War I. Some 2,084,000 would reach France, and 1,390,000 would see active combat.

                  Once the size of the Army had been determined, the demands on the economy became obvious, although the means to satisfy them did not: food and clothing, guns and ammunition, places to train, and the means of transport. The Navy also had to be expanded to protect American shipping and the troop transports. Contracts immediately began flowing from the Army and Navy to the private sector. The result, of course, was a rapid increase in federal spending from $477 million in 1916 to a peak of $8,450 million in 1918. (See Table 1 below for this and other data on the war effort.) The latter figure amounted to over 12 percent of GNP, and that amount excludes spending by other wartime agencies and spending by allies, much of which was financed by U.S. loans.

                  Table 1
                  Selected Economic Variables, 1916-1920  
                  1916 1917 1918 1919 1920

                  1. Industrial production (1916 =100) 100 132 139 137 108
                  1. Revenues of the federal government (millions of dollars) $930 2,373 4,388 5,889 6,110
                  1. Expenditures of the federal government (millions of dollars) $1,333 7,316 15,585 12,425 5,710
                  1. Army and Navy spending (millions of dollars) $477 3,383 8,580 6,685 2,063
                  1. Stock of money, M2 (billions of dollars) $20.7 24.3 26.2 30.7 35.1
                  1. GNP deflator (1916 =100) 100 120 141 160 185
                  1. Gross National Product (GNP) (billions of dollars) $46.0 55.1 69.7 77.2 87.2
                  1. Real GNP (billions of 1916 dollars) $46.0 46.0 49.6 48.1 47.1
                  1. Average annual earnings per full-time manufacturing employee (1916 dollars) $751 748 802 813 828
                  1. Total labor force (millions) 40.1 41.5 44.0 42.3 41.5
                  1. Military personnel (millions)  .174 .835 2.968 1.266 .353

                  Sources by row:

                  1. Miron and Romer (1990, table 2).

                  2-3. U.S. Bureau of the Census (1975), series Y352 and Y457.

                  1. U.S. Bureau of the Census (1975), series Y458 and Y459. The estimates are the average for fiscal year t and fiscal year t+1.
                  1. Friedman and Schwartz (1970, table 1, June dates).

                  6-8. Balke and Gordon (1989, table 10, pp. 84-85).The original series were in 1982 dollars.

                  1. U.S. Bureau of the Census (1975), series D740.

                  10-11. Kendrick (1961, table A-VI, p. 306; table A-X, p. 312).

                  Although the Army would number in the millions, raising these numbers did not prove to be an unmanageable burden for the U.S economy. The total labor force rose from about 40 million in 1916 to 44 million in 1918. This increase allowed the United States to field a large military while still increasing the labor force in the nonfarm private sector from 27.8 million in 1916 to 28.6 million in 1918. Real wages rose in the industrial sector during the war, perhaps by six or seven percent, and this increase combined with the ease of finding work was sufficient to draw many additional workers into the labor force.[3] Many of the men drafted into the armed forces were leaving school and would have been entering the labor force for the first time in any case. The farm labor force did drop slightly from 10.5 million in 1916 to 10.3 million workers in 1918, but farming included many low-productivity workers and farm output on the whole was sustained. Indeed, the all-important category of food grains showed strong increases in 1918 and 1919.

                  •  Thank you (3+ / 0-)
                    Recommended by:
                    Shockwave, rktect, leveymg

                    Thank you for doing the research; I recognize my post may have come across as snark, but it was honest skepticism. My understanding was that the cost of fighting WWI and WWII bankrupted Britain, and that was why it gave up its place as the creditor to the world. The cost of fighting the Iraq war has been a fraction as a share of GDP, but we've been consuming our way through our wealth for years above and beyond what we're spending there.

                    Britain liquidated many of its private overseas investments and then borrowed heavily to fight the war. They couldn't meet their commitments, which is why the U.S. had to restructure the debt and why their economy went south in the 1960s when exports stopped compensating for imports.

                    We're not there yet. We may never arrive there, for a variety of reasons. I agree the trends are worrying but post-war Britain is our model for the decline of a great power and we have some tools left in our toolbox, including devaluation that reduces consumption, and an economic rejiggering that favors exports over construction and consumption. We also maintain structural advantages in our attractiveness to immigrants and entrepreneurs, educational facilities, and financial prowess that parallel the advantages in manufacturing, shipping, and peace that Britain lost to others after WWII. We haven't lost those edges... yet.

                    •  Britain (2+ / 0-)
                      Recommended by:
                      brittain33, rktect

                      began losing economic competitiveness to the US and Germany in the last quarter of the 19th C. The cost of two major wars and the effects of the depression seeded up what was a long term trend already in progress.

                      The US war in Vietnam was a bigger economic impact on the US than what has happened SO FAR in Iraq. It did not catapult the US into bankruptcy. However, it did contribute to some decrease in US world economic dominance. Iraq is not going to bring about a dramatic economic collapse. Neither are fluctuations in currency exchange rates.

                      It is much more useful to look at long term trends and how these specific issues may reinforce them. To my mind the most important issue is whether the US is losing economic competitiveness in relation to the emerging economies of Asia in somewhat the same way that Britain lost its edge to the US. That is a real possibility.

                      •  The Iraq war isn't over yet (1+ / 0-)
                        Recommended by:

                        Give it a couple of more years and we'll be lucky to get out without catastrophic consequences to the US economy to say nothing about the "goodwill" the US enjoyed around the world.

                        "Goodwill" is an asset in corporate balance sheets, not in our country's balance sheet now.  Can you give it a value?

              ; an oasis of truth. -1.75 -7.23

                        by Shockwave on Tue Jan 02, 2007 at 11:08:19 AM PST

                        [ Parent ]

                        •  Goodwill (1+ / 0-)
                          Recommended by:

                          on the balance in accounting terms was a device concocted to plug the balance sheet when you pay more for a company that the value of its assets.

                          •  Precisely (1+ / 0-)
                            Recommended by:

                            The US has enjoyed positive goodwill for its products and services, for its regional initiatives, global business leadership and so on.  

                            Now comes an extended period of negative goodwill.

                            Business deals that will go to companies in other countries because business people don't want to deal with the US any more than they have to.

                            Scientific and business conferences that will be held elsewhere.

                            This goodwill that I speak off was an intangible but very real strategic advantage that one enjoyed when representing an American company internationaly.

                  ; an oasis of truth. -1.75 -7.23

                            by Shockwave on Tue Jan 02, 2007 at 12:36:36 PM PST

                            [ Parent ]

                    •  Another change--rise of worldwide corporations (3+ / 0-)
                      Recommended by:
                      rktect, jbeach, MarketTrustee

                      Much larger now, and I doubt they care more about America than they do about their own profits. They can work both sides of the street, use Euros or dollars, move money to the most profitable area through the use of sales between subsidiaries. This must have some affect on the balance between nations as well.

                      "Our lives begin to end the day we become silent about the things that matter." Dr. ML King, from a jail cell in Birmingham, Alabama in 1963.

                      by bewert on Tue Jan 02, 2007 at 09:42:22 AM PST

                      [ Parent ]

                    •  Old Empires don't die, they just fade away (2+ / 0-)
                      Recommended by:
                      rktect, sunshineonthebay

                      Let's assume the size of Iraq War-related expenditures indeed come in at the high-end of the Stiglitz estimate ($1 trillion).  That's about 8 percent of current US GDP.

                      The basic question is, what is the likely impact that Iraq war expenses are likely to have on the US?  The best historical comparison has to be the impact of the World War on Britain.  The reason for the relative decline of the UK was not just the cost of the war -- the U.S. also incurred high costs of the war(about .85 of GDP)* -- but the impact the conflict had on control over global banking.  London simply was unable to capitalize the cost of war with Germany, and ceased all external lending.  Meanwhile, Wall Street took the opportunity (with implied guarantees from Washington) to fill that vacuum at very advantageous rates of return.

                      During WWI, America lent Britain amounts totalling more than ten percent of 1917 U.S. GDP.  My reading of the literature tells me that the First World War reversed the balance of finance and terms of trade between the U.S. and the UK until the Great Depression, when even Jack Morgan was forced to sell some of his art work to Fritz Thyssen to raise operating capital.

                      Meanwhile, after 1933, the Germans selectively defaulted on their War debts and reparations payments -- continuing to pay London while cutting off the checks to New York -- splitting the British and American bankers even further.  It bought conciliatory speeches from Mr. Chamberlain, along with Czechoslovakia and Austria.  The effect of this unexpectedly easy default was emboldening in Berlin.

                      The overall cost of lost wars and pyrrhic victories isn't just financial.  The loss of hegemony and prestige by a great power -- even if dominance simply shifts to the closest rival -- can lead to some devastating political changes, as well.  That is what should really alarm us the most.  Winners and losers, alike.

                      •  A question of comparisons (1+ / 0-)
                        Recommended by:

                        Let's assume the size of Iraq War-related expenditures indeed come in at the high-end of the Stiglitz estimate ($1 trillion).  That's about 8 percent of current US GDP.

                        I just want to point out you're comparing a cumulative figure ($1 trillion) with an annual figure ($12.5 trillion) for GDP. $1 trillion would be more than 1/3 of our current annual budget and that would be a significant drain on our economy. But stretched out over several years, when cumulative GDP is closer to $50 trillion and federal spending over $10 trillion, it's not the same.

                        •  The point is: the actual costs of losing a war (3+ / 0-)
                          Recommended by:
                          rktect, Richard Lyon, Bronx59

                          far exceed the revenue costs, and even the costs of servicing the resulting debt.

                          Of course, under normal circumstances, we could pay for a war in which "only" 150,000 US troops are commmitted at any one time.  

                          But, the costs in terms of destabilizing political and comercial effects of losing such a war can be enormous, particularly if there are other factors pushing a tipping point in trade or financial dominance.  London reached such a tipping point in 1914.

                          I guess we need to talk about the relative health of the U.S. financial industry and other key sectors.  We know that we have enormously diadvantageous terms of trade, that have historically lead to currency and financial crises.  

                        •  BTW, British WW2 debts were stretched out over 50 (1+ / 0-)
                          Recommended by:
                          Richard Lyon

                          years, yet the UK economy was still so cripplied that London had to skip some payments in the 1960s.  Also, recall that British WW1 debts were repackaged into more than twenty annual annuity payments to the Americans.

                          So, the historical analogy still holds firm.  Past experience shows that war debts of this magnitude are a major, lasting drain on the national economies of those states that have to pay them, while they are a big benefit to the relative standing of countries that issue the loans.

                          So, who's issuing the Iraq War loans who will likely end up benefiting from this?  Those same countries and MNCs who hold out T-bonds and which have large ownership stakes in Wall Street banks.  Who might that be?  

                          Indeed, the very same parties who have benefited most from terms of trade imbalances and the rising risk premium attached to oil --  Asian manufacturers and Middle East oil exporting countries -- will also enjoy the financial rewards of Bush's deficit spending that pays for his disastrous Iraq occupation.

                          Surely, this outcome was not entirely unforeseeable by those who understood the implications going into it.

                      •  stability counts too (1+ / 0-)
                        Recommended by:

                        If we are perceived to be unstable, which is the direction in which we're heading, foreigners will cut back their investments.  This change could devastate our economy, since we hardly produce anything tangible anymore.

                  •  What you miss, and badly, is this: (3+ / 0-)
                    Recommended by:
                    bronte17, rktect, hulagirl

                    What would the world look like now if we hadn't had WWI AND WWII?

                    What if technology and science had been devoted to human welfare, population control and wise international relations.

