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Dollar fall and jobs

 
sanitation engineer
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Just as we are discussing the possible effects of tax cuts on job creation, I'm curious as to how the fall of the dollar can affect the level of unemployment.
In the last few weeks the Euro went from $1.10 to $1.15 dollars, and some say the trend is that it will continue to fall.
Does anyone have any insight?
 
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well the simple answer is that US exports become cheaper, US imports more expensive. So more people on both sides of the pond will buy US goods/services, ergo more US jobs.
HOWEVER. I can imagine that the Germans will get upset & try to bring things back into line. It's more politics than economics IMO.
The USD/GBP is at 1.60 which I think is a fairly 'natural' level, so I guess it's more that the EUR has strengthened rather than weaker USD.
my 2c.
 
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Originally posted by Carlisia Campos:
Just as we are discussing the possible effects of tax cuts on job creation, I'm curious as to how the fall of the dollar can affect the level of unemployment.
In the last few weeks the Euro went from $1.10 to $1.15 dollars, and some say the trend is that it will continue to fall.
Does anyone have any insight?


Hi:
i think dollar fall will certainly create more usa job. here dollar fall mainly means against japan yen and euro. since usa mainly compete against japan and west europe. and the market being developed country and some developing country. dollar fall means cheap usa product, so it definitely make usa product more attactive. and it means more usa jobs.
just my two cents!
 
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It's not as easy as that ...
US goods will be cheaper for sure, but the companies and investor moves their assets from Dollar to EURO. No Investor .. no job
 
John Lee
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Originally posted by Gus Mus:
It's not as easy as that ...
US goods will be cheaper for sure, but the companies and investor moves their assets from Dollar to EURO. No Investor .. no job


what kind of assets are you talking about? real estate? investment is long term, do sell and buy house in different country just because the fluctuation of exchange rate?
 
Gus Mus
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Just imagine like this.
X Company has a lot of money, they did good business. So they put the profit into USD currency. Now Euro is stronger and the trend is going to it.. of course they are afraid if USD get lower thus they will have less money. So they convert their money into Euro.
The key point is people or company will really carefull to spend the money. They will wait and see and in the mean time they will convert their money / asset to take profit
Of course this situation is not 100% correct and can be mixed. US will really collapse If rush happends.
[ May 09, 2003: Message edited by: Gus Mus ]
 
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Originally posted by Don Liu:

what kind of assets are you talking about? real estate? investment is long term, do sell and buy house in different country just because the fluctuation of exchange rate?


while investments may be long term mos tinvestors hedge their bets not only with puts and calls as in stocks but buy backs and etc in bonds and such..
some of the triggers to sell and invest in non us stuff is the currency rate fluxations..
and of course some of the triggers apolitical..for instance the recent de-investment in US stuff by Suadia Arabs for example..
Even if its only the fuxation of currency rates triggering the re investment in something else in another country you stil make neough inthe difference even after the costs of the transaction.. this is why major compaines operate currency trading desks when they produce goods and services sold in foreign countrie sto both hedge and take advantage of the currency fluxation on both sides of the transaction..
 
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Originally posted by Gus Mus:
X Company has a lot of money, they did good business. So they put the profit into USD currency. Now Euro is stronger and the trend is going to it.. of course they are afraid if USD get lower thus they will have less money. So they convert their money into Euro.


This is an extremely unlikely example and will have little impact on the economy. Quite simply, most companies don't invest in currencies.
Unless a business has overseas operations, it simply doesn't bother with the very complex international currency markets. Of those who do trade in the currency market, they do so either to hedge the risk to their products overseas, or because they need to transfer capital to overseas divisions. In either case, the need to do this is relatively uneffected (directly) by market flucuations. There are investors (usually financial institutions) who trade in currency markets, but that's very different then companies looking to reinvest their profits.
This is not to say that companies aren't effected by currency markets; as noted above, when buying power changes, it effects imports and exports, but that's the way the majority of companies are exposed, not by direct investment.

--Mark
 
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Agree with Gus.
Because of the extremly low saving quota and other stuff the USA has a very negative trading balance. Americans just buy anything they see. Or hmm you are not like those sniveling europeans and simply believe in the future of mankind (one gets the impression that we are currently loosing that in Germany ):
Because of all this balance stuff the USA needs quite a large daily influx of capital to finance the negative (consumption - production).
So if there is now diminishing atrativity of US papers (because dollar looses value against euro) this might create further imbalances. Problems with that daily influx.
There will be capital investment in production facility only if the currency thing is long term.
job effect is allways the most long term of all this stuff. Am still holding this rest of once strong neoliberal conviction.
Simon: Even if Germany would be upset, how to convince the people to buy dollar and sell euro. This is more economics than politics.
[ May 09, 2003: Message edited by: Axel Janssen ]
 
SJ Adnams
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Germany would increase money supply.
http://www.onbusiness.ie/2003/0429/ecb.html
money supply up 7.9% for EUR.
For GBP its closer to 10%.
 
