The plunging US dollar kills a new Lincoln.
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Joined: Jun 2004
Posts: 2,977
From: SeVa
Another thing about the the low value of the dollar is that it tends to increase our trade deficit. Importing goods cost more, as a result, more money leaves the US to the countries whose goods we're paying more for.
I theory, it should be balenced out by making our manufactured goods cheaper, and therefore we should export more, however that's necessarily the case anymore. Alot of United States' manufacturing has migrated to other countries (as has much of our service industry and engineering). The collaspe of one of the remaining US manufacturing bases (ie: the US auto industry) would not only wreck the US economy on it's own, but combined with a depressed dollar and a large trade deficit would do very serious economic damage, not just for a few months to a year, but quite possibly for a very, very long time..... assuming we recover.
Expanding on Z28x post about China, this is where I'm going to go political and hammer those who advocate deficit spending or blind tax cuts.
Nobody likes taxes. I know I sometimes sound like I'm all for new taxes, but the truth to the matter is that I'm a realist. I personally prefer to have prisons, a strong military, roads and bridges that I can drive on without destroying my car, enough police to keep my family safe, decent schools, knowing that if I become a disabled parapalegic I will have something resembling reasonable care, etc. Just like everyone, regardless as to if you're conservative or liberal. But I'm realistic enough to know that someone has to pay for all this, and that someone is us. At the same time, I've traveled around enough to know that we're paying next to nothing in taxes compared to other first world nations, so there's nothing to whine about.
But, as with any budget from a multi-national corperation, to any government, to your own household, somebody is going to have to pay the bill. You can't spend more money than you have, and you aren't going to cut anything but the most ridiculous or wasteful of government spending. In the late 90s, government was cut as much to the bone as it ever was going to get (and combined with a relatively balenced tax rate, we had surpluses) Rule of thumb: if it does enough people some good, it's not going on the chopping block. That means only 2 choices:
1) find ways to pay for it, or..
2) find ways to have someone else pay for it.
Pay for it ourselves, and we maintain control over our own house.
If someone else pays for it, they're going to want collateral or something in return.
To cut to the chase: China is giving us money to make up the difference between what we take in in taxes and what we are spending. In return, China can all but dictate US economic policy and the US government turns a blind eye to policies that are unfavorable to us. Sure, you'll get some lip service towards demands for these countries to change, but when was the last time you saw anything followed through?
Want more tax cuts, despite already running massive deficits? There's plenty of countries (again, China in particular) who would absolutely LOVE to fill in the difference.... and gain even more influence.
Companies that want to set up shop in China, MUST essentially work under a Chinese owned company. So in effect, China gets it's manufacturing base modernized, the quality of it's locally made products vastly improved, makes money via taxes for doing business there, makes money off of exporting to other countries, & not the least, dramatically decreases government expense of caring for it's populace by putting more of them to work in the private sector.
Now, keep in mind, that's on top of making the United States of America China's economic "biatch" by earning intrest on the trillion-plus dollars of US Treasury T-notes, bills, & bonds (intrest which WE are paying China as taxpayers) while being told what to do economically, even if it's at the expense of US workers, manufacturing base, or even US foreign policy (wonder why we drained our bank to go to Iraq without real evidence of WMDs, yet China backed North Korea can actually explode nukes, send missles over Japanese airspace and threaten South Korea... both of which we are bound by treaty to go to war with anyone who attacks them and have a large military presence of our troops in both countries... yet we do nothing?).
As a side note for the uninitiated, China is free to start dumping Treasury Bonds 10-30 years after maturity, "Notes" after 2-10, and "Bills" in a year. If you say "so what" let me point out that if China dumps even a modest portion of the securities it holds,
1. The value of the US dollar will plunge.
2. The deficit will explode because we'll have to pay that intrest back all at once.
3. All the bad things already mentioned due to plunging dollars and and exploding deficits will occur.
Another side note: You may very well recall that the US ran a surplus in the late 90s. That surplus went towards buying back various securities from foreign governments.... in effect, paying off our accumulated federal debt. As a result of better financial prospects, the US stopped issuing 30 year bonds back in 2000 or 2001.
Now we have run massive deficits for about 6 years.
Last February, 30 year "Long Bonds" went back on sale.
Sleep tight.
