Value of the dollar?

[Tspringer]

I noticed some comment on the Federal budget deficits and their impact on the dollar.

Just a wee word of advice: Pay no attention to the CBO annual budget deficit numbers. Take a look:

I just reviewed the budget numbers from 2001 through 2007. Here is a summary of the annual deficit figures:

2001: $127 Billion surplus
2002: $159 Billion deficit
2003: $374 Billion deficit
2004: $413 Billion deficit
2005: $319 Billion deficit
2006: $248 Billion deficit
2007: $162 Billion deficit.

That gives a net deficit total of $1.548 Trillion.

The total National Debt in 1/01 was $5.6 Trillion. Now... its up to $9.1 Trillion.

I may be no freaking mathmagician but I am pretty dang sure that 9.1 - 5.6 = $3.5

So how is it that the annual deficit totals equal up to $1.548 trillion but the actual national debt total has gone up by $3.5 Trillion?????

Who got the "missing" $2 Trillion? Can I have some?

Heck.... can I just do my company accounting using the same rules that the Feds are clearly using here?

I don't think it takes a rocket scientists to see that someone is perpetrating the largest fraud in history on a whole bunch of other folks.

My point is... the Govt lies about its actual expenses by playing accounting games that would be illegal for you or I.

As for the dollar, it has nowhere to go but down.


Terry

[rebel heart]

My $0.02:

The US Economy has one thing that the EU and China don't have: 200+ years of solid growth, spanning agricultural, industrial, and technological ages. Whatever tune the world has been playing, the American economy has been able to dance to. Have we had our ups and downs? Of course. But we've always rebounded, even from depressions that would have sent other countries into violent revolutions.

Forgive me for not jumping on the EU bandwagon, but it takes more than 15 years of a currency for me consider it something I'd put a lot of confidence in, anymore than I would fool myself into thinking a 15 year bull market in any economy is somehow going to last forever.

China, the EU, and America have cyclical economies. All of them. No exceptions. And when the growth slows, and the economies contract, there's always a bunch of doom-and-gloom about how it's the end of the economy, etc, etc. A line I try to remember is that "Wall Street has sucessfully predicted nine out of the last three recessions."

The American economy is most likely going into a recession, or at least a slowing of growth (regardless of the official GDP version). The EU, China, and every economy will also go into a recession, eventually, because that's the nature of the cyclical economies. They will also rebound out of those recessions, just like the American economy will. And in their recessions, there will be a bunch of people screaming about how it's the end of the world, etc, etc, etc.

Wise investors would have done well during the last 4 year bull run, will now look for a more stable platform if need be, and then wait for great buys as short term investors cut and run. You should invest in businesses that are profitable and well managed, especially if they do so during a slower economic growth period, because they will be well poised when the market turns around again.

Personally I think buying European stock right now is a really bad idea. The buying power of the USD is garbage. If you want to buy E, do it when the USD is back and you can actually get something with your money.

Personally, I haven't touched my long term investments. They're fine, and the market will come back eventually. My short term stuff moved into bonds, and my guess is I'll jump back in them around the end of Q1, but of course predicting even a few months out is risky. I do not, however, think it is risky to state that our economy will obviously recover, like it has for over two centuries.

[Hiracer]

Originally Posted by rebel heart

The US Economy has one thing that the EU and China don't have.

Yes, the largest debt in the history of the world. Our current presidential administration has accumulated far more debt than all the prior presidential adminsitrations combined. Which is precisely why the U.S government has no choice but to devalue the dollar. The public debt is now beyond its ability to pay.

But the situation is actually much worse than what anybody here has set out.

According to US Department of Energy, the average daily world oil production for the past three years has been (x1000 barrels):

2007 = 73,093 (average for 8 months)
2006 = 73,546
2005 = 73,791

These are official US government numbers.

http://www.eia.doe.gov/emeu/ipsr/t11d.xls

There is no country less able to handle decreasing oil supplies than the U.S. It uses 25% of the globe's entire production. It must import 60% of its oil even though it still is the third largest oil producing country in the world, bested only by Saudi Arabia and Russia.