John Lee
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Originally posted by Gus Mus:
Just imagine like this.
X Company has a lot of money, they did good business. So they put the profit into USD currency. Now Euro is stronger and the trend is going to it.. of course they are afraid if USD get lower thus they will have less money. So they convert their money into Euro.
The key point is people or company will really carefull to spend the money. They will wait and see and in the mean time they will convert their money / asset to take profit


no matter what currency they convert their money to, it is still company capital, to be invested someday on equipment, service, materials, labor... now when you invest them, you hope to make more product, sell them, make profit, cheap dollar means you can do more in the usa with same investment, and the result is you sell the product cheap, so you sell more, make more profit. and hire more people. that is the typical story for many new market.
so,
dollar fall->low labor cost->more job opportunity
 
Axel Janssen
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Simon.
Sorry. Nope.
I am not going to lookup the theory books about monetarian economy (or how its called in english).
But no. M3 is not something which is pushed to the market by the government or the central bank. Its something which is created by offer and demand


M3 covers cash, overnight deposits, other short-term deposits, repurchase agreements, shares and units in money market funds and debt securities with a maturity of up to two years ).


Most of those are stuff offered by a bank and demanded by companies or the man of the street.
The central bank can only influence it indirectly through things like rediscount rate (prime rate) and lombard rate. In the last six month both are reduced less than the market participants have expected.

All those rates are decided by the European Central Bank, which is N.O.T. german. Due to our teutonic "end-of-the-world-as-we-know-it" mood and the resulting sluggish economy, Germany would like to have way lower rate, but that isn't possible, because it would result in inflation in countries with acceptable growth figures (Spain, Greece, Irland, Sweden, Norway and Denmark) I think.
[ May 10, 2003: Message edited by: Axel Janssen ]
 
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Here is today's news entitled "The Bush Administration Appears To Abandon Strong Dollar Policy" at
http://news.yahoo.com/fc?tmpl=fc&cid=34&in=business&cat=us_economy
[ May 09, 2003: Message edited by: JiaPei Jen ]
 
John Lee
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Mozina said numerous U.S. corporations have reported higher earnings recently because the cheaper dollar made their goods more competitive in foreign markets.


my point is proved.
 
Greenhorn
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Well... not all companies report the same. Think about companies in US who sell the goods from foreign countries.. they are in bad shape also.. thus might cut jobs.
US is still fine if the currency rate goes down by only 20% - 30%... just like Gus said, it might be dangerous if it fall to 50% - 100% and rush happends.
Is not possible ? well it is.. "it's all about politic", US is quite clever by colinizing Iraq to avoid this strong Euro (even they talk about bio-weapon, but everybody knows their dirty tricks).
If the currency falls to 50%, then I think it's not healthy anymore, of course to produce goods you have to have some resources which sometimes you buy from foreign countries. Panic situation will come, all investors might leaves USD, and it can brings to even worse conditions.. US doesn't have much deposit in gold, if the USD is undervalue then US debts will be very..very high, the government suddenly fall into bankruptcy - and jobless will increase dramatically. But hopefully this won't happend, thanks to Iraq.
On the other hand, European countries also have problem with strong EURO, but I think they have better change and conditions to solve the problem..
Well.. I might be wrong...
 
Mark Herschberg
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Originally posted by Alexander Mark:
it might be dangerous if it fall to 50% - 100% and rush happends.
US doesn't have much deposit in gold, if the USD is undervalue then US debts will be very..very high, the government suddenly fall into bankruptcy


I don't know where you learned marco economics but there's a greater chance of the US getting nuked in the next 10 years then of the US going bankrupt.
BTW, the US went off the gold standard in 1968.
--Mark
 
John Lee
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Originally posted by Alexander Mark:
Well... not all companies report the same. Think about companies in US who sell the goods from foreign countries.. they are in bad shape also.. thus might cut jobs.


every economy is very divesified. in general, usa's economy is one of the most advanced, competing with japan,west europe.
when we talk about dollar fall and job, we talk about the center of the mass of the economy. if 10 person lost jobs, but 1,000 persons get jobs, then it still bring jobs.
of course, dollar fall can not happen too fast. people need time to adjust.