I theory, it should be balenced out by making our manufactured goods cheaper, and therefore we should export more, however that's necessarily the case anymore. Alot of United States' manufacturing has migrated to other countries (as has much of our service industry and engineering). The collaspe of one of the remaining US manufacturing bases (ie: the US auto industry) would not only wreck the US economy on it's own, but combined with a depressed dollar and a large trade deficit would do very serious economic damage, not just for a few months to a year, but quite possibly for a very, very long time..... assuming we recover.
Expanding on Z28x post about China, this is where I'm going to go political and hammer those who advocate deficit spending or blind tax cuts.
Nobody likes taxes. I know I sometimes sound like I'm all for new taxes, but the truth to the matter is that I'm a realist. I personally prefer to have prisons, a strong military, roads and bridges that I can drive on without destroying my car, enough police to keep my family safe, decent schools, knowing that if I become a disabled parapalegic I will have something resembling reasonable care, etc. Just like everyone, regardless as to if you're conservative or liberal. But I'm realistic enough to know that someone has to pay for all this, and that someone is us. At the same time, I've traveled around enough to know that we're paying next to nothing in taxes compared to other first world nations, so there's nothing to whine about.
But, as with any budget from a multi-national corperation, to any government, to your own household, somebody is going to have to pay the bill. You can't spend more money than you have, and you aren't going to cut anything but the most ridiculous or wasteful of government spending. In the late 90s, government was cut as much to the bone as it ever was going to get (and combined with a relatively balenced tax rate, we had surpluses) Rule of thumb: if it does enough people some good, it's not going on the chopping block. That means only 2 choices:
1) find ways to pay for it, or..
2) find ways to have someone else pay for it.
Pay for it ourselves, and we maintain control over our own house.
If someone else pays for it, they're going to want collateral or something in return.
To cut to the chase: China is giving us money to make up the difference between what we take in in taxes and what we are spending. In return, China can all but dictate US economic policy and the US government turns a blind eye to policies that are unfavorable to us. Sure, you'll get some lip service towards demands for these countries to change, but when was the last time you saw anything followed through?
Want more tax cuts, despite already running massive deficits? There's plenty of countries (again, China in particular) who would absolutely LOVE to fill in the difference.... and gain even more influence.
Companies that want to set up shop in China, MUST essentially work under a Chinese owned company. So in effect, China gets it's manufacturing base modernized, the quality of it's locally made products vastly improved, makes money via taxes for doing business there, makes money off of exporting to other countries, & not the least, dramatically decreases government expense of caring for it's populace by putting more of them to work in the private sector.
Now, keep in mind, that's on top of making the United States of America China's economic "biatch" by earning intrest on the trillion-plus dollars of US Treasury T-notes, bills, & bonds (intrest which WE are paying China as taxpayers) while being told what to do economically, even if it's at the expense of US workers, manufacturing base, or even US foreign policy (wonder why we drained our bank to go to Iraq without real evidence of WMDs, yet China backed North Korea can actually explode nukes, send missles over Japanese airspace and threaten South Korea... both of which we are bound by treaty to go to war with anyone who attacks them and have a large military presence of our troops in both countries... yet we do nothing?).
As a side note for the uninitiated, China is free to start dumping Treasury Bonds 10-30 years after maturity, "Notes" after 2-10, and "Bills" in a year. If you say "so what" let me point out that if China dumps even a modest portion of the securities it holds,
1. The value of the US dollar will plunge.
2. The deficit will explode because we'll have to pay that intrest back all at once.
3. All the bad things already mentioned due to plunging dollars and and exploding deficits will occur.
Another side note: You may very well recall that the US ran a surplus in the late 90s. That surplus went towards buying back various securities from foreign governments.... in effect, paying off our accumulated federal debt. As a result of better financial prospects, the US stopped issuing 30 year bonds back in 2000 or 2001.
Now we have run massive deficits for about 6 years.
Last February, 30 year "Long Bonds" went back on sale.
Sleep tight.
Registered User
Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
My friends in Coburg, Germany buy Fords as their company cars, and I asked why they don't buy Opel or BMW for example. The fast response was "best value and quality for the money." They like the design, the quality, and the pricepoint - period. In a country where VW and BMW are "home", that's a pretty bold statement. Not that they don't like BMWs or Mercedes' in Germany - they sure do - but Ford holds a higher regard there than they do in the US.