                    Economists always seem to
                    drop into "Gee, I can't speculate!" mode when you ask that question, but their entire stock in trade is speculation the rest of the time.

                    Think about Paradise Lost, because we war to fatten the rich.

                    Listen Before You Talk.

                    by ormondotvos on Tue Jan 02, 2007 at 09:42:36 AM PST

                    [ Parent ]

                    •  As your sig line goes... (1+ / 0-)
                      Recommended by:

                      We cannot change the past, but we can certainly shape our future.

                      Progress, far from consisting in change, depends on retentiveness. Those who cannot remember the past are condemned to repeat it. (George Santayana)

                      He who is unable to live in society, or who has no need because he is sufficient for himself, must be either a beast or a god.  --Aristotle

                      <div style="color: #a00000;"> Our... constitutional heritage rebels at the thought of giving government the power to control men's minds. Thurgood Marshal

                      by bronte17 on Tue Jan 02, 2007 at 11:06:33 AM PST

                      [ Parent ]

          •  More to the point (5+ / 0-)

            aftershocks that may be worse than a nuclear war

            Do you not see that this is hyperbole? The economic effects of leveling a city and killing a large number of its people are always going to be more damaging than an oil shock, even the worst oil shock you can imagine, unless there's something that literally destroys all the oil everywhere in the world.

            •  The Republicans have wasted all the money (2+ / 0-)
              Recommended by:
              ormondotvos, Picot verde

              extended the credit line to the limit and rather than investing it in something meaningful like a plan to transition to alternative energy or put an end to global warming have used war to enrich their corporate sponsers.

              Now we come to the point where global warming and worsening storms, rising sea levels and drowning cities begin doing trillions of dollars of damage to infrastructure rather than mere billions.

              We will have hundreds of leveled cities and worse people living in suburbs with no place to work, no way to get to work if they had a job, their families starving with no money coming in and no food, no water, no power, no trash pickup, no lights...

              The insurance companies will all go bankrupt and whole industries will go out of business.

              We are past peak oil and have perhaps 15 years till the last drop of oil is gone. Then we can burn coal and natural gas but they now have to make up that 85 MbO/day deficit from oil so instead of lasting hundreds of years they last a few decades, by then we are past peak fossil fuel and as demand rises and production drops prices go through the roof.

              In our lifetimes we will probably see the drowing of every major American City on the East and Gulf Coasts

              We might like to solve some of the problems but where does the money come from.

              Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

              by rktect on Tue Jan 02, 2007 at 07:47:13 AM PST

              [ Parent ]

              •  Even the most pessimistic (2+ / 0-)
                Recommended by:
                rktect, Richard Lyon

                projections of the Peak Oil crowd still have global oil production around 80 mbd 15 years from now. You are just blowing smoke here.

                •  The # of mbd being (2+ / 0-)
                  Recommended by:
                  rktect, ormondotvos

                  consumed cannot remain at the current level of consumption if we are to create a livable environment.  It doesn't matter if the oil is there or not.  We cannot afford to use the oil.  The issue becomes one of survivablity, not whether there is enough oil to keep the wheel spinnning on it's current course.  We cannot burn the oil that is left and not expect the economy to suffer  at least a 25% reduction due to current carbon output and that's putting a smiley face on it.

                  •  One major problem (1+ / 0-)
                    Recommended by:
                    Picot verde

                    is that the oil companies have grossly inflated their reserves.

                    Its a lot like the idea that its too soon to decide about global warming because some oil company scientists suspect that climate change may actually lead to another ice age...(complete with the kids animated movie "Ice Age" and the movie "Day after Tomorrow" and the TV program about the "Little Ice Age", and so forth.

                    Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

                    by rktect on Tue Jan 02, 2007 at 10:05:55 AM PST

                    [ Parent ]

                •  Take into account when they were made (0+ / 0-)

                  The most recent CIA estimate is c 2002-2005, since then there have been a few snafu's.

                  You should agree that the total of all available oil was 1.25 trillion barrels before we began using any.

                  Oil has been produced from Middle East fields since about 1926 and many or most of the wells producing light sweet crude are now dry. That accounts for the 500 billion barrels we have used to date.

                  Of the remaining 750 billion barrels 250 billion barrels are not economically recoverable because either the deposits are to small or the oil is in a condition that requires too much processing to get at it.

                  Using those numbers that leaves us 500 billion barrels which we are presently using at 85 MbO/day. That would last about 15 years at current rates of demand. Unfortunately demand is going up even as production goes down.

                  Some reserves were over estimated by OPEC in order to allow them to produce more to meet US demand, and make more money.

                  With over 260 billion barrels of proven oil reserves, a quarter of the world's total, Saudi Arabia is not only the top foreign supplier to the United States - the world's largest energy consumer - but also essentially the sole source of liquidity in the oil market. According to the Department of Energy's Energy Information Administration (EIA), the world will become more dependent on Arabian oil in the next two decades.

                  To meet global demand for oil, Saudi Arabia will need to produce 13.6 million barrels a day (mbd) by 2010 and 19.5 mbd by 2020. Both the International Energy Agency and EIA assume Saudi oil output will double over the next 15 to 20 years.

                  In a new study soon to be released, Matthew R. Simmons, president of Simmons and Company International, a specialized energy investment banking firm, contends that this is not likely to happen.

                  He argues that Saudi Arabia's oil fields now are in decline, that the country will not be able to satisfy the world's thirst for oil in coming years and that its capacity will not climb much higher than its current capacity of 10mbd.

                  Considering the growth in demand, this could easily spark a global energy crisis.

                  The Ghawar field is now exhausted and Hawtah is almost gone. What remains in places like Canada, Venezuala, Nigeria is heavy crude which comes out of the ground and is transported in trucks rather than piped. Its rate of production is both slower and more expensive than light sweet crude which can be processed in a GOSP.

                  You should also keep in mind that many projections of reserves are produced by companies attempting to attract investors.

                  Saudi Arabia has over 300 recognized reservoirs but 90% of its oil comes from the five super giant fields discovered between 1940 and 1965. Since the 1970s there haven't been new discoveries of giant fields.

                  The most significant of the oil fields is Ghawar. Found in 1948, the 300-mile-long sliver near the Persian Gulf is the world's largest oil field and accounts for 55%-60% of all Saudi oil produced. Ghawar's current proven reserves are 12% of the world's total. The field produces 5 mbd, which is 6.25% of the world's oil production. According to Simmons,

                  Ghawar's northern regions are almost depleted. Two other giant fields, Abqaiq and Berri, also seem to have peaked in the 1970s.

                  Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

                  by rktect on Tue Jan 02, 2007 at 09:49:42 AM PST

                  [ Parent ]

                  •  Not even close (1+ / 0-)
                    Recommended by:

                    You should agree that the total of all available oil was 1.25 trillion barrels before we began using any.

                    Proven oil reserves today are somewhere around 1.25 trillion barrels.

                    That accounts for the 500 billion barrels we have used to date.

                    We have already pumped over a trillion barrels of oil.

                    The Ghawar field is now exhausted and Hawtah is almost gone.

                    If by exhausted you mean producing 5,000,000 barrels per day.

                    The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

                    by deathsinger on Tue Jan 02, 2007 at 10:44:16 AM PST

                    [ Parent ]

                    •  Its pretty close (0+ / 0-)

                      Re: Proven reserves. Those are geological estimates by industry experts, ie; ARAMCO and  Halliburton. They are inflated 40% in the mideast.

                      The Ghawar field is 300 miles long x 30 miles wide and is on rinse cycle. I have been to every well and every pump station on it.

                      Its the Hawtah field that we put in south of Haradh in 1993 that is producing the 5 MbO/day at the moment but thats a very small field and most of that field is gas rather than oil (You can google it down on the edge of the empty quarter if you want to)

                      Produced to date 784 Gb (I use 500)
                      (600 if you go back to whale oil)
                      (you use 1000 but don't increase reserves)

                      Reserves         836    (I use 750)
                      Discovered      1620    (I use 1250)
                      I don't count unrecoverable as discovered
                      unrecoverable           (I use 250)

                      Yet-to-find      180    (I use 200)
                      Yet-to-produce  1016    (I use 500)

                      I don't count (250) inflated reserves and (250)unrecoverable, and would allow there is a certain amount of spillage

                      Ultimate        1800    (I use 1250)

                      I don't count (250) inflated reserves and (250)unrecoverable, and would allow there is a certain amount of spillage

                      Depletion Midpoint  2001
                      Depletion Rate       2.6%
                      Discovery Rate      <6 Gb/a </p>

                      The CIA is not the most reliable source for investigative reporting on those statistics due to their accepting OPEC's and other industry numbers.

                      When the US is depending on Saudi Arabia to produce 20 MbO/Day and instead they can only do 5 MbO/Day, with production going down and demand up, and when the Saudis have kicked the US military out of Saudia Arabia due to worsening relations, so that their main base is now Quatar, and the Sunni rulers of Saudi are so pissed at the execution of Saddam on Ead, the holiest day of their year that they have declared the shia and those who aid and abet them (The US) to be infidels I wouldn't get my hopes up for a lot of mideastern oil coming our way from Saudi Arabia, Iraq or Iran

                      Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

                      by rktect on Tue Jan 02, 2007 at 12:24:35 PM PST

                      [ Parent ]

                      •  But the numbers are ten years (1+ / 0-)
                        Recommended by:

                        old.  That information is based on 1993 - 1995 accounts.

                        Its the Hawtah field that we put in south of Haradh in 1993 that is producing the 5 MbO/day at the moment

                        I can find source after source that says Hawtah peak production is 200,000 barrels a day and that Ghawar produces half of Saudi oil production (meaning it is the field producing 5,000,000 barrels a day).

                        The only major commercial discovery was 50 miles southwest of Riyadh in 1989 at the Hawtah Field, which became known as the Hawtah trend. Production peaked at 200,000 barrels of oil a day.

                        and instead they can only do 5 MbO/Day

                        From EIA

                        Saudi Arabia maintains crude oil production capacity of around 10.5-11.0 million bbl/d,

                        The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

                        by deathsinger on Tue Jan 02, 2007 at 12:46:30 PM PST

                        [ Parent ]

                        •  A more recent breakdown from August 2nd 2005 (0+ / 0-)

                          Study Raises Questions About Future Oil Supply
                          Projections that Saudi oil production will double in the next 15 to 20 years may be wrong, according to a new study. That could mean a major energy crisis in the future.

                          The Department of Energy’s data-gathering arm—the Energy Information Administration—and the International Energy Agency have forecast ample supplies of Saudi oil to meet future energy needs. But a study of 200 technical papers issued by the Society of Petroleum Engineers casts doubt on these predictions.

                          "The entire world assumes Saudi Arabia can carry everyone’s energy needs on its back cheaply," Matthew Simmons of Simmons & Co. said during a presentation at the Center for Strategic and International Studies. If that is incorrect, Simmons said, "there is no ‘Plan B’ ... and the world faces a giant energy crisis."
                          Simmons’ research suggests that the "easy oil era" may be over. Although Saudi Arabia has 300 recognized oil reservoirs, 90 percent of Saudi oil produced from 1940 to 1965 has come from five giant oil fields, he said.

                          The largest of these—Ghawar—is nearly depleted, he said.

