US Economy

[Gunslinger]

Originally posted by Thrawn
And I wouldn't be surprised at all if those feeling the pinch don't lobby government to have them raise taxes so they can try and maintain it.

I read your entire post and mostly agree with you (even about the deer stand and gold thing) but then I came to this line.

Why in the hell in times of economic tribulation would ANY govt RAISE taxes????????????

The only thing taxing somone they don't have does is make somone more poor!  It just astounds me how some liberals think sometimes.

A big govt is a burden on the people as much as economic down times.

[Stringer]

Thanks Rolex, I look forward to it.

[Thrawn]

Originally posted by Gunslinger
Why in the hell in times of economic tribulation would ANY govt RAISE taxes????????????

To get re-elected and because governments already think they know how to "fix" the economy.

The only thing taxing somone they don't have does is make somone more poor!  It just astounds me how some liberals think sometimes.

I know that and you know that but western governments don't seem to.

[Thrawn]

"Dollar Under Fire from All Sides
Thu Mar 10, 2005 02:32 PM ET

 
By Jamie McGeever and Nick Olivari
NEW YORK (Reuters) - The dollar extended its slide against most currencies on Thursday on concerns over global central bank reserve diversification, a widening U.S. trade deficit and this week's dive in bond prices.

Having slumped to multi-month lows against its major counterparts on Wednesday, the dollar suffered another blow on Thursday after Japanese Prime Minister Junichiro Koizumi told parliament that, generally speaking, diversity in foreign exchange reserves was a good thing.

The Ministry of Finance, which manages the world's largest foreign reserve holding of $840.6 billion, quickly clarified that it has no plans to shift funds out of the dollars.

"Although MoF quickly suggested that they had no plans to change now, the suspicion lingers that more Asian central bank diversifiers are to appear," wrote Goldman Sachs analysts in a research note on Thursday.

But the specter of diversification was raised again, putting pressure on the dollar again, much as had happened after South Korea's central bank mentioned the subject in a report last month.

Midafternoon in New York, the euro was up 0.4 percent at $1.3432 . The dollar was down 0.5 percent at 1.1528 Swiss francs . Against the Canadian dollar the U.S. dollar is buying C$1.2026, after a 0.3 percent decline.

The dollar was little changed to slightly higher against the yen at 104.06 yen , while sterling also little changed at $1.9231 .

The yen came under some selling pressure after weak Japanese core machinery orders. The euro rose to 140.00 yen earlier in the session for the first time this year.

Sterling managed to take the Bank of England's decision to kept interest rates unchanged at 4.75 percent largely in its stride.

"The 'diversification' word really spooked the market ... but the bond market selloff is weighing on the dollar big time," said Samarjit Shankar, director of global strategy at Mellon Bank in Boston. "The bond market is really adding that extra piece of weight on the dollar right now."

TREASURIES WEIGH

The price of U.S. Treasuries have fallen steeply this week, pushing the yield on the 10-year note up to 4.57 percent overnight (US10YT=RR: Quote, Profile, Research) , its highest level since July last year.

Though now down at around 4.48 percent on Thursday,, they have broken convincingly through key technical levels that have been intact for several months.

Thursday, a new auction attracted average demand with indirect bidders, including investors and foreign central banks, picking up 11 percent of the issue. That compares with 29 percent in the original sale last month but better than the 10 percent seen at the last reopening.

The rise in bond yields is sometimes seen as a supportive factor for a currency, as it offers investors a higher rate of return relative to other fixed income markets.

But not in this instance.

Both the diversification and bond weakness themes aren't constructive for the dollar, say UBS currency analysts.

"The markets fear that dollar selling by Asian central banks plus less buying of US Treasuries will cause higher U.S. interest rates and lower capital inflows, to the detriment of the dollar globally," they wrote in a research note on Thursday.

"We also suggest investors need to watch very carefully the sharp sell-off in U.S. bond markets generally," they added.

TRADE DATA AHEAD

The massive U.S. current account deficit hasn't been particularly good for the dollar either in recent years, and a reminder of this may come on Friday morning when the Commerce Department releases January's trade data.

