Showing posts with label Eurodollar. Show all posts
Showing posts with label Eurodollar. Show all posts
Friday, August 31, 2012
Why Britain And Its Pound Sterling Won't Avoid The Impact of A EuroDollar Collapse
Too many British, feel that they've dodged a bullet by not joining the Euro-zone and adopting the Eurodollar as their base currency. But, hold on a minute. Nearly 44% of Britain's exports are with Euro-Zone countries like France, Germany, Italy, and Spain. So, if those economies fail because of a Eurodollar collapse, 44% of Britain's export business could be at some degree of risk. I seriously think Britain should be concerned with the collapse of the Eurodollar; just as the USA is concerned. God only knows what kind or ripple effect could take place should there be a major collapse of any world currency at a time when most economies in the world are in already in trouble.
Monday, May 14, 2012
You Can Thank France and Greece For Lower Oil Prices
This morning, West Texas Intermediate (WTI) oil was trading at $93/barrel. Just a few weeks ago it was trading at over $107 per barrel and gasoline prices we're clearly heading above $4/gallon; nationwide. That's nearly a 14% drop in price. So, what happened?
Well, you can thank the economic mess in Europe for the lower oil prices. As Europe moves into deeper recessions and as countries like France and Greece seem to be rejecting austerity to get debt under control, the value of the Euro dollar has fallen; actually causing the American dollar to rise in value on a relative basis. As a consequence, the stronger U.S. dollar has caused oil prices to fall.. It's just that simple. And, it basically proves that Obama's weak dollar policy through high spending and debt is at the core of out current high oil and gasoline prices. All along, the falling Euro has somewhat kept oil prices in check. I guarantee you that if Europe had been in good economic health over the last 3 years, we would have easily seen gasoline prices above $5 a gallon in the last two years.
Those same, so-called speculators that supposedly drove prices higher as a response to Middle East events are now responding to other changing world events and, as a consequence, are selling off their oil holdings; thus driving oil and gasoline prices down. Maybe Obama should demand an investigation because oil prices are obviously being manipulated lower. .
Well, you can thank the economic mess in Europe for the lower oil prices. As Europe moves into deeper recessions and as countries like France and Greece seem to be rejecting austerity to get debt under control, the value of the Euro dollar has fallen; actually causing the American dollar to rise in value on a relative basis. As a consequence, the stronger U.S. dollar has caused oil prices to fall.. It's just that simple. And, it basically proves that Obama's weak dollar policy through high spending and debt is at the core of out current high oil and gasoline prices. All along, the falling Euro has somewhat kept oil prices in check. I guarantee you that if Europe had been in good economic health over the last 3 years, we would have easily seen gasoline prices above $5 a gallon in the last two years.
Those same, so-called speculators that supposedly drove prices higher as a response to Middle East events are now responding to other changing world events and, as a consequence, are selling off their oil holdings; thus driving oil and gasoline prices down. Maybe Obama should demand an investigation because oil prices are obviously being manipulated lower. .
Friday, November 18, 2011
Europe's Debt Crisis And An American Double Dip Recession
No one in this country should be complacent about what's happening in Europe. If, like dominoes, the PIIGS --- Portugal, Ireland, Italy, Greece, and Spain --- default on their individually accumulated debts, the Eurodollar could easily collapse. For America, this could spell even higher unemployment and, for sure, a second recession.
40% of all American exports depend on the buying demand that comes from the 17 countries that make up the European Union. Thousands of jobs depend on those exports. As the Eurodollar weakens, our products become more expensive and less competitive throughout Europe. This fact, alone, could spell an increasing amount of layoffs in this country; slowing our economy and raising the unemployment rate. Further, as the cost of bond debt rises in each of the PIIGS countries, inflation will be sure to rear its ugly head; thereby reducing the purchasing power of the average European. This, too, could negatively impact American exports.
Additionally, our banks, brokerage firms, and individuals are holding somewhere between $600 billion and $1 trillion in European debt. No one really knows the exact amount. It might actually be higher than a trillion dollars. But, in any event, if the Eurodollar collapses, all of that debt could be easily at risk; threatening the survivability of our key national banks. Once again, the U.S. government and the taxpayers will be forced to ante up with another too-big-to-fail TARP-like bailout. As it is, we are already exposed to the debt problems in Italy and Greece. That's why, just recently, a derivatives brokerage firm called MF Global was forced to go belly up with thousands losing their money in the process.