                          Simmons faulted the data and models used by the two agencies in developing their projections. "A new era of energy transparency can possibly ward off a nasty energy surprise," he said.
                          "New Study Raises Doubts About Saudi Oil Reserves," Energy Security, prepared by the Institute for the Analysis of Global Security, March 31, 2004.
                          Consortia Apply to DOE to Test New Plant Licensing Process

                          Since 1994, the Hawtah Trend(also called the Najd fields), which includes the Hawtah field and smaller satellites (Nuayyim, Hazmiyah) south of Riyadh, has been producing around 200,000 bbl/d of 45o-50o API, 0.06 percent sulphur, Arab Super Light.

                          Offshore production includes Arab Medium crude from the Zuluf (over 500,000 bbl/d capacity) and Marjan (270,000 bbl/d capacity) fields and Arab Heavy crude from the Safaniya field. Most Saudi oil production, except for "extra light" and "super light," is considered "sour," containing relatively high levels of sulfur.

                          Saudi Arabia's long-term goal is to further develop its lighter crude reserves, including the Shaybah field, located in the remote Empty Quarter area bordering the United Arab Emirates. (In June 2005, the UAE said it wanted to amend a 1974 border pact which gave the Saudis rights to Shaybah, which lies 80 percent in Saudi territory and 20 percent in UAE).

                          Shaybah contains an estimated 15.7 billion barrels (or higher) of premium grade 41.6o API sweet (nearly sulfur-free) Arab Extra Light crude oil, with production as of May 2005 at around 500,000 bbl/d. Overall, the Shaybah project cost around $2.5 billion, with production starting in July 1998.

                          According to Oil Minister Naimi (October 1999), the development of Shaybah showed that "the cost of adding...capacity - that is, all the infrastructure, producing and transportation facilities - necessary to produce one additional barrel of oil per day in Saudi Arabia is, at most, $5,000 compared to between $10,000 and $20,000 in most areas of the world." Plans are to increase Shaybah output by as much as 300,000 bbl/d in the next few years.

                          The Shaybah complex includes three gas/oil separation plants (GOSPs) and a 395-mile pipeline to connect the field to Abqaiq, Saudi Arabia's closest gathering center, for blending with Arab Light crude (Berri and Abqaiq streams).

                          In March 2002, Aramco awarded major turnkey contracts to Italy's Snamprogetti ($630 million) and Technip-Coflexip ($360 million) aimed at increasing total Saudi oil production capacity by 800,000 bbl/d (500,000 bbl/d of Arabian light and 300,000 bbl/d of Arabian medium).

                          The $1.2 billion project, known as the Qatif producing facilities development program (QPFDP), involved construction of two gas-oil separation plants (GOSPs), as well as gas treatment and oil stabilization facilities, for the Qatif and Abu Saafa oilfields. Additional Qatif and Abu Saafa production had been slated to replace production elsewhere in Saudi Arabia, not to boost overall capacity, although recently this issue has been thrown into some question as the Saudis attempt to maintain a spare capacity cushion in the face of rapidly growing world oil demand. As of December 2004, Saudi Arabia reportedly had brought production from Qatif and Abu Saafa online.

                          The Hawtah trend    200,000 bbl/d
                          Zuluf               500,000 bbl/d
                          Marjan              270,000 bbl/d
                          Shaybah             500,000 bbl/d

                          quatif              800,000 bbl/d

                          harad               900,000 bbl/d
                          AFK                 500,000 bbl/d
                          Khurais             200,000 bbl/d
                          Takeback from
                          the shia in Bahrain 200,000 bbl/d

                          That's about 4,570,000 bbl/d from other fields

                          Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

                          by rktect on Tue Jan 02, 2007 at 02:39:41 PM PST

                          [ Parent ]

              •  dr krugman n/t (1+ / 0-)
                Recommended by:

                Diversity is the key to economic and political evolution.

                by MarketTrustee on Tue Jan 02, 2007 at 10:46:50 AM PST

                [ Parent ]

            •  Effects (1+ / 0-)
              Recommended by:
              Do you not see that this is hyperbole? The economic effects of leveling a city and killing a large number of its people are always going to be more damaging than an oil shock, even the worst oil shock you can imagine,

              Um, the "minor" foreshock tremors of the oil shock have included the Iraq war, which has leveled cities (eg. Fallujah) and killed hundreds of thousands of people.

              A major oil shock can well be worse, economically and in loss of human life, than any nuclear exchanges the world has yet witnessed.

          •  The scenario you paint is on the TV. (2+ / 0-)
            Recommended by:
            rktect, OHdog

            "The Day the Oil Ran Out."

            It's being run regularly. I've seen it three times.

            Nice little triple story of the crash of American civilization, told as a woman oil geologist drilling a dry hole in Alaska, a consumerist trucker couple, and the economy.

            Exactly what you said. Fuel prices rise, the trucks stop, goods become scarce, causing inflation to spiral.

            Money becomes worthless as jobs disappear. Big houses and cars become useless, but it's too far to find food.

            Hmmmm. Stock up, folks. It may take a few months for the government to wise up and kill the rich.

            The rich are parasites, and the whale of the state is coming up for a big splash to knock them off.

            If the Democrats don't apply the spending brakes to the rich and the armament makers, we're in for an unsustainable crash followed by a nuclear war.

            Call me Cassandra. Or Tiresias.

            Listen Before You Talk.

            by ormondotvos on Tue Jan 02, 2007 at 09:37:13 AM PST

            [ Parent ]

        •  Wrong about that. War costs a lot. (3+ / 0-)
          Recommended by:
          rktect, xanthe, Superpole

          Who pays for war? The middle class. The rich own the companies that make the armaments.

          War is the health of the capitalist state. But only if you are a capitalist, and only is you have resource nations to plunder.

          Globalization makes war less of a profit center for the rich.

          Do you think it will ever dawn on them, and their lackey economists?

          Listen Before You Talk.

          by ormondotvos on Tue Jan 02, 2007 at 09:30:21 AM PST

          [ Parent ]

        •  We flushed $2 Trillion down a rathole (5+ / 0-)
          Recommended by:
          Marek, bronte17, rktect, xanthe, Picot verde

          in the desert. And all we got was world-wide hate, enmity, loathing, contempt and this lousy T-shirt I'm wearing.

          "we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex" Dwight D. Eisenhower

          by bobdevo on Tue Jan 02, 2007 at 10:14:51 AM PST

          [ Parent ]

      •  It's not THAT bad (3+ / 0-)

        Come on folks, let's keep a grip on reality.  The reality is that the US government is strong and stable and has a long long track record of paying off its debts.  The dollar is decreasing in value, but given the current global economy, this makes perfect sense.    It's not a sign of some kind of imminent collapse, but there's a definite downward trend that needs to be dealt with.

        The beauty of the democratic process is that, nothing is permanent.  We've had 6 years of fiscal irresponsibility and wreckless (or more like wreckful) foreign policy, and yet, in 2 more years, we can totally reset the system.  We can elect somebody who's concerned about these issues and can correct them.  Hell, in 2006, we made the first steps in that direction, so hopefully the new congress will play smart from now on.  Time will tell.

        •  And All the Jobs of the Past and Future Come Back (8+ / 0-)

          onshore to reset our trade balance?

          We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy....--ML King, "Beyond Vietnam"

          by Gooserock on Tue Jan 02, 2007 at 08:09:47 AM PST

          [ Parent ]

          •  Real cost of business (2+ / 0-)
            Recommended by:
            3goldens, ormondotvos

            The reality is that we won't see a true restoration of balance until we sit down and make our trade agreements reflect the true cost of business.  If another country can do business at a lower cost for the same result without tossing labor standards to the wind and massively polluting, then more power to them.  Unfortunately right now, there's a significant competitive advantage in doing some pretty bad stuff so long as you can keep the costs down.

        •  It is that bad. This current account blow-out ... (4+ / 0-)

          ... is extraordinarily high.

          This is a thumbnail version of a graph of five year sequential average current account (solid line), ending in the 65, 70, 75 and so on, and the three main memo items that make it up as a share of GDP (dashed lines of various kinds). Income floats in the positive range, because of the low returns offered when the dollar is held as international reserves ... unilateral transfers slide from positive to negative ... and that dashed line that explodes down, dragging the current account down with it, that's the trade deficit.

          The full sized graph and more of the full story at ERW 3.2: The Current Current Account Blowout.

          •  Okay but... (2+ / 0-)
            Recommended by:
            rktect, ormondotvos

            Compare it to Germany post WWI, etc.  Is it bad?  Yes.  Will their be a painful reckoning?  Almost certainly.    Is it wheelbarrow full of dollars time?  I doubt it.  Am I imitating Donald Rumsfeld's speaking style?  Not deliberately.  

            I think we have a serious long term structural problem that goes beyond the current account deficit, etc.  Just think about how much of our GDP goes towards military spending versus any other nation we try to compete with economically, and you can see the problem.  But I don't think it's wheelbarrow full of money time by any stretch.

            •  A wheelbarrow full of dollars is ... (0+ / 0-)

              ... a bit of hyperbole, but then if oil goes off the dollar, the dollar falls 50% (against the Euro), and crude oil increases 50% (against the Euro), each of which is individually plausible, if not likely, that would be an increase in the dollar price of crude oil to $180/barrel.

              And in 1920's Germany, most people lived within walking (wheelbarrow pushing) distance to their local bread shop.

              •  The disincentive (1+ / 0-)
                Recommended by:
                Richard Lyon

                The thing is, nobody wants the dollar to crash.  While there may be a slow shift away from the dollar, the likely scenario is simply diversification.  Given the strength of the Euro, it makes sense to hold reserves in both dollars and euros.  This will be a gradual decline in the value of the dollar, but I don't see it likely that we'll see a significant crash or anything like that.

                That decline, in the long run, is healthy because it will encourage more spending on domestically produced goods.  It will be painful, no doubt, but maybe we'll finally get back to producing something of value in this country.

                •  People very rarely want the crashes to ... (2+ / 0-)
                  Recommended by:
                  Hatu, Cassiodorus

                  ... occur when they occur. IOW crashes that occur because they were manufactured in pursuit of some goal is mostly the realm of tin-hattism.

                  And, indeed, I did not even talk of an exchange rate crash ... losing 50% of your value is a bit steep, but its in the range of regular toing and froing of the marketplace, out there among floating exchange rate countries that do not issue the world's reserve currencies. When I arrived in Oz, the Australian dollar was about $0.79, and at one time when I was there it was $0.49, which is 38%.

                  No, a crash would be like during an international debt crisis ... 75%, 90%, 97%, something like that would be a crash. Its also possible, but obviously lower on the scale of likelihood than 50%.

                  Crashes occur because in markets for durable stocks, when everyone decides to either hold or sell, and nobody decides to buy, the price of that asset crashes. It is the aggregate consequence of potential buyers being nearly unanimous that right now is not a very good time to buy, combined with the need to get out with as small a loss as possible for those who were holding for speculative purposes.

                  And few things are as set up for a crash as an asset that holds its value because its held as an asset that holds its value. Which is, after all, the primary thing maintaining the value of the US$ at the moment. Any other country on the way from being a core economy toward becoming a semi-peripheral economy, with a current account deficit heading inexorably toward 10% of GDP, would have seen a much stronger correction in its currency's exchange rates a long time previously.

        •  Whistling past the graveyard, dude. (3+ / 0-)
          Recommended by:
          greenearth, ormondotvos, Picot verde

          "we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex" Dwight D. Eisenhower

          by bobdevo on Tue Jan 02, 2007 at 10:15:31 AM PST

          [ Parent ]

        •  Whatever you're smoking, Sterno, I want some. (1+ / 0-)
          Recommended by:

          In your nicely balanced future, fairness will mean a drop of about 2/3 in the American Standard of Consumption.

