Age Of Cruisers

[TaoJones]

Originally Posted by sailorm

. . . my longdistance cruising was in the late 80's, 90's and we celebrated the new century in South Africa so I don't think my time frame is so far off as you think it is.

Well, then, here are the inflation-adjusted figures for the time frame you mention:

1988: $1703.80
1992: $2020.65
1996: $2259.73
2000: $2480.09

Note that, even using the figure for 2000, it would require an additional 20+% dollars today to equal the purchasing power of $2480 then.

The more important factor is the fact that so much of my time was spent in countries where the dollar was worth so much more: British Columbia, Mexico, Costa Rica, Ecuador, various groups of the Polynesian Islands, New Zealand, Australia, South Africa and Brazil.

You would be shocked if you returned to some of those same countries today, Mary. The dollar has declined in value against most of the "resource economy" countries (Canada, Australia, New Zealand) significantly, and South Africa to a lesser extent.

Five years ago, one Canadian dollar could be purchased for about 63 American cents. Today, the Canadian dollar is within 3% of parity; i.e. one American dollar buys one Canadian dollar. There are no signs that the trend will end any time soon, either, so within the next few months the Canadian dollar will trade at a premium to the American dollar.

The same trend is apparent with the Kiwi and Australian dollars, as well, though they are further from parity than the Canadian dollar. The Australian dollar currently trades at just under 84 US cents, and the New Zealand dollar trades at just over 71 US cents.

Among the other countries you list, Brazil is among the well-known BRIC countries that are what the Asian "Tigers" were between the early 60s and the 90s. That is, they are experiencing economic growth at incredible levels. The four countries comprising the BRIC are Brazil, Russia, India and China, and their projected 2007 growth averages 8.9%, on the heels of last year's average of 8.8%. China leads the pack at 10+%! The US, by contrast, will be fortunate to achieve 2% this year, and all of the G-7 countries combined will average less than 2.1%.

The point is that since the de facto US$ devaluation that began in 2002, the American dollar has lost significant purchasing power. Without the inflow of foreign capital into the US to purchase American IOUs (T-Bonds and T-Bills), the US$ would be even lower, and the three entities holding the most significant surpluses of American dollars (Japan, China and the Middle Eastern petroleum-producing countries) have indicated in the last six months that they are disinclined to add to their vast holdings of American debt, and may actually begin spending their surplus dollars.

Either way, the American dollar is probably doomed, and its status as the world's reserve currency is limited in duration. First, the Euro will take that role. Ultimately, the Chinese renminbi (Yuan) will become the world's reserve currency. America, once the world's leading creditor nation, is now the world's leading debtor nation, and only its reserve currency status is preventing a precipitous devaluation, but with no savings (America actually has a negative savings rate), devaluation is, in time, a certainty.

Some have said that the US$, once "as good as gold" because it was backed by gold, is now backed only by military might and a bad attitude. With the military stretched to the breaking point, it remains to be seen how long a bad attitude garners respect.

TaoJones

[slomotion]

TaoJones is absolutely right. And make no mistake about it, there is an intentional administration policy to drive down the value of the USD in a misguided attempt to make American goods more competitive in overseas markets.

[delmarrey]

Originally Posted by TaoJones

Five years ago, one Canadian dollar could be purchased for about 63 American cents. Today, the Canadian dollar is within 3% of parity; i.e. one American dollar buys one Canadian dollar. There are no signs that the trend will end any time soon, either, so within the next few months the Canadian dollar will trade at a premium to the American dollar.
TaoJones

When I was a kid they were about the same. That's when there was trade aggrement on American cars sold in Canada. I don't remember the details but I have friends who, in the 80's, use to buy new cars/trucks in Canada and bring them back to the US and turn a profit after the C$ dropped way down.

But even in the Philippines over the last year the P$ has gained around 18%.

In my life time I've seen the US $ rise and fall (dramatically) a couple times. I don't let it worry me, much!

[delmarrey]

back at #57 or 58. Maybe I should turn it into a new thread, starting there?????