I am personally concerned that those troubled European countries will fail to extricate themselves from their debt problems through any real austerity programs. As a result, our own Federal Reserve and Treasury -- knowing the potential consequences of any European defaults -- might decide to shore up the entire European Union by loaning massive amounts of money to the individual PIIGS. If that happens, our own economy would be hurt because our own currency will lose value; making imports more expensive for us to buy. And, we buy a lot. Around the world, governments -- including ours -- need to stop with the liberal-minded spending and make fiscal discipline the priority. Otherwise, more than just the economies of Europe and the U.S. could be a risk.
40% of all American exports depend on the buying demand that comes from the 17 countries that make up the European Union. Thousands of jobs depend on those exports. As the Eurodollar weakens, our products become more expensive and less competitive throughout Europe. This fact, alone, could spell an increasing amount of layoffs in this country; slowing our economy and raising the unemployment rate. Further, as the cost of bond debt rises in each of the PIIGS countries, inflation will be sure to rear its ugly head; thereby reducing the purchasing power of the average European. This, too, could negatively impact American exports.
Additionally, our banks, brokerage firms, and individuals are holding somewhere between $600 billion and $1 trillion in European debt. No one really knows the exact amount. It might actually be higher than a trillion dollars. But, in any event, if the Eurodollar collapses, all of that debt could be easily at risk; threatening the survivability of our key national banks. Once again, the U.S. government and the taxpayers will be forced to ante up with another too-big-to-fail TARP-like bailout. As it is, we are already exposed to the debt problems in Italy and Greece. That's why, just recently, a derivatives brokerage firm called MF Global was forced to go belly up with thousands losing their money in the process.
I am personally concerned that those troubled European countries will fail to extricate themselves from their debt problems through any real austerity programs. As a result, our own Federal Reserve and Treasury -- knowing the potential consequences of any European defaults -- might decide to shore up the entire European Union by loaning massive amounts of money to the individual PIIGS. If that happens, our own economy would be hurt because our own currency will lose value; making imports more expensive for us to buy. And, we buy a lot. Around the world, governments -- including ours -- need to stop with the liberal-minded spending and make fiscal discipline the priority. Otherwise, more than just the economies of Europe and the U.S. could be a risk.
Tuesday, May 25, 2010
If Only PIIGS Could Fly!
There's an acronym floating around that seems to be spot-on with regard to the fiscal problems of the European Union. It's called PIIGS. Actually, PIIGS is simple shorthand for Portugal, Ireland, Italy, Greece, and Spain. But, more than anything, these countries truly are "pigs" when it comes to spending and social programs. They are all in debt up to their eyeballs.
Because of these PIIGS, the EuroDollar has been sliding faster than a speeding bullet. Also, these PIIGS may be the reason that the entire European Union disintegrates after having only been in existence for a few years since its founding in 1993. But, for us, the weakening of the EuroDollar is going to kill our trade with Europe because any American made products will become increasingly more expensive for Europeans to buy.
Our stock market and our recovery was being partly driven by our dollar being weak against the EuroDollar. It gave us a trading advantage and the stock prices of heavily exporting companies were continually bid up by higher export sales. Now, with that reality now disappearing, we just might see our economy slip into a secondary or double-dip recession. The dramatic drop in our stock markets over the last 3 weeks says it all. If only those PIIGS could fly!
Because of these PIIGS, the EuroDollar has been sliding faster than a speeding bullet. Also, these PIIGS may be the reason that the entire European Union disintegrates after having only been in existence for a few years since its founding in 1993. But, for us, the weakening of the EuroDollar is going to kill our trade with Europe because any American made products will become increasingly more expensive for Europeans to buy.
Our stock market and our recovery was being partly driven by our dollar being weak against the EuroDollar. It gave us a trading advantage and the stock prices of heavily exporting companies were continually bid up by higher export sales. Now, with that reality now disappearing, we just might see our economy slip into a secondary or double-dip recession. The dramatic drop in our stock markets over the last 3 weeks says it all. If only those PIIGS could fly!