          Not difficult physically, but very difficult financially. Amurricans gotta have their status symbols.

          It will be interesting to watch the desperate scramble of the power brokers to put a friendly face on poverty for the vast majority of Americans, as the rich retreat into their walled communities.

          As much as wolves have communities.

          Listen Before You Talk.

          by ormondotvos on Tue Jan 02, 2007 at 11:50:53 AM PST

          [ Parent ]

      •  Buy gold (1+ / 0-)
        Recommended by:

        That's the only answer.

        "A man who won't die for something isn't fit to live." -MLK

        by gjohnsit on Tue Jan 02, 2007 at 11:59:03 AM PST

        [ Parent ]

        •  What are you going to carry it around with (2+ / 0-)
          Recommended by:
          Hatu, Picot verde

          After we run out of gas.

          Buy a farm on high ground with enough land to grow some food, a house and a barn to keep a few animals, maybe an orchard with some fruit trees and a herb garden.

          Build a forge so you can make a few tools and hope the mobs wandering north from the city run out of energy before they find you.

          Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

          by rktect on Tue Jan 02, 2007 at 12:42:01 PM PST

          [ Parent ]

          •  unfortunately (0+ / 0-)

            i think you are painting a realistic scenario. those few who are in a position to pull off what you advise would be quickly overrun by the starving fleeing their cities.

            this is not a knock on city folks but i would be interested in seeing the results of a poll that asked the urban dweller the ambiguous question: 'where does your food come from'? i wonder how many would answer 'safeway' or 'piggly wiggly' etc..

            no oil = mass starvation.

            free your mind and your ass will follow

          •  There is a difference (1+ / 0-)
            Recommended by:

            between a complete breakdown of trade/business/commerce and a currency crisis.
              A currency crisis happens every few years, depending on where you are in the world.
             A complete breakdown only happens every few millennium. And even if there is a complete breakdown, do you really want to have paper in your pocket - as opposed to gold?

            "A man who won't die for something isn't fit to live." -MLK

            by gjohnsit on Tue Jan 02, 2007 at 04:00:08 PM PST

            [ Parent ]

            •  I want steel in my pocket... and maybe a flint (0+ / 0-)

              What am I going to do with gold?

              Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

              by rktect on Tue Jan 02, 2007 at 04:17:38 PM PST

              [ Parent ]

              •  So you think money will be useless? (1+ / 0-)
                Recommended by:

                The concept of money goes back to Sumarian days. Do you think civilization will go back to, well...pre-civilization?

                 I don't. In fact, I think the chances of that are extremely small.

                "A man who won't die for something isn't fit to live." -MLK

                by gjohnsit on Tue Jan 02, 2007 at 04:33:07 PM PST

                [ Parent ]

                •  Money in the the form of coinage (0+ / 0-)

                  goes back to the Greeks, c 652 BC.

                  Prior to that metal was always a good trade and a kbar steel knife (had it existed) would have been worth any amount of gold to a Sumerian kù-dím who was used only to zabar and barzil.

                  kù-dím: goldsmith, silversmith, metal worker ('noble metal' + 'to fashion').

                  barzil (AN.BAR): (meteoric) iron (bar6, 'to shine', + zil, 'to cut, peel').

                  zabar[UD.KA.BAR]: bronze (zil; zi; zé, 'to pare, cut', + bar6, 'bright, white'; Akk. siparrum, 'bronze' borrowed before vowel harmony changed Sumerian word; cf., barzil, 'iron') [ZABAR archaic frequency: 1].

                  kib: an object, that could be made of gold.

                  kù-sig17: gold ('noble metal' + 'yellow').
                  kušlu-úb-šir(-ra)...aka: to prepare (gold or silver) for the precious sack (by sifting) ('leather bag' + 'testicles' + locative case ending + 'to do').

                  Live Free or Die (-8.88 -9.49) IMPEACH THEN TRY FOR WAR CRIMES

                  by rktect on Tue Jan 02, 2007 at 05:00:14 PM PST

                  [ Parent ]

                  •  OK. Ancient Greece then (1+ / 0-)
                    Recommended by:

                    I have information that gold and silver were money before they were ever coined, but that is besides the point.
                      The fact is that money in the form of precious metals were still useful even after the fall of Rome. Therefore, even if you expect thing to get as bad as they were during the fall of Rome, money will still be long as it isn't paper.

                    "A man who won't die for something isn't fit to live." -MLK

                    by gjohnsit on Tue Jan 02, 2007 at 07:06:46 PM PST

                    [ Parent ]

    •  Funny (3+ / 0-)
      Recommended by:
      SarahLee, greenearth, cadejo4

      It doesn't surprise me a bit.

      Then again, I have deep-seated emotional issues.

      I just wish to Christ my wife had listened to me when I said we should stockpile gold, MREs, and ammunition.

      Yeah, kidding. No, not kidding very much. Wonder if I can get my Japanese employer to pay me in Euro?

    •  It's ridiculous, where the Dollar has gone (4+ / 0-)


      My mother was over from England for Christmas and Could Not Believe how much she could get for her money over here these days.  The Pound is at its highest against the Dollar in years and years; you can get almost two Dollars for every Pound lately, which is like the Seventies!  Ridiculous!

      While this is all fun and jolly on a tourist level, it has scary implications on higher levels.  But fortunately I have bonddad to explain all this to me, so I have something really solid to sit around and fret over...

  •  I'll still take the $ over the Euro anyday (0+ / 0-)

    when it comes as Double Eagles.

    we're shocked by a naked nipple, but not by naked aggression

    by Lepanto on Tue Jan 02, 2007 at 05:00:12 AM PST

  •  So, Dr. Bonddad (12+ / 0-)

    What will it take to cure this problem?

    This is what happens when supply-side economics and rampant "shop 'til you drop" consumerism is the dominant economic policy of a nation.

    Sounds like it is time to clean the supply-side virus from our system...

    A tyrant must put on the appearance of uncommon devotion to religion. - Aristotle

    by DWG on Tue Jan 02, 2007 at 05:00:37 AM PST

  •  The die is cast (10+ / 0-)

    One can only take this piece of significant data and project it out to the future.  The trend line is clear.  The dollar's dominance is declining, this appears to be irreversable.  We may enter a 10-20 year period of competition with the Euro and maybe even the Yuan but as for the dollar leverage our gluttonous lifestyle, it's over.  I personally must take this peice of data and realize that my wages will be constrained unless I continue to push myself harder with more education.  This trend will undoubtedly put major downward pressure on millions of Americans as spending power "equalizes" to the global currency adjustment.

  •  Two minor points (19+ / 0-)

    The plural of Euro is Euro. I know it's pedantic but it grates as badly as people in the UK who refer to "one pence".

    One reason the Euro is popular as a "portable" currency is the high demoniation €500 note. That was included at the insistence of the Germans who had a similarly high value DM bill. As that is now worth around $600, you can see how much more money can fit into a briefcase, even if you discount the larger physical dimensions of the note.

    Kneejerk reactions do not come from knees.

    by londonbear on Tue Jan 02, 2007 at 05:07:05 AM PST

    •  sdf (7+ / 0-)

      Sorry for the fingernail on the blackboard effect.

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Tue Jan 02, 2007 at 05:08:04 AM PST

      [ Parent ]

    •  And while I remember (12+ / 0-)

      The Euro became the official currency unit of Slovenia on 1 January. The tolar will continue in parallel until 14 January at a rate of 239.64 tolar = €1. After that, banks will exchange them without commission up to 1 March.

      Slovenia is the first ex-Communist state to adopt the currency officially although it is widely used in other former Yugoslav republics as a parallel hard currency. The Slovenian coins are the first to show a map of the enlarged Union on the common side.

      Kneejerk reactions do not come from knees.

      by londonbear on Tue Jan 02, 2007 at 05:26:41 AM PST

      [ Parent ]

    •  LondonBear writes: (1+ / 0-)
      Recommended by:

      "One reason the Euro is popular as a "portable" currency is the high demoniation €500 note. That was included at the insistence of the Germans who had a similarly high value DM bill. As that is now worth around $600, you can see how much more money can fit into a briefcase, even if you discount the larger physical dimensions of the note."

      I agree with that and want to add another, equally important, point.

      The different aesthetics of the Dollar vs Euro bills!

      US dollar bills look old, gray and uninspiring. They are just no fun to look at. They feature old, white haired, and now dead men on a green-grayish background. All bills look the same, feel the same (no tactil features for the blind!) and come at the same size. They look like 200 years ago.

      Euro bills OTOH are sexy looking. They come in different colours and different sizes and blind folks can easily sensor their different denominations. They feature windows and bridges and carry a positive universal message. They are pan-national, don't refer to religions and worldly ideologies (Eye of God or Free Masons) and allow everybody to immediately relate to their globally valid imagery.

      No wonder that people, given the chance, will opt to put euro bills in their purse!

      Photobucket - Video and Image Hosting

      "The USA appears destined by fate to plague America with misery in the name of liberty." Simon Bolivar, Caracas, 1819

      by Ritter on Tue Jan 02, 2007 at 10:13:53 AM PST

      [ Parent ]

      •  Ah, I almost forgot the 500 Euro bill. (1+ / 0-)
        Recommended by:

        Photobucket - Video and Image Hosting

        "The USA appears destined by fate to plague America with misery in the name of liberty." Simon Bolivar, Caracas, 1819

        by Ritter on Tue Jan 02, 2007 at 10:22:11 AM PST

        [ Parent ]

        •  Symbols (0+ / 0-)

          The "bridges and portals" do not represent actual buildings:

          Each euro banknote shows a European architectural style [in order of rising value]:

             * classical,
             * Romanesque,
             * Gothic,
             * Renaissance,
             * baroque and rococo,
             * the age of iron and glass, and
             * modern 20th century architecture.

          On the front, the banknotes show windows and gateways. They symbolise the European spirit of openness and cooperation. The 12 stars of the European Union represent the dynamism and harmony of contemporary Europe.
          The bridges on the back symbolise communication between the people of Europe and between Europe and the rest of the world.

          Kneejerk reactions do not come from knees.

          by londonbear on Wed Jan 03, 2007 at 12:56:49 AM PST

          [ Parent ]

  •  China's negotiating position (13+ / 0-)

    These enormous trade deficits are also weakening U.S. influence abroad. As much as Congress and the president may talk about forcing China to revalue the yuan, for example, China can always provide this cold-blooded response (Dec. 1, 2006):

    More clouds gathered over the US currency in Asia today, after a prominent Chinese economist suggested Beijing should look to shift more reserves into gold. Gao Jie, a professor at the University of Business and Economics, said the Chinese central bank should take advantage of any weaknessin bullion prices to shift more of its $1 trillion (£508bn) in foreign exchange reserves out of dollars.

    China caused a stir in the foreign exchange markets about a month ago by raising the prospect of transferring funds out of dollar assets.

    If I recall correctly a Chinese official began talking about buying gold shortly  before President Hu Jintao's visit to the U.S. last April, a rather obvious (and probably successful) attempt to forestall discussion about the yuan.

    To oversimplify: dollar diplomacy is useless if no one wants dollars.

    •  Just talk. (2+ / 0-)
      Recommended by:
      3goldens, ormondotvos

      Annual world gold production is about $50 billion.  China's annual current account surplus with the US is about $200 billion.

      Either the PRC continues to buy dollars, and shifts only a small percentage of its purchases into gold, or it buys up the entire world's gold production and more.