IMO, here in the US, Ford, Chevy, and Chrysler are stymied with a "cheap transportation" tag. Lincoln and Caddy are "upgraded Fords and Chevys".
In Europe, Ford is held in the ranks of Peugot and Citroen. The Ford marque is definitely held above the likes of Smart, Opel, Vauxhall, Renault, and others - NOT that they are bad at all, but they are more main-stream and accepted by middle-market buyers as being a little less quality and at a little less price.
A Mondeo in Great Brittain is kinda like a BMW 5-series here. Or a C-series Mercedes.
Hard to believe - I know, but I am trying to tell you that the cars Ford is producing in Europe are heads and shoulders above what we have offered to us here - I swear it.
Registered User
Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
So, essentially, you are saying convert my modest retirement to something like gold and invest in stocks, mutual funds, ect that have a majority (or completely) of thier assets in something other than the US in the slim chance that this house of cards called the US economy comes crashing down (dont worry, I'm not asking for economic advie, just an opinion)?
Corporate stocks have been and will continue to drop as a trend IMO, seeing that mutual funds and money markets that can swing big weight into offshore investments are bringing some of the biggest rewards lately.
People in China are hocking their homes and investing in their local businesses, landing up to 50% returns inside a year sometimes.
The market is being dominated more and more every day by the Chinese, making it more risky (IMO) to put my money into something a communist dictator can control on a whim.
BTW - nice post to guionM there. Where the flock were you about 3 months ago when I was trying to say this... and was being beaten relentlessly by optimists who think globalization is our savior here in the USA?!?!
Thread Starter
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Joined: Mar 2001
Posts: 13,713
From: The Golden State
Globalization in itself isn't bad. But when you throw in a plunging US dollar, runaway US deficits being bankrolled by China in exchange for relative control over policy (both foreign and economic), and clammoring for even more deficits via tax cuts and an almost distain for the auto industry (our largest manufacturing institution left in the US), it's a different story.
I used to think the falling dollar was good for the US, but in the world of globalization, the dollar needs to remain steady against world currency to do any good. It isn't.
The Roman Empire grew too big to sustain itself, split in half, and the riches flowed to the eastern empire (which became the Ottoman Empire, then Turkey) at the expense of the west, which fell into a long term depression called the "Dark Ages". Although the US and China were never part of the same empire, much the same is happening. Riches and resources are migrating the wrong way.
Registered User
Joined: Jan 2000
Posts: 10,285
From: Albany, NY
So, essentially, you are saying convert my modest retirement to something like gold and invest in stocks, mutual funds, ect that have a majority (or completely) of thier assets in something other than the US in the slim chance that this house of cards called the US economy comes crashing down (dont worry, I'm not asking for economic advie, just an opinion)?
- 1972 the Dow broke 1000 for the first time ever. In 1982 it was in the high 700's
- NASDAQ lost almost 80% from 2000 crash (~5000 to about ~1100)
It wouldn't be unrealistic for the Dow to be back at 5,000 someday. It may not happen, but if it did, it wouldn't be unrealistic.
Oil and Gold will do good when the dollar is doing bad.
The Roman Empire grew too big to sustain itself, split in half, and the riches flowed to the eastern empire (which became the Ottoman Empire, then Turkey) at the expense of the west, which fell into a long term depression called the "Dark Ages". Although the US and China were never part of the same empire, much the same is happening. Riches and resources are migrating the wrong way.
I need to read up more on my Roman history.
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Joined: Aug 1999
Posts: 2,610
From: Cincinnati, OH
Nasdaq is a little different story as so many people were investing in vaporware that just never came to be.
However, and I might be wrong on this, I'm not too concerned with Dow stocks such as GE collapsing when their market values are pretty much inline with their profits.
My international fund did make 17% last year though.
However, and I might be wrong on this, I'm not too concerned with Dow stocks such as GE collapsing when their market values are pretty much inline with their profits.
My international fund did make 17% last year though.
Registered User
Joined: Jan 2000
Posts: 10,285
From: Albany, NY
Nasdaq is a little different story as so many people were investing in vaporware that just never came to be.
However, and I might be wrong on this, I'm not too concerned with Dow stocks such as GE collapsing when their market values are pretty much inline with their profits.
My international fund did make 17% last year though.