Tuesday, February 16, 2010
What Obama Didn't Count On
In the State of the Union Address, Barack Obama made the claim that his policies would double exports in 5 years (Click to See Full Story: Obama Sets Ambitious Export Goal ).
This just reaffirms what I have always felt about the President and his economic team. I have always believed that Obama and his academic elite economists have this untested plan to kill the U.S. dollar with higher and higher accumulated debt (deficit spending). This, in turn, would result in an extremely weak U.S. dollar. Then, as the dollar weakens, American products would become cheaper and cheaper in the world markets. That, in turn, would result in higher exports. And, as I have written in the past, a weak dollar will also punish us for the more than 60 percent of manufactured goods that we currently import.
But, what Obama didn't count on is the fact that other countries might be just as deep in their own debt -- resulting in the collapse of other world currencies like the EuroDollar.
Since December, the U.S. dollar has actually been strengthening after having dramatically fallen since Obama took office and passed his budget busting Stimulus Package. The reason for the dollar's strength today comes out of the assumption that, even though heavily wounded by high deficit spending, it is still a better bet to hold than other currencies; making it more attractive in the world markets. This attitude started when it was learned that the country of Dubai was at risk of defaulting on its loans. It has been furthered by the fact that Greece, Spain, Portugal and three Eastern European countries are also in jeopardy of not meeting their debts. Right now, the EuroDollar -- not the U.S. Dollar -- looks to be in serious trouble as Europe struggles with its collapsing economies (Click to See Full Story: Collapse of the euro is 'inevitable': Bailing out the Greek economy futile, says FRENCH banking chief).
With the dollar gaining strength, we now have another ill-thought-out Obama plan. That's because, besides having massive debt, we no longer have a promise of greater exports. In fact, just last month, U.S. exports fell more than expected because of the strengthening dollar (Click to See Full Story: U.S. trade deficit soars in December).
Every day, this President's plans continue to reflect the ineptness of his economic team. This is what happens when a bunch of "big idea" academics get a hold of a country. None of these people have any practical, real world experience and that fact keeps showing up in their failed policies. Failed policies that haven't created jobs or stemmed the tide of foreclosures and bankruptcies. Failed policies that haven't increased business and consumer loans. Failed policies that aren't stimulating this economy. And, now, a failed policy that will leave our children paying for the outrageous spending and the lack of promised increases in exports.
In the classroom, Obama's economic team's big ideas have no consequences. But in the real world, they have serious consequences that affect all of our lives. I am concerned that these experiments will leave us with the frightening reality of economic collapse.
The "hope and change" that America should be wishing for right now is the "hope" that it isn't too late to "change" before our own economy is completely destroyed by these people!
This just reaffirms what I have always felt about the President and his economic team. I have always believed that Obama and his academic elite economists have this untested plan to kill the U.S. dollar with higher and higher accumulated debt (deficit spending). This, in turn, would result in an extremely weak U.S. dollar. Then, as the dollar weakens, American products would become cheaper and cheaper in the world markets. That, in turn, would result in higher exports. And, as I have written in the past, a weak dollar will also punish us for the more than 60 percent of manufactured goods that we currently import.
But, what Obama didn't count on is the fact that other countries might be just as deep in their own debt -- resulting in the collapse of other world currencies like the EuroDollar.
Since December, the U.S. dollar has actually been strengthening after having dramatically fallen since Obama took office and passed his budget busting Stimulus Package. The reason for the dollar's strength today comes out of the assumption that, even though heavily wounded by high deficit spending, it is still a better bet to hold than other currencies; making it more attractive in the world markets. This attitude started when it was learned that the country of Dubai was at risk of defaulting on its loans. It has been furthered by the fact that Greece, Spain, Portugal and three Eastern European countries are also in jeopardy of not meeting their debts. Right now, the EuroDollar -- not the U.S. Dollar -- looks to be in serious trouble as Europe struggles with its collapsing economies (Click to See Full Story: Collapse of the euro is 'inevitable': Bailing out the Greek economy futile, says FRENCH banking chief).