[Ex-Calif]

Originally Posted by TaoJones

Either way, the American dollar is probably doomed, and its status as the world's reserve currency is limited in duration. First, the Euro will take that role. Ultimately, the Chinese renminbi (Yuan) will become the world's reserve currency. <snip> Heavily cut <snip>

Seeing as how we are so off topic. I agree with everything up to this point.

The US economy is about 12 trillion dollars in 2005. The next nearest economy is Japan at about 4.6.

With 5% of the world population the US makes up 32% of the world economy. US domestic economy grew at 5% in 2005. Unemployment is low. But the US is the worlds biggest debtor. Let's look at that.

The 2003 deficit was 519 billion dollars - OH MY GOD! However, that was about 5% of GDP. It's kinda like, "Let's eat chicken for a month to pay off the credit card bill."

Our $41,000 per capita GNP (rank 5) compares nicely with Norway (rank 2) at $51,000, however the population of Norway is is 5 million. If the US GNP per capita went up $10k our economy would grow by $3,000,000,000,000 or about 25% and we'd have a 15 trillion dollar economy.

Yes - China is the next big player but they have some significant challenges. They are running out of "educated" people and among those educated people wages are skyrocketing. Their economy is on the cusp of a skilled labor crunch.

I am not saying that Mr. and Mrs. USA are not in trouble. Personal debt is ridiculous and we are stuck on the drug of consumerism.

OTOH, the rest of the world is addicted to selling to the US so we aren't going to get foreclosed on any time soon. Where else will they sell those goods? Why do you think China resists unhitching the RMB from the USD?

So a weaker dollar is in fact the right tool to use to slow down consumption. On the micro level it might make a US cruiser explore the US rather than buy those expensive foreign currencies...

The second tool is interest rates but that is a dangerous club to pull out of the bag as its effects are widespread on business as well as consumers.

All in all I am still bullish on the US economy for the long term. No other economy is going to replace the US as the investment of choice for the long term. No other economy is big enough to absorb the money and just about everywhere else is too unstable.

Look at it like a bank - Who the heck is gonna rob the USA? It's the biggest bank in town and the security guards ain't bad either...

[TaoJones]

Originally Posted by Ex-Calif

Seeing as how we are so off topic. I agree with everything up to this point.

The US economy is about 12 trillion dollars in 2005. The next nearest economy is Japan at about 4.6.

Actually, Dan, the total US economy (on a Purchasing Power Parity basis is about $13.2 trillion (2006). Japan is far from the second largest economy. China is second at a bit over $10 trillion, India is third at $4.25 trillion, and Japan is fourth at $4.13 trillion.

With 5% of the world population the US makes up 32% of the world economy. US domestic economy grew at 5% in 2005. Unemployment is low. But the US is the worlds biggest debtor. Let's look at that.

The total world economy (2006) was $66.823 trillion, so the US portion is, in fact, less than 20% of the total world economy. See: http://siteresources.worldbank.org/D...es/GDP_PPP.pdf

The 2003 deficit was 519 billion dollars - OH MY GOD! However, that was about 5% of GDP. It's kinda like, "Let's eat chicken for a month to pay off the credit card bill."

The 2006 trade deficit was $800 billion, or slightly over 6% of the US economy. If any other nation ran a deficit of 6%, the World Bank would impose draconian austerity measures (and has, for instance, in Argentina). It is only the status of the $US as world reserve currency that (so far) has prevented a similar fate in the US. Interestingly, the Argentine peso has appreciated against the $US consistently since the middle of 2003.

Our $41,000 per capita GNP (rank 5) compares nicely with Norway (rank 2) at $51,000, however the population of Norway is is 5 million. If the US GNP per capita went up $10k our economy would grow by $3,000,000,000,000 or about 25% and we'd have a 15 trillion dollar economy.

I don't know the source of your figures, Dan, but the latest World Bank numbers (2006) show Luxembourg in first position for GNI per capita in both methodologies they employ. See: http://siteresources.worldbank.org/D...rces/GNIPC.pdf
As you can see, the US ranks fourth using the Purchasing Power Parity method, and tenth using the Atlas method, with Norway ranked fifth and third using the respective methodologies.

Yes - China is the next big player but they have some significant challenges. They are running out of "educated" people and among those educated people wages are skyrocketing. Their economy is on the cusp of a skilled labor crunch.

