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Dec 6th, 2017
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If a new person to this forum or a person that has limited knowledge about economics were to read the threads in this sub-forum they would think that the dollar is doomed and that the US economy is done for... However, the markets do not reflect that. The resilient dollar Yet for all these worries, the dollar has come through the recent turmoil surprisingly well. It initially gave up some of the ground it made over the summer but swiftly recovered (see left-hand chart). The persistent foreign demand for American assets is remarkable given all those scares. Last year just over $2 trillion of capital—direct investments in firms or purchases of bonds, equities and other loans—came from investors outside America, mostly private ones. This was more than enough to cover the $730 billion current-account deficit and leave enough over to finance $1.3 trillion of investments by Americans overseas. The euro’s capital markets are of comparable depth and liquidity as the dollar’s, and the euro-area economy is roughly the same size as America’s. Faith in the efficiency of America’s financial markets must surely have been shaken by recent events. Yet the banking crisis and its economic fallout is a transatlantic affair. This week’s banking bail-outs in Europe are a sign that the old continent is not much safer for foreign investors than America. Worried savers may still find that they still sleep a little easier with dollars under the mattress, rather than euros.
A gem cannot be polished without friction, nor a man perfected without trials. ~Chinese Proverb
The early bird gets the worm, but the second mouse gets the cheese. ~Jon Hammond
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If a new person to this forum or a person that has limited knowledge about economics were to read the threads in this sub-forum they would think that the dollar is doomed and that the US economy is done for... However, the markets do not reflect that. Yet for all these worries, the dollar has come through the recent turmoil surprisingly well. It initially gave up some of the ground it made over the summer but swiftly recovered.... The persistent foreign demand for American assets is remarkable given all those scares. The dollar has some temporary stability since foreign holders of the Yankee dollar are frantically buying up solid American assets before their dollars are worthless ---- as your quote from the Economist magazine left-handedly admits. Whatever is left of value in the USA is being sucked overseas, leaving us the bones to pick over. The same thing happened to Russian assets when the Soviet Union collapsed. I regard the reporting of the Economist magazine the way I do what I find in the kitty-litter box. They beat the drums with frantic enthusiasm for the Iraq War. Also, their issue just before September 15 was notable for the almost total lack of indication of an upcoming crisis. If they were unaware of a crisis which many of us saw coming, it does not say much for their "expertise". If they did know about it and did not mention it to their readers, then why read the bloody rag? I, for one, would not dream of buying the Economist. I glance at it when I visit the local library in order to find out what middle-managers are being brainwashed into believing. _________
Last edited by numan; 10/06/08 06:41 PM.
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Foreign Nationals Shop for U.S. FirmsIn 2007, foreign investors bought stakes in U.S. companies whose businesses range from financial services and real estate to steel making and lighting. Foreign acquisitions totaled a record $414 billion, almost 90 percent more than the previous year and almost 30 percent more than 2000’s record, according to Thomson Financial, an economic data and research firm.
The relative weakness of the U.S. dollar creates opportunities for companies in countries with stronger currencies. They can buy U.S. businesses at bargain prices, according to economists.
“The valuation of U.S. companies compared to Japanese or European firms makes them reasonably attractive,” Brian Bethune of economic forecasters Global Insight told America.gov.
[SNIP]
Alan Tonelson, a research fellow at a trade group representing small and mid-size U.S. manufacturers, believes that, by targeting mostly leading technology firms, foreign companies are “acquiring control over the most dynamic pieces of the American economy.”
“They’re acquiring control over America’s future,” he told The Boston Globe.
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I'm not debating that the dollar has seen better days.
What I'm saying, and using the Economist as a source, is that the Dollar is still the currency of choice for reserves and while the Euro has given some alternative options to investors, it has not yet replaced the Dollar.
For the past 3 years the European central banks have kept their interest rates significantly higher than the FED. That has played a huge role in the dollar getting weaker and weaker each year.
However, there is no denying that today, all economies are affected by the credit crunch and investors are running to the dollar dominated securities as reflected by the gains the dollar has made the past 2 months.
A gem cannot be polished without friction, nor a man perfected without trials. ~Chinese Proverb
The early bird gets the worm, but the second mouse gets the cheese. ~Jon Hammond
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Joined: Aug 2004
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It's the Despair Quotient! Carpal Tunnel
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It's the Despair Quotient! Carpal Tunnel
Joined: Aug 2004
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That just means that some still believe in the Ponzi scheme, sorry.
When currency is nothing and backed by nothing, eventually someone gets stuck with the debt.
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journeyman
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journeyman
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I regard the reporting of the Economist magazine the way I do what I find in the kitty-litter box. They beat the drums with frantic enthusiasm for the Iraq War. The Economist did support the Iraq War, but they were not frantically enthusiastic about it. Even if they had been, exactly how is this a relevant argument against their financial analysis?
Last edited by a knight; 10/06/08 08:48 PM.
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Joined: Nov 2006
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journeyman
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journeyman
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If we don't look out Those evil Brits are going to own America, and what pieces they leave behind, their Euro buds will pick-up. Want to play Goose<-*->Gander? From the CIA 2008 World Factbook - United States
Stock of direct foreign investment - at home: $2.093 trillion (2007 est.)
Stock of direct foreign investment - abroad: $2.791 trillion (2007 est.)
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