      If it's the former (i.e. China is just jawboning) expect the dollar's decline to continue to be slow and grinding.  If it's the latter, the decline will be sharp and swift.  But China holds a trillion dollars in its reserves, so even a 5% decline in the purchasing power of the dollar means a $50 billion loss for China.

      Result: we have MADD (mutually assured dollar destruction).  As bonddad indicated, the risk is not a unilateral move by China, but a random external shock.

  •  All charts = Poorer Americans (22+ / 0-)

    I was having conversations with conservatives over the weekend - the kind who never travel outside this country.

    They have no idea how poor they are.

    Simply none.

    It's like they're North Koreans.

    "It's better to realize you're a swan than to live life as a disgruntled duck."

    by Mumon on Tue Jan 02, 2007 at 05:29:03 AM PST

  •  Inflation or stagflation ahead??? (1+ / 0-)
    Recommended by:

    What is your guess and why?

    President of the Elders of Zion Chapter 112

    by Pumpkinlove on Tue Jan 02, 2007 at 05:32:20 AM PST

    •  If this is a question for everyone . . . (6+ / 0-)

      I believe we'll soon be in period of stagflation. Here are a couple of recent quotes from Nouriel Roubini (we all have a favorite economic guru - he happens to be mine):

      The stagnation part (Dec. 27, 2006):

      The message from all these reports is clear: the US manufacturing recession is continuing and becoming worse. The housing recession has now become a construction recession and the construction recession has turned into an auto recession and the auto recession is now a broader manufacturing recession. And with non-defense capital goods durable orders sharply down for two months in a row we also have now a corporate investment recession.

      The inflation (dollar devaluation) part (Dec. 18, 2006):

      Over a two to three year horizon the dollar still needs to fall by a significant amount as such dollar weakness will help to reduce over time the external balance (as long as expenditure reduction policy accompany the expenditure switching effects of a dollar real depreciation).

      •  Talk about armaments makers, (0+ / 0-)

        and their destructive effects on the world economy.

        Or this whole discussion is a sham.

        non-defense capital goods durable orders sharply down for two months in a row we also have now a corporate investment recession.

        Listen Before You Talk.

        by ormondotvos on Tue Jan 02, 2007 at 08:47:56 AM PST

        [ Parent ]

  •  Another link? (4+ / 0-)
    Recommended by:
    poemworld, greeseyparrot, dvx, ormondotvos

    It makes me a little uncomfortable that the main source of "evidence" you cite is an Op-Ed by Ron Paul (R-TX).  "Creaky welfare" was the tipoff for me, but I hardly think that a Republican from Texas is going to be the best source of accurate economic reporting.  And if he is, where is the Financial Times, or any number of other less biased sources on this?

    But thank you for the clear and excellent analysis.  I just wish the original source were more credible.

    •  asdf (8+ / 0-)

      It was all over the financial press.  This was the first link I found on the story.

      Just because we don't like the person doesn't mean his facts are wrong.

      Here's a Financial Times Link

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Tue Jan 02, 2007 at 05:39:08 AM PST

      [ Parent ]

    •  nice catch (9+ / 0-)

      "Creaky social welfare systems" is typical of the gratutious and largely baseless criticisms of European social policies that routinely appear in the English-language business press.

      To my mind, you can call systems that routinely provide comprehensive services to hundreds of millions a lot of things, but not creaky.

      •  How about (0+ / 0-)

        unsustainable. Beacause that is what the European social welfare systems are. They make the US Soc Security system look like a model of fiscal sobriety.

        •  Except for the Europeans'. . . (6+ / 0-)

          . . . demonstrated willingness to tax. They have historically accepted very high tax rates, especially on the wealthy (there's a concept!).

          So, I'd hesitate before saying that they have "unsustainable" social policies - it's all a matter of what the populace is willing to pay for.

          The "everywhere" that flattery will get you is a stark and terrible place. - James Ernest

          by Robespierrette on Tue Jan 02, 2007 at 09:32:13 AM PST

          [ Parent ]

          •  Its a simple matter of (0+ / 0-)

            demographics that makes these systems unsustainable. With birth rates below 2 for the past 30 years, there are not enough young people to support these systems.

            Euope already has high levels of taxation, and they will need to go even higher as their baby boom generation retires to support these systems. One of the reasons that the UK did not want to join the EU was that they did not want to become burdened with the EU retirement system costs.

        •  Can you provide some documentation? (0+ / 0-)

          I hear this argued all the time, but I never see the numbers.  Perhaps you should do a diary on this.

        •  Which particular country(ies) do you have in mind (3+ / 0-)
          Recommended by:
          Hatu, Alexander G Rubio, ormondotvos

          question mark (because I ran out of space in the subject line.)

          Three points that I would like to make:

          1. European social programs provide good value for more money (and are paragons of efficiency to boot when compared with e.g. private-sector health care in the US), and are currently adequately funded, at least in the countries of which I am aware.
          1. Like Social Security, Europe's social systems have to deal with demographic changes. But payment flows are predictable decades in advance (actuarial mathematics is a finely honed tool of several centuries' standing). A few moderate changes and some long-range planning should be enough to master the upcoming challenges.
          1. Why do you imply that Social Security doesn't work, respectively that SS is pissing away Americans' money? That contradicts all information I have seen.
          •  Its a mixed bag (0+ / 0-)

            in terms of funding.

            Norway, the UK and the Netherlands are well funded and solvent. France, Italy and Germany are not.

            The US Soc Security faces a real challenge in about 5 years when the surplus additions to the US deficit begin to shrink. At that point the US will have to borrow real money, as opposed to making accounting entries and the problem just gets progressively worse. Every objective analysis points to a 25-35% reduction in benefits or increase in taxes to close the imbalance by 2025. I suspect the problem will present itself much sooner than that.

            •  I think it will take longer (0+ / 0-)

              than you do (more like 10 years).  Many people are realizing that they cannot make it on SS so they are continuing to work.  (I cannot understand the idea of taking a 20+ year mortgage in your 50's, but then again I am cheap and conservative.)

              The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

              by deathsinger on Tue Jan 02, 2007 at 01:04:34 PM PST

              [ Parent ]

        •  Not really (1+ / 0-)
          Recommended by:
          Alexander G Rubio

          Another thing, other than the higher upper income tax rates noted just above, is that they all spend far less than we do per capita on health care:

          Total health spending accounted for 15.3% of GDP in the United States in 2004, the highest share in the OECD and more than six percentage points higher than the average of 8.9% in OECD countries. By comparison, Switzerland and Germany allocated 11.6% and 10.9% of their GDP to health, respectively, and France 10.5%.

          The United States also ranks far ahead of other OECD countries in terms of total health spending per capita, with spending of 6,100 USD (adjusted for purchasing power parity), more than twice the OECD average of 2,550 USD in 2004. Luxembourg comes after with spending of just over 5,000 USD per capita, followed by Switzerland and Norway with spending of around 4,000 USD per capita.
          The public sector is the main source of health funding in all OECD countries, except for the United States and Mexico. In the United States, only 45% of health spending is funded by government revenues, well below the average of 73% in OECD countries. The public share of total health spending remains the lowest among OECD countries. On the other hand, private insurance accounts for 37% of total health spending in the United States, by far the largest share among OECD countries. Beside the United States, Canada, France and the Netherlands also have a relatively large share of health spending paid by private insurance (more than 12%).

          Unfortunately, for all that extra spending we don't get as much for our money as our peers do with their single-payer, government run systems:

          Despite the relatively high level of health expenditure in the United States, there are fewer physicians per capita than in most other OECD countries. In 2004, the United States had 2.4 practising physicians per 1 000 population, below the OECD average of 3.0. There were 7.9 nurses per 1 000 population in the United States in 2002, which is slightly lower than the average of 8.3 across OECD countries. The number of acute care hospital beds in the United States in 2004 was 2.8 per 1 000 population, also lower than the OECD average of 4.1 beds per 1 000 population.
          In 2003/4, life expectancy in the United States stood at 77.5 years, below the OECD average of 78.3 years. Japan, Iceland, Switzerland, Sweden and Australia were the 5 countries registering the highest life expectancy...It stood at 6.9 deaths per 1 000 live births in 2003, above the OECD average of 5.7. Among OECD countries, infant mortality is the lowest in Japan and in the Nordic countries (Iceland, Sweden, Norway and Finland), with rates all below 3.5 deaths per 1 000 live births.

          With healthcare such a significant and growing, as we age, part of our economy this is a situation that needs a lot of attention.

          "Our lives begin to end the day we become silent about the things that matter." Dr. ML King, from a jail cell in Birmingham, Alabama in 1963.

          by bewert on Tue Jan 02, 2007 at 10:32:16 AM PST

          [ Parent ]

    •  Ron Paul is an economic Libertarian (2+ / 0-)
      Recommended by:
      GayHillbilly, ormondotvos

      --very popular with gold bugs.  He is hardly a fan of the current Republican economics.  Agree or not, he has an unconventional and interesting point of view.

      Why can't we make energy security one of the great American projects of the 21st century? The answer is, we can. - Sen. Barack Obama

      by Bronx59 on Tue Jan 02, 2007 at 07:57:04 AM PST

      [ Parent ]

    •  Ron Paul is the true maverick Republican (1+ / 0-)
      Recommended by:

      He's kind of loony and definitely not in our camp on most social issues, but he is a principled libertarian (right wing variety) and he opposed the Iraq war from the start.

      Compared to him, McCain is Bush's waterboy.

  •  I just negotiated a contract in USDollar (33+ / 0-)

    with a global US-based company for work in Asia.  We refused to discount because of the currency risk that accepting dollars poses for us with the pound and euro strengthening against the dollar these days.  The client needs to contract in dollars because they are a US company and their budgets are all in dollars.  We are making them pay through the nose for that inflexibility and parochialism.  

    Think about this as a new global context.  If no one wants dollars anymore, expect inflation to kick up as more and more international businesses refuse to take dollars unless they are compensated for the downside risk.

    It's the first time I've played hardball on this particular point.  I'm guessing it won't be the last.

    "Being a politician is a poor profession. Being a public servant is a noble one." - Herbert Hoover

    by LondonYank on Tue Jan 02, 2007 at 05:39:32 AM PST

    •  Foolish Americans (0+ / 0-)

      Even if the dollar slides a little, which it might, it is silly for them to refuse to accept a discount to take the monetary risk. Either that or they expect the dollar to drop a huge amount during the course of the contract.

      Of course, any company that is locked into 'what the budget will allow' is likely to suffer, now or later.

      Democrats: Giving you a government that works.

      by freelunch on Tue Jan 02, 2007 at 05:49:35 AM PST

      [ Parent ]

    •  And when the dollar (0+ / 0-)

      appreciates from its current level, you can pat yourself on the back a second time.

  •  economists; most optimistic just before the fall (5+ / 0-)

    a little like listening to the generals to guage troop morale.
    When all the talk is good, I worry. There's something being hidden.
    PS. Where can I get a briefcase filled with 500 euro notes?
    Thanks again Bonddad.

  •  One of the turning points, I think, was... (0+ / 0-)

    When the GWB administration, around about 2002 if I recall correctly, did nothing directly to devalue the dollar, but the Secretary of the Treasury 'indicated' to other countries having high dollar holdings that the US would not, in effect, object to some devaluation (implying no US intervention to the contrary and no 'floor').

    While I may be wrong on the year, it was a signal (IMO) that devaluation would not meet with US action to necesarily counter devaluation and support the dollar... and at the time, it seemed to be a way to increase foreign trade, i.e., boost exports (in theory).  I think it was meant to make US exports more attractive, yet all the while, it ignored the fact that jobs and manufacturing and other things were being exported with the exception of certain services, so the US (in net total) had less to even export, all other things being equal.