With the dollar gaining strength, we now have another ill-thought-out Obama plan. That's because, besides having massive debt, we no longer have a promise of greater exports. In fact, just last month, U.S. exports fell more than expected because of the strengthening dollar (Click to See Full Story: U.S. trade deficit soars in December).
Every day, this President's plans continue to reflect the ineptness of his economic team. This is what happens when a bunch of "big idea" academics get a hold of a country. None of these people have any practical, real world experience and that fact keeps showing up in their failed policies. Failed policies that haven't created jobs or stemmed the tide of foreclosures and bankruptcies. Failed policies that haven't increased business and consumer loans. Failed policies that aren't stimulating this economy. And, now, a failed policy that will leave our children paying for the outrageous spending and the lack of promised increases in exports.
In the classroom, Obama's economic team's big ideas have no consequences. But in the real world, they have serious consequences that affect all of our lives. I am concerned that these experiments will leave us with the frightening reality of economic collapse.
The "hope and change" that America should be wishing for right now is the "hope" that it isn't too late to "change" before our own economy is completely destroyed by these people!
Saturday, August 22, 2009
An American Economy Based On A Baseless Dollar?
More than once, Obama's chief economic adviser, Larry Summers, has made a statement that has been very similar to the following quote of just 3 weeks ago:
Ever since Obama took office, he has massively increased the debt load and the deficits. That, in turn, has weakened the American dollar. When Obama took office you could exchange 1.32 dollars for one Eurodollar. Today, you will need to cough up 1.45 dollars for that same benchmark of European currency. That's a decline in the value of the dollar by 22%. The exchange rate with some other currencies is even worse.
Whenever the dollar is weakened, our products become cheaper to buy in other countries. Likewise, products being imported into America become more expensive for Americans to buy. We are already seeing this in oil prices. Despite the worldwide usage decline and the complete overstock of this commodity, oil prices have still been rising. Yesterday, it hit $75 a barrel before falling back. Most oil is traded in dollars. We are the world's leader in oil consumption. We import more than we domestically produce; and, therefore, the price will rise with any fall in the dollar. In effect, the weakened dollar is punishing us all at the gas pumps.
As the dollar continues to weaken, domestic products become cheaper and more attractive to buy than similar imported products. This could force manufacturers to establish or, just maybe, re-establish manufacturing operations in this country in order to regain price competitiveness. Subsequently, our exports could expand. I believe that is what Summers means in his comment that "a rebuilt American economy" must be "more export oriented."
The downside to the Summers philosophy is that America imports more than it produces domestically. In most cases, this is because many items are not even made here anymore. This is certainly the case for consumer electronics, most textiles, ceramics, etc. When Summers says "less consumption-oriented", he's not kidding. As the dollar falls, all those imported flat screen TV's will cost a lot more to buy because of it. Further, as the unemployment rate rises and the value of homes decreases, fear will cause consumers to hold onto cash and pay off their bills. People will buy less and save more money because they will have learned the value of saving from the hardships of this recession; just as the survivor's of the Great Depression did in and after the 1930's.
Mr. Summers is also right when it comes to his statement that American society will become "more environmentally oriented and less fossil-energy-oriented". As noted previously, the fall in the U.S. dollar will force world oil prices up and that, will, as a consequence, force up the price of gasoline. This, then, will make alternative and domestic sources of energy more competitive with fossil fuels; but, also, it will make every American's energy costs exceedingly more expensive. Because of the falling dollar and high imported oil prices, this Administration will be able to force-fit America into wind and solar by artificially pushing the cost of fossil fuels up.
The comment of "more bio- and software-engineering-oriented and less financial-engineering-oriented" is really referring to more control over Wall Street and our banking system. The mindset of this Obama-government is to completely control banking and completely stifle any more of those radical "wealth building" activities of Wall Street. We can see this with Obama's tactic of giving bailout money to Wall Street and the banks so he can absolutely control them; both in terms of business operations and in terms of salaries.
Our leadership in "bio- and software-engineering" might not be as doable as Summers thinks. We are losing ground in both these areas to countries who are getting educationally stronger than we are. However, it appears from the context of these words that Federal money will be funneled into these activities. We have already seen that in software-engineering due to Obama's push for the complete national database of health records. His funding and relaxed rules on Stem Cell research will certainly give a boost to bio-engineering.