US is still fine if the currency rate goes down by only 20% - 30%... just like Gus said, it might be dangerous if it fall to 50% - 100% and rush happends.
Is not possible ? well it is.. "it's all about politic", US is quite clever by colinizing Iraq to avoid this strong Euro (even they talk about bio-weapon, but everybody knows their dirty tricks).
If the currency falls to 50%, then I think it's not healthy anymore, of course to produce goods you have to have some resources which sometimes you buy from foreign countries. Panic situation will come, all investors might leaves USD, and it can brings to even worse conditions.. US doesn't have much deposit in gold, if the USD is undervalue then US debts will be very..very high, the government suddenly fall into bankruptcy - and jobless will increase dramatically. But hopefully this won't happend, thanks to Iraq.
On the other hand, European countries also have problem with strong EURO, but I think they have better change and conditions to solve the problem..
Well.. I might be wrong...



50%? that is way too much i guess. unless you mean over the course of 10 years.
 
Alexander Mark
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50% .. yes .. Anything can happend..
Why US is very rich country ?
There are many reasons :
1. The currency is used as "de facto" assets everywhere in the world.
2. It's open and free country
3. The country is rich in resources
4. People is good
But the most important are point #1 and point #2. Especially point #1. As long as USD is used everywhere then US have no worries about its economy. In other word by using USD then other countries pays the debt from US.
I remember when EURO was introduced, many analysis from US laughed on it. They said a lot of negative opinion, but in deep their heart they were really afraid against it. They are afraid EURO will dominate and thus they have to pay a really big number of their debt.
US already did some ways to avoid this, we know it already (for example by occupying Iraq). And now US is not really open as it was before. People is living under fear, the freedom is limited, and a lot of things that make US is more like isolating themselves.
Yes US is still rich country, they have a lot of resources, but how many country like this and suddenly become poor ? Russian and Indonesian are very rich in resources, but after their currency collapse, they become really poor.
People in US is still good in term they have good intelligent, education, and etc. But their current leader is not like that� it seems like he lead this country into wrong direction.
Really a lot reason to say that.. US economy can collapse in short term�
Well.. this is only my opinion, I am not super economy � analysis who graduated from Harvard University. I am simply a java software developer.
[ May 13, 2003: Message edited by: Alexander Mark ]
 
Mark Herschberg
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Originally posted by Alexander Mark:

1. The currency is used as "de facto" assets everywhere in the world.
...
In other word by using USD then other countries pays the debt from US....They are afraid EURO will dominate and thus they have to pay a really big number of their debt.
US already did some ways to avoid this, we know it already (for example by occupying Iraq).


Can you (or anyone) cite a respected economic authority showing:
1) How being the defacto standard significantly contributes to US economic power?
2) How other countries "pay the debt from the US" by using US dollars?
3) How the invasion on Iraq had an impact on US strength versus the Euro?
Frankly, I'm just not seeing it.

--Mark
 
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I wonder if you are considering the possibility the US is going to experience negative inflation. But that's not the term for it??? IMO this will really screw the value of the dollar.
Use to be people from foreighn countries invested in US because the credibility of the investment accounting system was very high. Recent accounting scandals cannot have been missed by the world's investors. Nor can the world's investors fail to notice the current administration lack of any real punishment of to the quilty.
1.4 Billion fine on 10 Wall Street firms in a joke. And quite a bit of the fine is for investor education that Wall St. should be paying anyway. To so many the fines look like a fair price for doing the screwing business.
If the assertion was that George Bush was not too bright, are we reaping what we sowed? Bush's first treasury secratary had a very good performance history. But Bush fired him for the new one. Who has done what besides look good?
If the markets are a barometer, can one deny that Bush has been an economic failure for nearly the last three years? Or do you believe Karl Roves' finger pointing?
 
Mark Herschberg
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A front page WSJ article yesterday (May 13) talked about current US monetary policy. The artciel suggested Bush may be saying one thing and doing another--but that's just what the economy needs. Specifically, the administration is hoping for a weaker dollar to help make US exports cheaper (Japan and German are not happy about this), but at the same time must offically state they want a string dollar, to keep the markets stable.
--Mark
 
John Lee
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Originally posted by Alexander Mark:
50% .. yes .. Anything can happend..


yes, you are right. i think dollar has fall 20% since the whole thing started.
 
John Lee
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A interesting article:
Tracking the Dollar's Fall
 
John Lee
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obviuosly, dollar fall isnot good for everybody.
Russia: Dollar's Fall Means Higher Debt Payments
 
JiaPei Jen
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Three European economies contract, causing fears of global damage. See http://www.nytimes.com/2003/05/16/business/worldbusiness/16EURO.html?ex=1054267200&en=413b61ed7e465a05&ei=5004&partner=UNTD
 
John Lee
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Indeed, the United States is indirectly aggravating Europe's misery, through the dollar, which has tumbled 26 percent against the euro in the last year.

 
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