Get this: China currently uses on a per capita basis 1/3 of the oil as does Mexico. India is similar. Should those two countries begin to use oil on the same per capita basis as Mexico, world oil production must increase by over 50% to meet that demand. And that ain't gonna happen. Read the numbers above. And again.

Our economy is dead meat.

There are few investments more certain to go down in value than the U.S. dollar. This paradigm is literally sweeping through the world. Worse, there is precious little that the U.S. goverment can do to stop it, as its currency has no inherent value.

"Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy."

Emphasis added, from the U.S. Department of Treasury website U.S. Treasury - FAQs: Legal Tender Status of currency

[GreyRaven]

It works very nicely the other way around, however.

Depending on the broker, the buying price for „Spirit“ lay between $235.000 and $265.000 when I found her in Malaysia this past summer. I made an offer of $205.000 to the owner directly and it was accepted.

As it was already clear at that time that the US$ was going to go south rapidly, I entered final negotiations with my bank on August 14th, came to an agreement with them, and took out a loan in US$ for the remaining amount of the purchase price, which I required. It will be paid back in US$, paid for in Euros, with no penalties for earlier repayment.

As such, on August 16th. I would have had to pay EUR 152.928 in order to buy Spirit. As of today, three months later, that amount has been reduced to EUR €138.654,04. I’ve managed to save myself €12.846,57 or $18.993,66 in that short time. The amount saved is, of course, going into renewing the Spirit's equipment and for general upgrading.

You can be sure that I’ll be paying Spirit's debt off fast and furiously, as long as the dollar remains as low as it is. When I bought her the exchange rate was at 1.3405 per dollar. Today it is 1.4785. By the end of the year it will be 1.5000 or even below that.

Go figure.

[rebel heart]

Originally Posted by Hiracer

Our economy is dead meat.

I'll make sure to bump this thread 5-10 years from now when we've recovered.

[planetoftheapes]

Rebel,

Take a look at this Naomi Wolf presentation on the state of America. We may be facing far more than a simple economic cycle.

Talk by Naomi Wolf - The End of America

[rebel heart]

Naomi Wolf said that 150,000 women die in America from anorexia every year; the number is more around 100. Anorexia statistics: Naomi Wolf’s Overdo and Lie Factor (WOLF)

In that book of hers, only 22% of her figures were accurate; everything else was off the charts. She defended it by saying that she needed to lie in order to get people to see the way she did.

I have a feeling this thread is getting locked soon. I'll argue economics and politics all day long, but on this mesage board the admins aren't normally keen on this stuff.

[delmarrey]

Originally Posted by rebel heart

I'll argue xxxxxxxxx and politics all day long, but on this mesage board the admins aren't normally keen on this stuff.

You betcha!

[blove8]

so let's keep it to the value of the dollar so we can keep this thread going.. it's an interesting and informative one. cheers.

[planetoftheapes]

The falling and failing dollar is having a major impact on my cruising plans. I imagine it affects others as well.

The dollar may be falling for reasons more sinister than a simple economic cycle.

Let me assure you, everything Mrs. Wolf describes in this lecture is absolutely true and her warnings must be taken seriously. I've personally followed these events closely, in real time, over the last three years - quite scary.

I know nothing of her claims on anorexia.

My goal is to continue saving, while the opportunity exists. I want the option to leave America and not return.

[David M]

I just looked. The value of the dollar to the Euro is 1.48. I remember a few months ago it being 1.35. Whew!

XE.com - UCC Error

[rebel heart]

TSpringer -

In answer to some of your questions, and I'll over simplify for some others, "deficit" is the flow of money, and "debt" is the balance. So if we're making $2000 a month, but spending $2500, we have a monthly deficit of $500. In a year's time, we would have a $6000 debt.

And for most accounting systems, that's totally legit. Except that the US government, like a company, can sell "instruments of debt", like stocks, or in this case, US Savings Bonds. So of our $9 trillion dollar debt, $5 trillion is held in government bonds (typically by the US public), only $4 trillion is held otherwise.

