Dollar To Sink?

[boont]

I have read, from several sources, that the new treasury secretary was hired to, "oversee the gradual decline of the dollar."

Not immediately of course. First they want to talk up rates and even raise them a little to send a message.

Then they will move to lower the value of the dollar to boost profits of American companies.

Anyone else hear this?

We will have to wait and see but I think that is what will happen.

boont

 

[Telly]

Kudlow & Company had a good roundtable discussion on that today. A lower dollar would mean significantly higher interest rates would be needed to entice foreign investors to invest, when their payback would be in devalued dollars. High interest rates = no good for business.

A replay of the '70's.  Been there, done that. Once is enough, thank you!

 

[boont]

"A lower dollar would mean significantly higher interest rates would be needed to entice foreign investors to invest, when their payback would be in devalued dollars."


The problem with that argument is that we have just been through a very low interest rate environoment with a very cheap dollar and foreign investment has been huge. The following quote attests to this...

"The bigger worry for policymakers is the global savings glut and its evil twin, the dearth of investment.

Contrary to supply-side theory, a huge infusion of cash into U.S. corporations in the past few years has not led to a large increase in investment. It appears that it was not high taxes that restrained investment in the future, but executives' uncertainty about the prospects for a decent rate of return.

The same uncertainty holds true globally.

Oil producers are floating on cash, but have not stepped up investments in their domestic industries. China and Japan are saving, but the savings are going into U.S. Treasurys, not factories and schools. Investment in Europe is "tepid," in the chairman's words.

Global savings are being siphoned into U.S. real estate.

Overproduction is the specter haunting the world now. Greenspan doesn't know the answer, but at least he's asking the questions."

Rex Nutting is Washington bureau chief of MarketWatch.

 

[dex]

The dollar is due to fall. It started to raise interest rates before other countries and it will stop raising them first. Other currencies have help up pretty well in the face of recent and expected raises.
See the attached article.
http://www.thisismoney.co.uk/news/article.html?in_article_id=410219&in_page_id=2

 

[ShokWaveRider]

Isn,t 35% in 5 years enough? No wonder oil and gas are so high, 35% from $70 is $45 a barrel. Sound Familiar?

SWR

 

[renferme]

Used to play golf in Scotland when the pound sterling cost about $1.50.
Now it's significantly higher and you're telling me the dollar will be devalues even more? I DON'T LIKE IT!
That will end most people's plans for European travel.

 

[johnlw]

The Federal Reserve printed a massive amount of money a few years ago to prevent what they feared was a possible deflationary environment. Every dollar that is printed devalues the value of the existing dollar supply.

The Fed has been raising rates for the past 2 years which has helped shore up the dollar, however, they are now concerned that if they raise them much more, they will stall the economy.

When they pause on the interest rate increases, the dollar should start to drop again.

 

[AltaRed]

I recall an earlier discussion that said that with both huge trade and fiscal deficits, the dollar has nowhere to go but down. Either of trade or fiscal deficits are often manageable, but not both together. Interest rate increases alone will not likely solve the problem.

Since the trade imbalance is not likely to be resolved soon (China and Japan would stop buying US treasuries in that case), the gov't better get to a balanced budget fast.

 

[Craig]

And then it will be interesting to watch the related effects on gold, oil, and other commodities again ...