The figures are expected to show a deficit of $56.5 billion, slightly wider than the previous month and what would be the second widest on record.

Data released on Thursday from two of the U.S.'s biggest trading partners suggest its deficit won't be narrowing significantly any time soon.

Germany, the euro zone's largest economy, appears to be coping with a strong currency, as it posted a trade surplus of 12.9 billion euros in January on record exports. China posted a surplus of $11 billion in the first two months of the year.

Elsewhere, U.S. weekly jobless claims, which rose an unexpectedly high 17,00 last week, kept the dollar under pressure too, analysts said. Economists had expected no change."

http://www.reuters.com/printerFriendlyPopup.jhtml?type=businessNews&storyID=7869060

[Toad]

So now foreign goods and services will be more expensive in the states? And US goods and service will be cheaper in the global market?

It may well be cheaper to make things in the US?

So maybe this will reduce the trade deficit and spur hiring in the States?

Or is it the end of the world and I should go to Vegas, spend it all and then end it all?

[Rolex]

Originally posted by Toad
So now foreign goods and services will be more expensive in the states? And US goods and service will be cheaper in the global market?

It may well be cheaper to make things in the US?

So maybe this will reduce the trade deficit and spur hiring in the States?

Or is it the end of the world and I should go to Vegas, spend it all and then end it all?

A little cheaper but it doesn't increase any overseas demand for US goods and services and certainly not enough to spark domestic manufacturing of currently imported goods.

The trade deficit will not likely decline due to increased oil costs. A small burp in hiring is more likely to occur from the short-term tax benefit offered to repatriate overseas profits, but most companies are looking to reduce debt with the windfall, not invest.

It isn't the end of the world, but Vegas would still be happy if you spent it all there.

[Toad]

So you don't think the across the board increase in the price of foreign goods in the US will generate much change?

And the across the board lowering of the price of US goods in the global market won't make our goods more marketable?

How will this affect the Boeing/Airbus comparisons, for instance?

[NUKE]

I read just the other day that German companies like Crysler are deciding to move production to the US as a result.

[Rolex]

That's correct, Toad. I don't there will be much net effect. Transportation costs are affected by higher oil costs and the reduction of the US$ through the past year hasn't yielded any improvement in the trade deficit. Companies tend to find greater efficiencies to offset currency fluctuations and profits aren't always repatriated or exchanged quickly.

I don't consider myself knowledgeable about the aircraft industry in particular, but I suspect that politics, discounting/financing nuances of the industry and total operating costs of comparable aircraft would be greater factors than current currency valuation.

[Toad]

So if there's no net effect.... not much is going to change, eh?

[Rolex]

That's pretty much my outlook for the next year or so. There are plenty of people and economists out there who will write columns of impending doom because they think that's their job.

So, yeah, about the same for a year or so, then some trends will converge and some changes will be in the wind.

[Toad]

So what do you do that leads you to read these trends and portents accurately? Just curious.

[Thrawn]

Originally posted by Toad
So now foreign goods and services will be more expensive in the states? And US goods and service will be cheaper in the global market?

It may well be cheaper to make things in the US?

So maybe this will reduce the trade deficit and spur hiring in the States?

One would think, but the USD has lost about 30% of it's value in the past six years, yet the trade deficit has grown incredibly.

Or is it the end of the world and I should go to Vegas, spend it all and then end it all?

I'm not advocating panic, I'm advocating preparation.

[Tumor]

Originally posted by Thrawn

I'm not advocating panic, I'm advocating preparation.

  I've got the kids out back diggin a hole for the bunker already.  Now once I find my tin foil hat I'll be good to go

[Rolex]

Oh, I'm not always right and claim no psychic abilities. As you can see, I do hedge with language because I'm over 50. Before starting my own consulting firm, I spent a decade as a board-level advisor to a few of the largest companies in Japan on global marketing, manufacturing expansion, subsidiary establishment in Europe, Asia and America, risk management, etc.

I apologize Toad, but my current financial/economic advisory work and clients require and expect discretion, but it is on a global scale.