Summer's last comment --- "more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population" --- is really key to Obama's populist and socialist attitude towards the rich. That statement says it all about his plans to kill off the wealthy through taxing and, ultimately, the redistribution of the nation's wealth. In effect, from that statement alone, it is the intent of this Administration to eliminate entrepreneurship in America by punishing the more creative wealth builders and giving that money to the less instrumental members of our economy. The downside is that unemployment will rise because we won't have the funds available for the building of new business opportunities and current business expansion.
I personally find Mr. Summers comments to be anti-capitalistic and naively socialistic. It is obvious that the Obama Administration seems to falsely think that a weak dollar is the key to rebuilding America. I say falsely because the big drawback of the Summers/Obama philosophy for a weakening dollar is the fact that our country will be so in debt that it will make us more and more dependent on the foreign countries that hold all that debt. For years we have been emasculated in dealing with Arab oil-producers because we are so dependent on their oil. In the future, we will be similarly emasculated in dealing with countries that hold our debt; like China. China, today, is increasingly trying to be the world's superpower and we are becoming more and more subservient to them. Not good!
Additionally, as the dollar falls, so does the value of our bonds (our debt). This, then, poses a real problem for China and all those other countries that we need, debt-wise, to bankroll all of our unfunded spending. But, if anyone buys our debt and the value of the dollar falls faster than the interest rate that is being paid on it, they will lose money on their investment. To overcome this problem, the buyer of our debt has only two choices: (1) stop buying, completely or (2) demand higher and higher interest rates.
If China and other countries continue to buy our debt, but at higher rates, it will mean that our national debt will be much more costly to us than it had been previously. We will have to issue more and more less effective debt instruments in order to cover our deficits. The interest that we will pay will skyrocket. Like the Carter years, the interest rates to buy a house will be double digits; probably above 20 percent. To buy a car may cost you interest of 15% or higher.
If the value of the dollar falls too low and China and other countries completely stop buying our bonds, we will be in a world of hurt. At that point, our dollar will literally collapse because all of the bonds will fall to junk status. Inflation will be uncontrolled. In fact, our economy could be very similar to many of history's "Banana Republics" that have all fallen by the wayside.
Debasing the dollar is OK if you don't have as much debt as the United States already has. But, we are increasingly looking like a spender who is quickly becoming the "up to their eyeballs in debt" debtor. Typically, that kind of person eventually winds up in bankruptcy court. There is no bankruptcy court for a country; just complete and utter collapse.
"The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally oriented and less fossil-energy-oriented, more bio- and software-engineering-oriented and less financial-engineering-oriented, more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population."This, in my opinion, is an insight into all that Obama and his people have been doing since he took office. Simply speaking, I think that Larry Summers and Barack Obama want to see the destruction of the U.S. dollar as a means to the goals that he has expressed in the quote above.
Ever since Obama took office, he has massively increased the debt load and the deficits. That, in turn, has weakened the American dollar. When Obama took office you could exchange 1.32 dollars for one Eurodollar. Today, you will need to cough up 1.45 dollars for that same benchmark of European currency. That's a decline in the value of the dollar by 22%. The exchange rate with some other currencies is even worse.
Whenever the dollar is weakened, our products become cheaper to buy in other countries. Likewise, products being imported into America become more expensive for Americans to buy. We are already seeing this in oil prices. Despite the worldwide usage decline and the complete overstock of this commodity, oil prices have still been rising. Yesterday, it hit $75 a barrel before falling back. Most oil is traded in dollars. We are the world's leader in oil consumption. We import more than we domestically produce; and, therefore, the price will rise with any fall in the dollar. In effect, the weakened dollar is punishing us all at the gas pumps.
As the dollar continues to weaken, domestic products become cheaper and more attractive to buy than similar imported products. This could force manufacturers to establish or, just maybe, re-establish manufacturing operations in this country in order to regain price competitiveness. Subsequently, our exports could expand. I believe that is what Summers means in his comment that "a rebuilt American economy" must be "more export oriented."