But take social security and medicade. You have the option of not calculate in future worker's contributions and run the debt to $50 trillion, which in some accounting circles is the way you should do it. So do we have a $9 trillion, $5 trillion, or $50 trillion debt? If I sell off one of my US savings bonds before it's matured, I've directly affected the national debt, and it's something that the deficit wouldn't have anticipated. There's also interest paid on that debt, and the interest rate fluctuates, as does inflation. And when you're messing around with trillions, a few points of interest and inflation here and there make up some of the lost money.

A lot of this goes back to "lies, damn lies, and statistics". Because you can use different numbers to talk about the same thing, people (like whacko Naomi Wolf) intentionally distort the figures. And while she's on the totally-wrong side, it gets more convoluted with deficit spending as a practice, the way Regan did it. Cheney had that infamous line of "Regan proved deficits don't matter."

If you go to the GPO's forecast, you'll see that by 2012, it's projected our deficit (the flow) will be reversed, in which case we'll end up being back in the green, and will start lowering our debt.

Budget of the United States Government: Browse Fiscal Year 2008

The problem of course is that we were supposed to be in the green by 2004, but 9/11 (and the Bush administration) happened, so we opened up the purse strings and cranked the deficit again.

The only thing that will make this recession, or slowing expansion, or correction (whatever term you want to use) a bit on the painful side is that if you go along with the Regan form of deficit spending, you don't do it the way we've been doing it.

The idea with Regan deficit spending is that when the country is most in trouble (high unemployment, low corporate and income taxes) is when people need the most help (unemployment insurance, welfare, etc). So you deficit spend to bridge the gap. When the cyclical economy goes the other way around, and we're making a bunch of money, you pay the deficit back off.

What worries me a bit is that we were deficit spending during a bull market, which is what you're not supposed to do, pretty much across the board. But the weak dollar is helping, and American businesses are still incredibly profitable and well managed. Warren Buffet style: don't invest in markets, invest in businesses that are profitable and well managed.

[GordMay]

Originally Posted by rebel heart

... The idea with Regan deficit spending is that when the country is most in trouble (high unemployment, low corporate and income taxes) is when people need the most help (unemployment insurance, welfare, etc). So you deficit spend to bridge the gap. When the cyclical economy goes the other way around, and we're making a bunch of money, you pay the deficit back off…

Thanks, Rebel Heart, for a concise, yet very enlightening explanation.
The “Regan” convention on deficit spending sounds a lot like classic Keynesian economics, to this (uneducated & ignorant) old man.

[bananabender]

Every cloud has a silver lining (for someone!) ... used boats in the USA are getting more affordable for those of us on the outside.... if you're selling make sure it's on a website that's linked to easy overseas access.

[Tropic Cat]

I think for every argument that the trade deficit or national debt is causing the demise of America, you find yet another expert trotting out charts and graphs showing our economy plotted against those items demonstrating most assuredly that they are not related. It makes a person's head spin. Yet something is obviously 'wrong' or we wouldn't have this thread here.

I've given this subject a lot of thought, and I'm coming to the belief that the experts are looking at the wrong set of charts and graphs. American consumer spending now comprises nearly 70% of the American economy. Don't you think a couple of charts and graphs on this may be in order?

The following link is the best explanation I've seen about our slowing economy and the loss of value of the dollar. The essense of the video is tracking inflation adjusted expenses a family of 4 has to deal with over a period of time.. 1971 - 2004. She tracks two groups of expenses. 'Fixed' expenses like housing costs and variable expenses such as food and clothing. The results are nothing short of amazing. This is a good explanation of what happened to the single income family and why, as well as extending this data set into the current economy.

At the time of this post it's the first item in the list.

"The Coming Collapse of the Middle Class: Higher Risks, Lower Rewards, and a Shrinking Safety Net "

UCTV--University of California Television

Yes it's a video of a 30 min lecture and yes there are lots of charts and graphs. But it deals with reality and the disappearing middle class in America. Good solid data dealing with the reasons for it and she's not trying to sell a book.

Reduced middle class = reduced consumer spending which = shrinking economy = loss of value of the $$

They are all related

PS... for those folks inclined to comment without watching the lecture. Her 'numbers' aren't hers. They come from the US commerce dept and dept of BLS. They are all complied government numbers. -- Rick