    In other words, the devaluation against other currencies is a result, partially at least, by manipulation rather than natural market forces, including a calculated (right or wrong) political component.  Am I totally wrong in this assessment?  

    Life is not a 'dress rehearsal'!

    by wgard on Tue Jan 02, 2007 at 05:42:13 AM PST

    •  Official Indications (3+ / 0-)
      Recommended by:
      wader, dvx, 3goldens

      When it comes to currencies, all governments are the same. Sometimes the government does what it says it will do. Sometimes it does not. This is intentional. Governments do not like to have speculators driving their currencies, as that manages to drive the currency either too high or too low. Sometimes they tell the speculators that they are going to cut the legs out from under them. Sometimes they just do it.

      A real problem for the US and Europe is that China's currency is overvalued and that there is nothing they are willing to do directly to force China to revalue. Another problem is that the dollar had been traditionally overvalued because it had been the primary reserve currency in the world. In a well-balanced world economy, the purchasing power parity of a currency would be its trade value.

      Do countries try to manipulate their currency? Sure, but those with relatively free markets in currencies have a hard time doing it. The US, with the largest amount of currency abroad, has the hardest time doing anything to manipulate its currency. The best it can do is engage in sensible fiscal and monetary policies.

      Democrats: Giving you a government that works.

      by freelunch on Tue Jan 02, 2007 at 06:05:31 AM PST

      [ Parent ]

      •  I certainly agree with... (0+ / 0-)

        the idea of "engage in sensible fiscal and monetary policies."

        Yet, I would propose to you that your premise of 'when it comes to currencies, all governments are the same', is a false one.  Your own exposition shows the fallacy.  Is the policy of the Chinese relative to the Yuan the same as that of the US relative to the dollar?  I think not.  Are either of them identical with the polity of Europe relative to the Euro?

        Another way, IMO, at looking at imbalances -- since you use the Yuan and dollar and Euro as reference points -- would be to take one reference point, say the Yuan.  In that case, the dollar and perhaps the Euro, too, are 'overpriced' as to value.

        Only the way I see it, mind you.  There are implications in what you said (and did't say) that may prove fortuitous; basically, though I think that the dollar is going downhill for a number of years, some of that attributable to factors you mention and some of it due to other considerations.

        BTW, while nations try to 'hype' their currencies in various ways, I think the FOREX (though speculative) ultimately does a pretty damned good job of sorting out the bullshit.  After all, if a nation trys a premium on its currency, a business or trader can always go to the FOREX if it is advantageous and build in a hedge against said premium.

        Only my uneducated thoughts, mind you.  Cheers:)

        Life is not a 'dress rehearsal'!

        by wgard on Tue Jan 02, 2007 at 06:35:06 AM PST

        [ Parent ]

        •  Floating or not floating (0+ / 0-)

          I wasn't referring to policies, but to what they say and what they do. I agree that different countries have different goals for their central banks. It is how they attempt to meet their goals that gives the similarity.

          All currencies have had governments that lie about their intentions, including China, which promised to go to a crawling peg of some sort, but really hasn't. The Euro has the advantage that the ECB has clear statutory goals, but it certainly isn't required to tell anyone how it intends to meet those goals and only does so for its own purposes -- still our recent experience is that the ECB (and its effective predecessor, the German Central Bank) is the central bank that is least likely to surprise people.

          Over time, it appears, that the central banks for floating currencies, are most willing to play hardball when the currency gets too strong relative to PPP. The Swiss Central Bank has been famous for doing what it can to keep the Franc's value from being overwhelmed by speculative fever.

          Democrats: Giving you a government that works.

          by freelunch on Tue Jan 02, 2007 at 07:19:14 AM PST

          [ Parent ]

  •  Dollar devaluation driving US market indices. (1+ / 0-)
    Recommended by:

    So long as there's no run on US assets, foreigners are buying in increasingly on the cheap.

    But the second they lose interest....oops.

    I was a postmodernist, back in the modern age.

    by cskendrick on Tue Jan 02, 2007 at 05:45:58 AM PST

    •  Invesment is risky (1+ / 0-)
      Recommended by:

      I did a back of the envelope calculation comparing the exchange rate when the Dow was at 10,000 in 2001 and last year when it reached its record highs. The upshot was that if somebody invested Euro at the low point in the market, they would receive less back today if the dollar value of their stocks rose in line with the market.

      Kneejerk reactions do not come from knees.

      by londonbear on Tue Jan 02, 2007 at 05:51:49 AM PST

      [ Parent ]

      •  This graph illustrates your point (1+ / 0-)
        Recommended by:

        I think this graph illustrates our point. The DJIA rose around 20% over the past five years, while the dollar declined about 30% against the Euro. All things being equal, a U.S. stock investment would have lost 10% in Euro terms.

        •  inflation (3+ / 0-)
          Recommended by:
          opinionated, wader, cadejo4

          The so-called ""value" of my house has increased by a factor of 40 since I bought it 37 years ago.  Sure, I've added some "improvements", but . . .

          The "value" of American business (as reflected by price in the stock market) has increased, too, and over the same time that Detroit has turned into a wasteland, and darned near everything that I buy is made somewhere else.

          In fact my house remains more or less the same, and American business is, if anything, less than it once was.  All that has changed is that what used to cost a dime now costs a dollar.  When's the last time you stooped to pick up a penny?  In my lifetime that's what it cost to mail a post card . . . compare that to the price today and you'll know what the government acknowledges to be the real rate of inflation . . .

  •  Consumerism and Supply-Side economics (2+ / 0-)
    Recommended by:
    daisycolorado, ormondotvos

    Bonddad, not saying you are wrong, but the rest of your article does not make clear why either supply-side economics (by which I assume you mean, simply, low tax rates) and "consumerism" (a trait to be found in all of the wealthier EU countries to a large extent) cause the dollar to lose volume as against the Euro.

    It is probably obvious to you why this is so, but the graphs you provide are not clear evidence to most non-economists about why U.S. low-tax policies and presumed consumer habits led to this gradual change in currency preference and use.

    Make Crablaw Maryland Weekly your source for Maryland news and commentary. (-1.88/-5.69)

    by tbrucegodfrey on Tue Jan 02, 2007 at 05:56:48 AM PST

  •  CDs denominated in euros (0+ / 0-)

    Is it wise or prudent to invest in CDs denominated in euros? If so, is EverBank a good outfit to use? What CDs might you recommend? Is the rate of return guaranteed? I'm looking at an advertised 3 month CD with a rate of return >5.35%


    •  Add exchange rates to that (3+ / 0-)
      Recommended by:
      Marek, wader, cadejo4

      5.35 sounds like you are looking at the "Commodity" CD, which does not invest in Euros at all.  Make sure you read the fine print, and look at the historical exchange rate fluctuations for the currencies.

      For a pure Euro play you may think 2.27% is not so great, but look at what the Euro/US$ rate was over the last year.  Money put into Euros at ZERO percent a year ago would have earned 9% in US$ terms.  Add the 2.27% on top of that.

      Of course the Euro could go down again too.  Stay short term?

      I know somebody looking at a move to Ireland in a few years so we've been researching this.

  •  I should mail your diary to my father (3+ / 0-)
    Recommended by:
    cotterperson, tryptamine, scoff0165

    Maybe it would finally break through his denial. He is a former-Wall Street analyst who still somehow manages to hold onto the idea that Bush is ok - these financial numbers might crack through.

    Be very kind, for everyone you know is fighting a great battle.

    by Wee Mama on Tue Jan 02, 2007 at 05:58:46 AM PST

  •  Who wrote this tripe? (4+ / 0-)
    Recommended by:
    Hatu, Euroliberal, wader, ormondotvos

    There is increasing pressure on nations to buy and sell oil in euros, and anecdotal evidence suggests that drug dealers and money launderers now prefer euros to dollars. Historically, the underground cash economy has always sought the most stable and valuable paper currency to conduct business.

    Maybe that's because the Euro comes in $500 notes which bundled together is alot smaller than if you bundled the same amount of money in Dollars?  Easier to smuggle smaller bundles.  God do these people have ANY common sense?

    Seriously though WTF is up with this quote?

    European politicians want to spend money just as badly as American politicians, and undoubtedly will clamor to inflate-- and thus devalue-- the euro to fund their creaky social welfare systems

    Is this based on facts or some Republican talking out of his ass again?  The same Republicans who so willingly spent our tax money on corporate giveaways and lucrative contracts to their buddies who then end up doing such a bang up job that when it is finally done it ends up raining shit and piss on our troops and Iraqi trainees?

    How I wish our politicians would spend money to fund our creaky social welfare system.

  •  My best bud has worked in banking for a decade... (5+ / 0-)

    ..and we constantly get into arguments where he makes me feel stupid. I send him these articles all the time and he tells me to "Chill and stop this stupid liberal nonsense..." He is utterly and totally convinced that all this Euro stuff means nothing, that, as he states to me, as long as the Dollar is the global reserve currency all those dollars will copme back to the US just like the Japanese had to spend all their dollars back in the US back in the 80's he insists.

    He says within five years China will be forced to spend all it's dollars in the US on stupid real estate deals and investing in our economy and we'll see th ebiggest boom ever.

    I don't have the economic knowledge, as they get into all sorts of discussion of currency valuations, et al.  to argue with this line of thought and end up feeling stupid when all his drinking buddies call me a "whiny liberal ninny"...

  •  obviously we need more wars (4+ / 0-)

    to protect dollar hegemony. There is no fiscal policy solution: this scam has been going on since Nixon refused to redeem dollars for gold and abandoned Bretton Woods, which saw an artificial expansion of the money supply twenty-fold ('who cares how much we print, it's only paper!').

    It worked: wealth concentrated in the hands of a few, that is real wealth, commodities, real estate, etc. Therefore, have more wars, destroy everything produced by labour so it can be produced again, and start the game again with the rich holding even more assets from the start. War is a bi-partisan policy supported equally by both factions of establishment.

    As i see it, that's how the system works, and thats why capitalism can never work.

    Look at the debt like this: you make $50K a year, spend $70K a year, and on top of that you have to service a $500K credit card debt from a paycheck whose value is constantly decreasing. Any financial adviser in the world would say to you "declare bankruptcy, fool" because it is simply a rock you cannot get out from under.

    The only easy (as they see it, anyway) solution is war.

    Like it or not, we are headed for World War III.

    Reality is that which, when you stop believing in it, doesn't go away. - Philip K. Dick

    by VoiceFromTheOuterWorld on Tue Jan 02, 2007 at 06:26:10 AM PST

    •  War is the health of Capitalist States. (1+ / 0-)
      Recommended by:

      I agree completely. That is why you never hear about the effects of the military economy from our resident economists.

      They all ignore the effects of inflation, which is cured by bankruptcy, which is called war (when we declare our debts unpayable).

      Full faith and credit of the United States?

      Our credit with others, and faith of others in our system, must be at an all-time low.

      Anybody got an idea what our Credit Score might be?  

      Listen Before You Talk.

      by ormondotvos on Tue Jan 02, 2007 at 09:04:49 AM PST

      [ Parent ]

  •  FGEXPND vs FGRCPT (4+ / 0-)

    Is there any particular reason for the different scales other than to make things seem better than they are?