However, and I might be wrong on this, I'm not too concerned with Dow stocks such as GE collapsing when their market values are pretty much inline with their profits.
My international fund did make 17% last year though.
So lets say under hard time GE's revenue is exactly the same as now. Investers still might drive the stock down 70% to get that P/E more inline with the inflation rate.
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Joined: Nov 2000
Posts: 2,712
From: Ontario
People in China are hocking their homes and investing in their local businesses, landing up to 50% returns inside a year sometimes.
The market is being dominated more and more every day by the Chinese, making it more risky (IMO) to put my money into something a communist dictator can control on a whim.
The market is being dominated more and more every day by the Chinese, making it more risky (IMO) to put my money into something a communist dictator can control on a whim.
Registered User
Joined: Aug 1999
Posts: 2,610
From: Cincinnati, OH
This is where you lose me, as I don't have a business background... 
What little I do know is that it seems like a lot of the big surviving US industrial companies are setup to make money outside the US, so hopefully revenue continues to increase even through a US slowdown.
What little I do know is that it seems like a lot of the big surviving US industrial companies are setup to make money outside the US, so hopefully revenue continues to increase even through a US slowdown.
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Joined: Apr 2000
Posts: 3,748
From: New England
The Roman Empire grew too big to sustain itself, split in half, and the riches flowed to the eastern empire (which became the Ottoman Empire, then Turkey) at the expense of the west, which fell into a long term depression called the "Dark Ages". Although the US and China were never part of the same empire, much the same is happening. Riches and resources are migrating the wrong way.
I have kinda kept mum on this but since its is being talked about and just in that mood.
Kinda funny that in a few threads about or near this topic I said again and again that we would fall to the Asian "empire" Japan with its auto industry and china with its marketing and manufacturing industry. Yet somehow a person like myself that is an everyday Joe that cannot pinpoint facts or articles but just loves to read about everything past present and future travel and interact with people from everywhere walks of life came to the same conclusion over and over again in arguments about this yet was dismissed and counterfacts of articles and "I work in this you don't so shut up" mentality pushed me aside. But Like I have said.
"Rome is burning. Rome is the U.S.. U.S. is burning."
"Toyota, As American as Apple Pie"
The thing is buying, working or helping these Asians markets influence who we are as a country and saying that it is just globalization, or just betterment for our people is just BS. I have had enough of it for a while. Our government has gone BAD business and they don't give a rats a$$ about what we need and it is too late to do anything serious about it that will effect the way business is done.
Japan is beating us at our own game. We as American prided ourselves on what we did who we are and what we could do. Now do we? Its how cheap it can be done, who does it for that cheap and where can it be done for that cost. That effects us big time. Japan prides itself on being that they love being Japanese they look down on anything made outside of a Japanese company as inferior. The work they do is top notch they strive for excellence and don't go for second best. Kinda sounds like a country founded a few hundred years back huh? Yea the once mighty giant the U.S. is soon going to be picking scraps for the Asian market that will explode. The U.S. vs. the juggernaut of China is what manufacturing? China wins. Exporting? China wins? Cars? By default Japan wins? soon food? China has the land and soon the materials and machines to produce it. So who will be the powerhouse and a very persuasive one at that since they will OWN the U.S. in that time? Yes, these countries like Japan and China who have the foothold right now are going to be making a huge mark in the future. And we as Americans are just holding that door wide open. Yet its okay. Since its part of globalization. SURE if it was all a level playing field like so many want you to think. Its not.
okay rant mode off cus I could go on about things some know and so many are ignorant to.
I will end on this. I did some work recently at an elderly home. One of the older ladies just bought a new car a Lexus. I have talked to her a lot over the past 6 years of going to this place on and off. So She says you like my car. I say yea for a rebadged Toyota. and she looks at me and says ohhh no this is an American car. I said no its not its a Toyota. She said no its made by Ford. I told her to look closer. and pointed out a few things that said Toyota on the car. The people that live in her complex also voice that they did not know this either. Not saying that this is a huge example or what not but still. Good indication of how we think now. She was shocked and said but I thought it was an American car, I only buy American cars. She said if she knew she would have gotten something else. I said yup they got you too. She said yea nothing is made in the U.S. anymore. I said no there is you just gotta know what. So she said I think Ill get what I had before a Caddy. I told her to look at the 2008 CTS coming out. So she said she would. Just goes to show you again "Toyota, As American as Apple Pie."
