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What The Dollar's Collapse Will Mean To The World


The Masked Tulip
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From that link:

Some believe that the decline of the dollar against the currencies of American's trading partners will help correct the USA's trade deficit, and the dollar will stop falling when the trade imbalance is corrected. However, the evidence is that the opposite is happening - the $US has declined 40% against the Euro over the last 2 years, and during this time America's trade deficit has continued to deteriorate.

I suggest the author of the article study an economic phenomenon called the "J-curve":

http://www.economist.com/research/Economic...ic.cfm?LETTER=J

J-CURVE

The shape of the trend of a country’s trade balance following a DEVALUATION. A lower EXCHANGE RATE initially means cheaper EXPORTS and more expensive IMPORTS, making the current account worse (a bigger DEFICIT or smaller surplus). After a while, though, the volume of exports will start to rise because of their lower PRICE to foreign buyers, and domestic consumers will buy fewer of the costlier imports. Eventually, the trade balance will improve on what it was before the devaluation.

Paragraphs 2 through 6 are plausible, but unlikely.

However, I wholeheartedly agree with paragraph 7:

Americans do not appear to comprehend the bitterness that has grown around the world as a result of their illegal invasion of Iraq. While once Europeans looked up to, and admired America; today it is held in utter contempt for its arrogance and warmongering. Anti-European comments in the American media have only added to this hostility towards the US. America's attempt to impose its version of government on the world, its hypocrisy in claiming to be the moral leader of the world,
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But we shouldn't under-estimate the yanks. There seems to be an idea that the dollars fall is out of their control, whereas I suspect they are behind the whole thing. They police the world and now we must pay for it. As businessmen, they are smart and utterly ruthless. If anyone thinks the US economy is about to fall, they may be dissapointed.

While other countries see devaluationas the ultimate sin, the Americans will do it on a whim. Look and learn. Maybe buy the S+P as well.

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There seems to be an idea that the dollars fall is out of their control, whereas I suspect they are behind the whole thing.

It's true that the fall isn't 'out of control': they can stop it any time by pushing interest rates up to 10+%: of course that would cause a major depression in the US economy, so they'd never do it. Hence the dollar will continue to fall.

They police the world

If that's true, they're doing a real bad job of it. They can't even police Baghdad...

and now we must pay for it.

How long are the Chinese going to continue paying for Bush to go blundering around in the Middle East, threatening their oil supplies? They've been making various deals with Iran, they're not going to be happy if Bush tries to invade.

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  • 5 weeks later...

Hi All,

Given the longer term slide /crashing of USD, is it better for UK residents to buy EUR? or gold or another commodity?

If I were living in US i would just buy EUR ofcourse , I'dont want to short cos i dont want to pay interest rates via the margin required to do it, and i dont want any margin calls when short squeezes occur.

Another point is how much political / military influence does Washington have over ther asian Central banks to FORCE them to bank roll the US empire?

Or are we all agreed they will go the inflation route rather than oppression?

However it does strike me that an economic crash in the us will be rich picking s for the top 1% who could buy of america from the comman folk and thus control the world even greater?

But using the time as excuse to spend common us lives on a war to capture more global resources would be a better thing to do and of couse a depression in the west will be just the mandate foe such extended pilage.

Further would the current bull market be a prime time for the richest to liquade the stock portfolios to the rest of us before bargin shoping later while shorting the USD ofcourse Jesse livermore style.

All thoughts appricaited.

Thanks sp1

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  • 2 months later...
Guest muttley

If the dollar has fallen 40% against the Euro then hasn't it already crashed? This looks more like a BUY signal than a SELL.

The US seem determined to protect the dollar,hence the recent IR increases.Maybe Bush isn't such a dummy after all.

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Smurf1976    May 29 2005, 01:31 PM  Post #9      HPC Regular      Group: Members  Posts: 402  Joined: 6-February 05  From: Hobart, Tasmania, Australia  Member No.: 1,303          If we get a deflation then the USD ought to be the STRONGEST currency since the largest portion of debts are denominated in USD.    In any event, trading on margin the worst that can happen is you lose your margin. If you buy/sell near a major turning point then you only need risk a few percent of your savings (less than 5%) to have effecively invested the whole lot in another currency. If it works out you get the full benefits, worse case you lose 5%.    If the USD really does crash then don't forget that ultimately all other FIAT currencies are supported by nothing more than the USD is. For that matter, most other currencies are supported BY the USD so you really don't want to be holding any of them if the USD crashes.    This comment won't be popular I'm sure but if you honestly believe that the USD is going to crash then the only real way to protect yorself is to buy something physical which can't be destroyed along with the currency. In practice that means buying gold and REAL ESTATE. Renting is going to be a real problem in an economic collapse so you really do want to own a house (preferably a house with a garden to use to grow food located well away from any city). Stay well clear of bonds, stocks and any currency.    The biggest challenge in a currency collapse will be basic survival. No point going down to the supermarket with a few gold coins when they have nothing to sell. Self sufficiency is the order of the day and house possession (note "possession" as opposed to "ownership") is a must.    The concept of a house price crash and USD collapse are somewhat contradictory IMO. Probably without realizing it, most people on HPC forum are effectively arguing that there will be a deflation which historically has always lead to the senior currency (presently the USD) becoming peristently STRONG. This time it's different? Perhaps it is. Perhaps house prices will keep rising and the USD really is finished but I seriously doubt it.    True, some USD buyers have disappeared but then the USD has been RISING which suggests that SOMEONE is buying. My guess is that it's the early stages of a scramble for Dollars as we enter a deflationary period. The Dollars being needed to repay debts. Time will tell.          --------------------    Turn off the TV and THINK

EDited - sorry i copied the wong post this is more pertenent.

Edited by sp1
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The US seem determined to protect the dollar,hence the recent IR increases.

But in most respects the fundamentals are even worse than the UK. Huge debts, huge liabilities, huge government spending, while the economic growth is based almost entirely on the housing market and government jobs.

Though admittedly their housing bubble may not be quite as bad as ours.

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The view i take is that the uk, europe and emerging markets will be seeing asset deflation. ...then the investment theme will become defensive cash cows. On balance most of the cash cows are US cos the size of the us economy is big. Further as emerging markets see recession they will scramble for dollars. With asset deflation happening globally alot of the speculative money will leave the uk leave europe and leave emerging markets then on balance iin my view it will constitue capital flieght to the US. The debt is a red herring short term, long term it will be important but only when the end point of inequality is reached (global feudalism in my view) the debt will grow they will favour it cos the rich are benefiting from the debt and the many will be the ones to pay it off. THus the many will eventually be disposessed and the rich few will enjoy the same control they have over much of the world extended over the G8 too.

sp1

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