    Give us back the America we trust and respect!!!

    by icerat on Tue Jan 02, 2007 at 06:42:29 AM PST

  •  Who can turn down a 30% discount? (4+ / 0-)

    As the dollar continues to sink we can expect foreign companies to snap up more of our leading edge technology companies at bargain prices. China will continue to use it's dollar reserves to purchase selected manufacturers, dismantle the factories and ship them home. Foreign banks and governments will continue to subsidize Republican debt but at very much higher interest rates. The United States will be the biggest Pay Day Loan customer in history.

    For individual Americans it would be best to get out of debt, become used to a lower standard of living and be sure to plant that Iraq war victory garden.

  •  Ecuador adopted the US dollar as its currency (4+ / 0-)

    in 2000. Now Ecuador plans to boot the US from a key military base in 2009 and give that base to China.

    Anyone taking bets on how long it will take Ecuador to change its currency?

  •  Drug dealers and money launderers (0+ / 0-)

    may prefer Euros simply because there's a 500-Euro bill, and also a 200, while the biggest bill in U.S. currency is only $100.  Apparently, dealing any drug except marijuana, the money is much more bulky than the drugs.  It's been suggested that's by design, to make it harder to transport big amounts of cash which is often done for illicit transactions.  

    We're all pretty crazy some way or other; some of us just hide it better. "Normal" is just a setting on the dryer.

    by david78209 on Tue Jan 02, 2007 at 07:01:57 AM PST

  •  If drug traffickers dump the dollar (4+ / 0-)

    for the Euro the US will be in serious trouble. Perhaps we should consider printing a $10,000 bill in order to keep the lucrative illicit drug trade. Legalizing drugs of any type will of course be out of the question as that could pop the whole bubble.
    Afghan heroin, it's not just for breakfast anymore.

  •  Buy oil futures, add an Eu FX option (0+ / 0-)

    If I had money in the bank to blow in Vegas (uh, I mean, invest), that's how I'd do it.

    Almost seems ridiculously obvious.

  •  Wonderful -- now Europe can pay for NATO (0+ / 0-)

    Since they are so flush with cash and we're in the dumps, I'm sure European countries won't mind paying the bills for NATO now, right?


    So this is how liberty dies -- with thunderous applause.

    by MJB on Tue Jan 02, 2007 at 07:39:46 AM PST

    •  and their fair share for UN operating costs (2+ / 0-)
      Recommended by:
      Hatu, ormondotvos

      as well? Dare someone ask?

      And maybe even their 'own defense', so we can get our troops out of Europe? {said in a semi-snark, as I KNOW the bases are there for our purposes, not to 'defend Europe' - still the argument can be made}

      But really, this is all just a bunch of numbers, signifying not necessarily a strengthening of the Euro as more realistically, the collapse of the United States.

      Truth is, Europeans are on the same path we are on; both are increasingly built upon unsustainable consumer based economies. At best, it's a moderation of destructive habits, at worst a shift of greed from one Continent to another.  

      Keep it Lit.
      Mike Malloy is on the Quake, KPHX and on Nova M Radio

      by shpilk on Tue Jan 02, 2007 at 08:43:37 AM PST

      [ Parent ]

      •  Overseas development aid (0+ / 0-)

        The UN nations have long had a target of 0.7% of GDP (or Gross National Income as it is now) for development aid to poorer nations. These should be seen as commitments to the global community as well as pure UN fees. In any case those oft quoted fees do not include the costs of personnel provided to engage in UN peacekeeping duties, which the USA makes virtually no contribution to apart from in the former Yugoslavia.

        The ODA figures make interesting reading. The USA is currently the largest donor by crude cash criteria.

        However these figures take on a new light when expressed as a percentage of GDP

        The amounts of ODA given by the USA have increased in the past few years but remember that large amounts are being spent in Iraq as ODA. These also point out the problem with much aid, the degree to which those donations are actually to the benefit of companies in the country donating varies considerably.This "self help" extends beyond the obvious of requiring the recipient to buy the donor's goods to the inclusion of technical assistance from the donor's nationals in the figures amongst other things. The Center for Global Development did a study in 2004 based on the 2002 figure. The USA is again almost bottom of the list of OECD countries. Adjusted, the percentage of GDP drops to 0.07% or one tenth of the target.

        The same page that information on also gives some of the issues surrounding the other justification for the low government ODA figure, the amount of private donations. Not only are these difficult to calculate as a lot of money transfered directly overseas is either investment or immigrants sending money home but also the huge foundation donations are of dubious benefit to the recipients while helping the donors. The Bill Gates donation is one example of this given.

        Kneejerk reactions do not come from knees.

        by londonbear on Wed Jan 03, 2007 at 02:56:26 AM PST

        [ Parent ]

  •  Cash Portability & Fraud v/s Reserves (1+ / 0-)
    Recommended by:
    Chris 47N122W

    I tend to agree with some of Bondads thoughts and am equally alarmed by the "GWB-effect" on the USDollar.

    While it is true that "nobody likes to be stuck with a fast-depreciating commodity" is one reason for the  Dollar being under pressure, the other reasons for the the Euro's popularity are obviously portability (larger denominations) and the fact that North Korea and other "forge-shops" have still not perfected Euro-art!

    In most parts of the world where currency regulations are in effect, and wherever individuals need large sums of cash to satisfy their whims, the Euro will become a popular commodity....

    If I were Ben Bernanke, I wouldn't be as worried about losing "cash appeal" as I would be about the major shift in the popularity of the Dollar being used as a major "reserve" currency.

  •  does that mean we are hosed? (0+ / 0-)

    I read American Theocracy by Kevin Phillips. It says the three greatest threats to America are fundametalist Christians, Big Oil, and debt, More Debt, and EVEN MORE DEBT.

    The value of our dollar is propped up by petrodollars and hence our economy and hence our massive debts, public and private. This may be an oversimplification but it should point you in the right direction. I'd read that Iran was going to create an oil bourse that was going to trade in euros, but later found out it fizzled before it got off the ground. I was wrong about the mechanism that would shift the premiere currency from the dollar to the euro.

    So what to do? Start hoarding gold and silver? Head for the hills? Forget hoarding diamonds. You can't sell them.

    When in danger or in doubt, run in circles scream and shout.

    by londubh on Tue Jan 02, 2007 at 08:03:20 AM PST

  •  How much of the European economy is tourism... (0+ / 0-)

    these days?  Just curious?

    •  Considerable (0+ / 0-)

      The problem is in measuring the impact on the trade figures. The vast majority of tourism income and expenditure will take place within the EU itself although the numbers going to places outside the EU are considerably more than the number of US citizens travelling outside the USA.

      That said, the impact on some individual countries' economies can be considerable, particularly the ones with Mediterranean shorelines. Onviously in places like Malta and Cyprus it is one of if not the main income earner.

      Kneejerk reactions do not come from knees.

      by londonbear on Wed Jan 03, 2007 at 03:15:50 AM PST

      [ Parent ]

  •  well (1+ / 0-)
    Recommended by:

    the silver lining is this will make our imperialism too expensive. Maybe after the dollar collapses we'll close some of the military bases in 130+ countries.

  •  i heard it's because (0+ / 0-)

    the euro has much larger denominations.  If you're in the drug business (or any black market), you'd rather have 500 and 1,000 Euro notes, instead of 5 or 10 $100 Bills.

    Don't start a blog, build a community with SoapBlox - the NEW blog framework.

    by pacified on Tue Jan 02, 2007 at 08:27:27 AM PST

  •  The scariest graph to me is CMDEBT, which (0+ / 0-)

    shows the consumer debt going to the moon.

    This kind of a graph can only mean big trouble.

    •  That graph is meaningless because (1+ / 0-)
      Recommended by:
      it says nothing about the distribution of debt among households. If Bill Gates runs up a debt equal to his assets, the average household debt would look pretty scary. The graph also says nothing about household debt-to-asset ratios (and the distribution of said ratios among households). If average income is climbing at a rate equal to or greater than the growth rate of average debt, the absolute level of debt would be no problem at all. In the end, that graph says absolutely nothing useful at all.
  •  notes on the balance of trade game (1+ / 0-)
    Recommended by:

    The dollar transfer is a little more interesting then you suggest. When the US transfers payments to another country, lets say Thailand, whose currency is the Thai Baht, that country in turn has to print an equivalent amount of its own currency at the current exchange rate. The other country then buys US treasuries to complete the deal. No dollars change hands.
    In the real world real dollars would be shipped to Thailand, and Thailand would return to the US with those dollars, and buy things. In the event of a trade deficit, too many dollars chasing too few goods, the extra dollars would be repatriotiated. The money would be physically carried to the US treasury and the US Treasury would have to go into the international currency market and buy Thai Baht and return it to Thailand.
    Assuming that Thailand is running their money supply correctly that brings a problem to bear. Thailand would have to print more money to meet the demand for the Baht, and of course that is inflationary. So inflation begins at that end of the transaction
    Rather than trade in dollars the Treasury completes the deal with Thailand using US bonds, which they issue, and monetize into bank reserves and credit, through the Federal Reserve, and the circle is complete. Thailand holds the bonds, which are extended as credit to US consumers, and as investment capital which finds it way into foreign countries. (Emerging market stocks were the big winner this year, and while stocks are not technically the same thing as capital investment, they do function that way in our gogo economy)
    Suddenly Thailand realizes it is not alone, and the products it sells are meeting stiff competition. They drop prices, and deflation in consumer prices is transferred to the US. Countries resort to dumping, unfair trade practises, all sorts of things which would never happen if the economy was working properly. But since the balance of trade is showing a surplus in Thailand, they continue to sell goods below cost, just like in the US consumers continue to buy even though their real wages are declining.
    eventually Thailand wants real dollars, and the US Treasury prints a few trillion of them, done and done. check the GEAB report. Now printing dollars is inflationary, but it is being done in reaction to deflationary forces.
    The largest of which is deflation in interest rates, because as more bonds are printed to complete the balance of trade transfers, the rate of return on those bonds falls. In supply demand terms it is a supply driven market.
    a shock to the currency exists usually when the shoe is on the other foot, and rich US banks take down an inflated currency, like Indonesia in 98. Or sometimes a rich rogue banker like George Soros, who took down the pound. The US institutional banks are far too dependent on the US government to ever ever raid their own currency. so forget that.
    the real problem could occur if a country, like say Russia, who is becoming an energy giant, takes a hostile attitude toward the dollar. Read Jim Willie over at 321GOLD. Points to remember, the US Treasury has already printed trillions in hard cash to handle an event. The most likely natural threat to this arrangement is runaway inflation and collapse in other than US nations, leaving US consumers without many of the imported goods they take for granted, oil being just one of them.