Without a doubt, China, like every other developing nation, faces significant challenges. Wage and price inflation is one of the most significant. There will be set-backs, to be sure, and mistakes will be made, but the upward trend is undeniable. Over the next decade, though, they will dominate Asia, and their influence is rapidly spreading in Africa and Latin America, as well.

I am not saying that Mr. and Mrs. USA are not in trouble. Personal debt is ridiculous and we are stuck on the drug of consumerism.

OTOH, the rest of the world is addicted to selling to the US so we aren't going to get foreclosed on any time soon. Where else will they sell those goods? Why do you think China resists unhitching the RMB from the USD?

I wouldn't be so sure about that, Dan. It is accurate to say that Americans are addicted to living beyond their means; i.e. buying crap they don't need, with money they don't have, living off the equity extracted from their homes (until now, since credit has tightened considerably and there is no more equity left to extract anyway) because we have a negative savings rate.

Where else will they sell those goods? Well, like every other developed country in world history, they will produce for their domestic market. Since the turn of the century, China has grown a 300 million member middle class. Why ship goods across the Pacific to a nation you have to prop up by buying their debt so they have capital with which to pay for the goods?

I know exactly why the Chinese have pegged their currency to the $US. Because their inherent economic advantage (low-cost labor) is locked in place no matter what happens to the $US. It is through exploiting that advantage that the Chinese have amassed a $1.3 trillion trade surplus, and there is no evidence that they will stop adding to their surplus any time soon.

And, in spite of Senators Schumer and Graham, along with Treasury Secretary Hank Paulson, imploring the Chinese to loosen the peg, in truth that is the worst thing that could happen to the US. Some have posited that we are witnessing a high-stakes application of reverse psychology, because the Chinese never do what others dictate.

So a weaker dollar is in fact the right tool to use to slow down consumption. On the micro level it might make a US cruiser explore the US rather than buy those expensive foreign currencies...

The second tool is interest rates but that is a dangerous club to pull out of the bag as its effects are widespread on business as well as consumers.

I presume you mean that raising interest rates has an adverse effect on businesses and consumers. As of today, or course, that point is moot - the Fed, faced with an impossible situation where they had to choose between protecting the economy (by lowering rates), and protecting the dollar (by raising rates), did the only thing they could. By dropping rates 50 basis points (one-half percent) they condemned the dollar to further devaluation.

Many, however, have felt for some time that official US Treasury policy is to devalue the dollar so that servicing the debt is done with "money" of less and less value. It's the Weimar approach to economics, and one can only hope that the Fed can maintain control of the process. The Germans after WW I could not.

All in all I am still bullish on the US economy for the long term. No other economy is going to replace the US as the investment of choice for the long term. No other economy is big enough to absorb the money and just about everywhere else is too unstable.

Well, as has been said by others, to take no action is to take a position. Your bullishness may prove the correct course to have taken, ultimately, but fundamentally and technically, it's a bad bet. To assume that no other economy can replace the US economy cannot possibly be true, as every dominant power - economic, militaristic, cultural or of any other description - in world history has ended up on the scrap heap and been replaced by the next "Superpower."

Why would it be any different now?

Look at it like a bank - Who the heck is gonna rob the USA? It's the biggest bank in town and the security guards ain't bad either...

I like this bank analogy, Dan. It paints a vivid picture. As I see it, though, the US "bank" contains only IOUs at this point, and the "security guards" are pinned down on the other side of the world, sent on a fool's errand to rob someone else's bank.

TaoJones

[Ex-Calif]

TaoJones - Points taken. We really are too far off topic for my liking anyway - my bad.

I'll leave it with one more comment - In the 70's the Japanese were going to spell the end of the US economy. Now it's the Chinese.

I just get cranked up about the endless hand wringing and fear mongering - time will tell whether your prediction that "the American dollar is probably doomed, and its status as the world's reserve currency is limited in duration" or my prediction that the rest of the world will continue to finance the US extravagant lifestyle is the one that comes true.