The downside to the Summers philosophy is that America imports more than it produces domestically. In most cases, this is because many items are not even made here anymore. This is certainly the case for consumer electronics, most textiles, ceramics, etc. When Summers says "less consumption-oriented", he's not kidding. As the dollar falls, all those imported flat screen TV's will cost a lot more to buy because of it. Further, as the unemployment rate rises and the value of homes decreases, fear will cause consumers to hold onto cash and pay off their bills. People will buy less and save more money because they will have learned the value of saving from the hardships of this recession; just as the survivor's of the Great Depression did in and after the 1930's.
Mr. Summers is also right when it comes to his statement that American society will become "more environmentally oriented and less fossil-energy-oriented". As noted previously, the fall in the U.S. dollar will force world oil prices up and that, will, as a consequence, force up the price of gasoline. This, then, will make alternative and domestic sources of energy more competitive with fossil fuels; but, also, it will make every American's energy costs exceedingly more expensive. Because of the falling dollar and high imported oil prices, this Administration will be able to force-fit America into wind and solar by artificially pushing the cost of fossil fuels up.
The comment of "more bio- and software-engineering-oriented and less financial-engineering-oriented" is really referring to more control over Wall Street and our banking system. The mindset of this Obama-government is to completely control banking and completely stifle any more of those radical "wealth building" activities of Wall Street. We can see this with Obama's tactic of giving bailout money to Wall Street and the banks so he can absolutely control them; both in terms of business operations and in terms of salaries.
Our leadership in "bio- and software-engineering" might not be as doable as Summers thinks. We are losing ground in both these areas to countries who are getting educationally stronger than we are. However, it appears from the context of these words that Federal money will be funneled into these activities. We have already seen that in software-engineering due to Obama's push for the complete national database of health records. His funding and relaxed rules on Stem Cell research will certainly give a boost to bio-engineering.
Summer's last comment --- "more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population" --- is really key to Obama's populist and socialist attitude towards the rich. That statement says it all about his plans to kill off the wealthy through taxing and, ultimately, the redistribution of the nation's wealth. In effect, from that statement alone, it is the intent of this Administration to eliminate entrepreneurship in America by punishing the more creative wealth builders and giving that money to the less instrumental members of our economy. The downside is that unemployment will rise because we won't have the funds available for the building of new business opportunities and current business expansion.
I personally find Mr. Summers comments to be anti-capitalistic and naively socialistic. It is obvious that the Obama Administration seems to falsely think that a weak dollar is the key to rebuilding America. I say falsely because the big drawback of the Summers/Obama philosophy for a weakening dollar is the fact that our country will be so in debt that it will make us more and more dependent on the foreign countries that hold all that debt. For years we have been emasculated in dealing with Arab oil-producers because we are so dependent on their oil. In the future, we will be similarly emasculated in dealing with countries that hold our debt; like China. China, today, is increasingly trying to be the world's superpower and we are becoming more and more subservient to them. Not good!
Additionally, as the dollar falls, so does the value of our bonds (our debt). This, then, poses a real problem for China and all those other countries that we need, debt-wise, to bankroll all of our unfunded spending. But, if anyone buys our debt and the value of the dollar falls faster than the interest rate that is being paid on it, they will lose money on their investment. To overcome this problem, the buyer of our debt has only two choices: (1) stop buying, completely or (2) demand higher and higher interest rates.
If China and other countries continue to buy our debt, but at higher rates, it will mean that our national debt will be much more costly to us than it had been previously. We will have to issue more and more less effective debt instruments in order to cover our deficits. The interest that we will pay will skyrocket. Like the Carter years, the interest rates to buy a house will be double digits; probably above 20 percent. To buy a car may cost you interest of 15% or higher.
If the value of the dollar falls too low and China and other countries completely stop buying our bonds, we will be in a world of hurt. At that point, our dollar will literally collapse because all of the bonds will fall to junk status. Inflation will be uncontrolled. In fact, our economy could be very similar to many of history's "Banana Republics" that have all fallen by the wayside.
Debasing the dollar is OK if you don't have as much debt as the United States already has. But, we are increasingly looking like a spender who is quickly becoming the "up to their eyeballs in debt" debtor. Typically, that kind of person eventually winds up in bankruptcy court. There is no bankruptcy court for a country; just complete and utter collapse.
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