Last edited by Caps94ZODG; May 18, 2007 at 07:34 PM.
Registered User
Joined: Apr 2000
Posts: 3,748
From: New England
China's market has all the classic signs of a bubble. No economy can grow smoothly and consistently forever, and emerging ones have even more difficulty. Anyone remember the meltdown in South Korea and its neighbours in the late-90s? The prelude was very similar to what China is currently experiencing, with rapid growth, tons of investment, and boundless optimism that people could make fortunes there forever.
and also our auto industry.
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Joined: Apr 2000
Posts: 3,748
From: New England
Or..
you want to know something..go watch the movie 300. You could substitute alot of what was in that movie for what is in our world going on today.(sure alot of it is Millars epic comic story come to life on the big screen so much of it is not actual historical fact but its there)
History repeats itself.
I left feeling like we as Americans should feel like the Spartans did. Yet to many are like the politicians in the movie.
If you have seen it you will know what I am talking about. If not go see it and you will know by the end of the movie.
you want to know something..go watch the movie 300. You could substitute alot of what was in that movie for what is in our world going on today.(sure alot of it is Millars epic comic story come to life on the big screen so much of it is not actual historical fact but its there)
History repeats itself.
I left feeling like we as Americans should feel like the Spartans did. Yet to many are like the politicians in the movie.
If you have seen it you will know what I am talking about. If not go see it and you will know by the end of the movie.
Registered User
Joined: Jul 2001
Posts: 3,132
From: Santa Clara, CA
On another thread, I described how the plunging value of the US dollar has made heavily taxed gasoline in Australia barely more expensive than fuel is getting here. Now, Lincoln's small SUV (which was to be made in Germany) has gotten the axe.
Is killing plans to import the Mondeo to follow?
Is killing plans to import the Mondeo to follow?
Registered User
Joined: Jul 2001
Posts: 3,132
From: Santa Clara, CA
Was predisposed.
Globalization in itself isn't bad. But when you throw in a plunging US dollar, runaway US deficits being bankrolled by China in exchange for relative control over policy (both foreign and economic), and clammoring for even more deficits via tax cuts and an almost distain for the auto industry (our largest manufacturing institution left in the US), it's a different story.
I used to think the falling dollar was good for the US, but in the world of globalization, the dollar needs to remain steady against world currency to do any good. It isn't.
The Roman Empire grew too big to sustain itself, split in half, and the riches flowed to the eastern empire (which became the Ottoman Empire, then Turkey) at the expense of the west, which fell into a long term depression called the "Dark Ages". Although the US and China were never part of the same empire, much the same is happening. Riches and resources are migrating the wrong way.
Globalization in itself isn't bad. But when you throw in a plunging US dollar, runaway US deficits being bankrolled by China in exchange for relative control over policy (both foreign and economic), and clammoring for even more deficits via tax cuts and an almost distain for the auto industry (our largest manufacturing institution left in the US), it's a different story.
I used to think the falling dollar was good for the US, but in the world of globalization, the dollar needs to remain steady against world currency to do any good. It isn't.
The Roman Empire grew too big to sustain itself, split in half, and the riches flowed to the eastern empire (which became the Ottoman Empire, then Turkey) at the expense of the west, which fell into a long term depression called the "Dark Ages". Although the US and China were never part of the same empire, much the same is happening. Riches and resources are migrating the wrong way.
Registered User
Joined: Jun 2004
Posts: 2,977
From: SeVa
Or..
you want to know something..go watch the movie 300. You could substitute alot of what was in that movie for what is in our world going on today.(sure alot of it is Millars epic comic story come to life on the big screen so much of it is not actual historical fact but its there)
History repeats itself.
I left feeling like we as Americans should feel like the Spartans did. Yet to many are like the politicians in the movie.
If you have seen it you will know what I am talking about. If not go see it and you will know by the end of the movie.
you want to know something..go watch the movie 300. You could substitute alot of what was in that movie for what is in our world going on today.(sure alot of it is Millars epic comic story come to life on the big screen so much of it is not actual historical fact but its there)
History repeats itself.
I left feeling like we as Americans should feel like the Spartans did. Yet to many are like the politicians in the movie.
If you have seen it you will know what I am talking about. If not go see it and you will know by the end of the movie.