    "Everything is chrome in the future..." Sponge Bob Square Pants

    by agent double o soul on Tue Jan 02, 2007 at 08:35:24 AM PST

    •  You have missed a step or three (1+ / 0-)
      Recommended by:
      agent double o soul
      China, and probably other Asian countries, are sterilizing their intake of US Dollars. A Chinese exporter sells goods to the US and receives US Dollars as payment. They (or their bank) convert the Dollars to Yuan by selling the Dollars to the People's Bank of China (the Chinese central bank) which pays for the Dollars with newly printed Yuan. In turn, the PBC does two things: 1) they take the Dollars and buy US Gov't bonds, and 2) they sell Yuan denominated bonds to the Chinese, thus mopping up the Yuan they printed when they bought the Dollars. The PBC has been sterilizing about 2/3ds of the total yearly Chinese intake of Dollars. This allows the Chinese to keep their currency low relative to the Dollar without causing a large inflation in China. So no, the Chinese manufacturers/exporters are not selling their goods to the US at below their cost of production as measured in Yuan (the only measure that matters to the Chinese manufacturer). But the PBC, by selling the Yuan at a rate that is likely below what the rate would be if the Yuan were allowed to float freely is causing the goods produced by the Chinese to be underpriced in Dollars (the only measure that matters to both US manufacturers and consumers).
      •  show me the money (0+ / 0-)

        these dollars are actually never created, (until recently) the balance of payments occurs electronically, and the US treasury obviates the need to inflate the cash money supply. (and M3 went bye bye) its one thing to inflate credit, and another to inflate your currency, and we have gone from A to B very recently, however the cash money is still in our custody, the sword of damoceles, hanging over THEIR heads.
        the Chinese are obviously taking a haircut because bond returns dont keep up with the decline in the currency, but it still creates a trade surplus and the Chinese can float bonds and create more credit as well, without inflating the currency.

        big problem no one noticed here was that every dollar of credit the Fed floats benefits two parties, the borrower and the lender, and then further multiplies out through the fractional reserve banking system, each dollar they create is like $100 dollars in new credit.

        there is inflation in China where GDP is under reported. and all the central banks in the wrold save one have been raising rates, (you guess which one) and reporting phenomonal growth. thats inflationary, no matter how you cut it.

        the feds currency printing binge of late is supposed to fight the deflation that is hanging over our heads. mostly interest rate deflation.  in the final outcome they may be able to balance these forces, but at their extremes the volatility they put into the currency markets is a big problem and bonddad is right about that.

        "Everything is chrome in the future..." Sponge Bob Square Pants

        by agent double o soul on Tue Jan 02, 2007 at 12:06:37 PM PST

        [ Parent ]

        •  Huh? (0+ / 0-)
          There is no meaningful distinction between actual paper dollars shipped to China and electronic Dollar entries in a computer program somewhere. It would be trivial to deny China the right to spend those dollars no matter which way they are held.

          I was going to patiently try and talk you through some basic macro because your post sounds like a bunch of poorly understood buzz words ripped from scary headlines written by other folks who don't really understand basic econ 101, but sorry, I'm just too tired to try that right now.
  •  all of this can be stopped by US. (2+ / 0-)
    Recommended by:
    xanthe, ormondotvos

    We have to find a way to change ourselves, the rampant nearly insane buying of "things", the massive waste of a whole country fed in restaurants, over satiated on mass entertainment media.

    It's easy to attack the weak {'creaky welfare'} , while we continue to consume at breakneck speed.  

    Yes, the only difference between the Europeans and the US is that they are playing catch up ball; they simply have not learned how to be as gluttonous as we are: yet.

    The future of the planet's health is truly in the balance. When are we going stop this carousel of greed and get off?

    Keep it Lit.
    Mike Malloy is on the Quake, KPHX and on Nova M Radio

    by shpilk on Tue Jan 02, 2007 at 08:35:42 AM PST

    •  Correct again. (0+ / 0-)

      It's easy to attack the weak {'creaky welfare'} , while we continue to consume at breakneck speed.

      It's very hard for the "economists" to advocate sane consumption when their salary depends on the opposite happening.

      I don't trust economists.

      Any of them.

      I don't hear Bonddad talk about the economics of war.

      Listen Before You Talk.

      by ormondotvos on Tue Jan 02, 2007 at 09:18:16 AM PST

      [ Parent ]

    •  Martin Luther King on This Issue: (1+ / 0-)
      Recommended by:

      Increasingly, by choice or by accident, this is the role our nation has taken -- the role of those who make peaceful revolution impossible by refusing to give up the privileges and the pleasures that come from the immense profits of overseas investment.  

      I am convinced that if we are to get on the right side of the world revolution, we as a nation must undergo a radical revolution of values. We must rapidly begin the shift from a "thing-oriented" society to a "person-oriented" society. When machines and computers, profit motives and property rights are considered more important than people, the giant triplets of racism, materialism, and militarism are incapable of being conquered.

      More of a cultural/religious perspective but the bottom line seems to check out.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy....--ML King, "Beyond Vietnam"

      by Gooserock on Tue Jan 02, 2007 at 12:46:40 PM PST

      [ Parent ]

  •  I need some education. (0+ / 0-)

    How does one legally and conveniently move dollars into another currency--I'm not talking about converting some money to travel with.

    I knew I should have done this a year ago (I knew I wanted to be able to do this well before then, but couldn't; no real liquid assets).  Now I can, and I'd like to move some.

    But this isn't something I've ever done, and lack knowledge about...

    "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

    by ogre on Tue Jan 02, 2007 at 08:36:28 AM PST

    •  Many banks will transfer cash into foreign money (1+ / 0-)
      Recommended by:

      Another way to put your money into foreign currency is by purchasing shares in mutual funds that invest exclusively outside the USA. Mutual fund shares can be bought from E*Trade or any other online broker.

      "My paramount object in this struggle is to save the Union. If I could save the Union without freeing any slave I would do it." -- Abe Lincoln

      by munky on Tue Jan 02, 2007 at 09:03:39 AM PST

      [ Parent ]

    •  If all you want (2+ / 0-)
      Recommended by:
      ogre, Chris 47N122W
      is to cash in on a falling dollar, the easiest way is to buy into a mutual fund that buys foreign stocks or bonds. Try Vanguard's Total International Stock Index Fund. Beware, though, that just because the conventional wisdom says that the Dollar is overvalued doesn't guarantee that the markets will drive down the Dollar's value. Buying a foreign currency, like all investments, is subject to risk regardless of weather you buy Euros and stuff 'em in your mattress or buy non-Dollar denominated stocks.
      •  Not the object... (0+ / 0-)

        (but wouldn't mind!)

        I just want to not have all my eggs in the basket that George and the Neocons are stomping on.

        "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

        by ogre on Tue Jan 02, 2007 at 01:20:36 PM PST

        [ Parent ]

  •  I guess bombs don't count as an export.. (0+ / 0-)

    If only we could bill the recipient + shipping charges.

    "I count him braver who overcomes his desires than him who conquers his enemies; for the hardest victory is over self." --Aristotle

    by java4every1 on Tue Jan 02, 2007 at 08:48:49 AM PST

    •  They Did Under George II (0+ / 0-)

      We actually made a small profit on Gulf War I. I'm sure he personally came out a lot better though.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy....--ML King, "Beyond Vietnam"

      by Gooserock on Tue Jan 02, 2007 at 12:50:02 PM PST

      [ Parent ]

  •  Weak dollar is a _good_ thing (1+ / 0-)
    Recommended by:

    An unjustifiably strong dollar is good for those that already have a lot of them and bad for most of us. Please leave defending a strong dollar to the Republicans.

    David Sirota or Stephanie Miller for President, screw the wonks and whimps.

    by fairleft on Tue Jan 02, 2007 at 09:11:46 AM PST

  •  Great... (0+ / 0-)

    just in time for our annual trip to visit our family in Ireland.

    (sigh) we're gonna pay through the nose this trip.

    Fear leads to anger. Anger leads to hate. Hate leads to suffering. -8.75 / -6.10

    by Alegre on Tue Jan 02, 2007 at 09:32:11 AM PST

  •  the Dollar Index chart (1+ / 0-)
    Recommended by:

    looks like it's makin' a big ol' two year bottom...

  •  Is the situation permanent? (1+ / 0-)
    Recommended by:

    It doesn't take an economist to figure out how low the dollar has dropped, those of us who travel outside the country regularly have noticed its steady decline for years.
    The question is, is this situation permanent?  Is there a structural problem, or is the problem merely a result of Bush overspending and undertaxing?

    •  Depends on what you mean by permanent (2+ / 0-)
      Recommended by:
      Richard Lyon, Bronx59

      The situation is certainly unsustainable, so something will have to change.  Blaming Bush is too easy.  As a country we appear to be consuming more than we are producing.  Not just goods and services, but infrastructure, global good will, etc.

      The system will eventually find a new equilibrium.  The question in my mind is how painful the process of finding that equilibrium will be for us.  As far as the dollar goes, I'm looking for the day that the US Treasury issues euro denominated bonds as the sign that it has all gone to hell in a handbasket.  Not sure if that will be a leading or lagging indicator, though...

      •  Equilibrium alert (0+ / 0-)

        My fear is not that we won't find an equilibrium, because eventually we will, but rather what that would look like.  Are we going to turn into a third-world nation where there is a small rich ruling class, and masses of poor people?

  •  The Euro might not be so strong after all (2+ / 0-)
    Recommended by:
    Fast Pete, Richard Lyon

    news article

    It seems that there are more than trivial Euro related disagreements surfacing between the EU nations, and the different economic situations they each have, some prospering – like Germany – and some suffering a great deal – France and others. The Euro has strengthened a great deal in the last year, and of course this causes some serious trade competitiveness issues. For example, Airbus is having lots of trouble competing in the airline industry because the strong Euro is making them cost ineffective. I don't know if you have been following the recent airline sales, but Boeing is cleaning Airbus' clock.

    The tension is becoming so great that there are:

    • Reports of Germany and France readying stocks of native (non euro) currencies – in case of – what? Those reports alone made me take a big double take, thinking of what this can mean.
    • French and other officials openly calling for the abandonment of the Euro in the sense of at least re attaining local central bank controls over interest rates. Presently, the ECB sets interest rates for the entire EU region. Believe it or not, there are actually Euro treaty contingencies to allow just that – retaking monetary policy control by nation. Of course, this would cause a lot of inter currency strife as nations compete with interest rate wars in the EU - supposedly having one common currency, but then having different interest rate agendas...basically such a retrograde move by the EU nations would cause a lot of turmoil, and possibly is not even manageable, but could possibly call into doubt the very viability of the Euro.


    "A man who won't die for something isn't fit to live." -MLK

    by gjohnsit on Tue Jan 02, 2007 at 11:57:46 AM PST

    •  by gjohnsit on Tue Jan 02, 2007 at 11:57:46 AM PS (1+ / 0-)
      Recommended by:
      Richard Lyon

      You forgot to continue with your quoted comment from a right wing web log, Johnny:

      "Remember, the Euro is only about 6 years old, friends....

      Which leads me once again to something I have said for some time, the Euro is only 6 years old, and the EU nations are buried in social programs so badly that I envision big Euro trouble. The Europeans are worse off than the US regarding out of control social programs that break their budgets every year, and eat away at any chance of them remaining economic exporters... something France is dealing with in a big way this year.

      Of course we keep hearing about the wonderful euro- and nations are all moving more foreign reserves into it... but... something is clearly not right with the Euro model.
      In fact, I have big doubts as to the future of the Euro, all financial Euro aggogery aside.
      I think gold bulls and people concerned about the USD would do well not to consider the Euro an automatic alternative.....

      Now, Germany has had a manufacturing resurgence, is exporting successfully to China. However, this does not necessarily bode well for the Euro. Why? Because other EU nations are definitely NOT benefiting from the constraints a strong Euro is putting on them, and are losing export and general economic market share. Germany’s success will do nothing but cause lots of grief between them and the other more troubled economies....Grief between a successful Germany, the biggest economy in the EU, and other seriously unhappy EU neighbors could spell doom for the common currency.

      For example, France had a 14 percent drop in car manufacturing activity in the year ended October. That is simply disastrous. Of course there are calls for a weaker Euro by France, and this is but one example, but a good one of the whole situation.

      Here is a good news clip about the situation:

      Euro Threatened with 2007 Meltdown, as French Economy Slumps ..."

      "The USA appears destined by fate to plague America with misery in the name of liberty." Simon Bolivar, Caracas, 1819

      by Ritter on Tue Jan 02, 2007 at 12:44:36 PM PST

      [ Parent ]

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