[slomotion]

Ok, back on topic. People who engage in global economics discussions are really old and therefore, representative of the active cruising population. I actually remember (sort of) having such discussions while cruising. Generally, this occurred after we had exhausted important topics such as weather, batteries, fuel filters, and the merits (if any) of really cheap French rum.

[sailorm]

I'm curious, did we ever meet? I was single handed on the Mighty Merry Too, starting from BC on down to Mexico, Ecuador and New Zealand etc.etc. I'm finally a landlubber but trying to make contact with some of the many people I met through those many years. Happy if you visit my blog htttp://antiquesailor.blogspot.com

[slomotion]

Hmmm, don’t think so - we were exclusively Bahamas/Caribbean sailors, and hope to be again soon before we get too old. Gotta keep redefining "too old." I do remember seeing a Canadian flagged Dana 24 anchored in Tyrell Bay, Carriacou in 2000 - it kind of stood out. Never met the skipper (at least not that I know of) but the cruisers there were a fun group. Most of them were parked for hurricane season; most were in their 40s and 50s; AND they helped us get rid of the really cheap but really awful rum we bought in Martinique. My biggest regret is that we did not memorialize our voyage with detailed logs including names/contact info of the great people we met.

[stoupidmonkey]

Well, I suppose I will be one of the youngest sailors down in the Caribbean. I am 26 and my girl is 24. I am one of the only young people on my dock, but have a good time with the "seasoned" people there. Gives me hope for the future, as a bunch of 50+ year olds can get more crazy than I can. Bunch of drunks......hehe.

[rtbates]

60 in Nov. NOT cruising YET. I'll be doing that when I retire at 62.

For those youngsters out cruising, beware of peaking too soon!

I can't imagine two things.
1st: Cruising for years and THEN going back to work.
2nd: Cruising for rest of my life.

Even starting at 62, it's a temporary thing for ME. I'm keeping the house and will be back on and off. Again, for me, and ONLY me the best way to ruin the sailing life is to have a boat be my ONLY home.

Years ago, I asked a cruising couple that charter out their boat, crewed, what they did for a 'vacation'. Their answer was to get a motel room so they could take long hot showers and sleep in a bed that didn't move in a room that can't drag anchor. Boy can I relate to that...

[stoupidmonkey]

Well, I can surely understand the hotel room and hot showers. The transition for me wont be very dramatic, though. Ive already spent four years on a boat with far less room than the 41 footer (per person.) I think as people get older and more acustomed to a lifestyle with plenty of ammenities, they have a harder time giving those ammenities up. Luckily, when a person is young, poor, and stupid, he already doesnt have much, so there is less lost. I have friends that have hiked through South America, hopped on freighters to other countries, backpacked for a year (nonstop), and have other tough adventures. With youth comes exuberance and a strong wonderlust that results in experiences that can propel you through the rest of your life. I see sailing and adventure more as a responsibility than a vacation and will qualm the thinking of "What if....." in my more senior years.

[delmarrey]

Originally Posted by stoupidmonkey

I think as people get older and more acustomed to a lifestyle with plenty of ammenities, they have a harder time giving those ammenities up. Luckily, when a person is young, poor, and stupid, he already doesnt have much, so there is less lost.....

With youth comes exuberance and a strong wonderlust that results in experiences that can propel you through the rest of your life. I see sailing and adventure more as a responsibility than a vacation and will qualm the thinking of "What if....." in my more senior years.

Good for you!

It wasn't until I reached 40 did I settle into a home. I have now lived in one place longer (19 years) then any other place in my entire life. And I'm starting to get itchy. My only regrets is that I'd probably be financially better off. But being raised poor has made it less of a problem which brings us back to your statement..................................._/)

[Therapy]

Originally Posted by stoupidmonkey

Well,
With youth comes exuberance and a strong wonderlust that results in experiences that can propel you through the rest of your life. I see sailing and adventure more as a responsibility than a vacation and will qualm the thinking of "What if....." in my more senior years.

Dang right dude!!!

I did not have the guts to take off when I was 20 and had the chance and friend that said "lets go man, lets just go".

I fell into the "what about my job" "who is going to do it"

What a bunch of self serving chicken s**t excuses.

Just no balls. That is it.

No balls - No babies.