The plot thickens...and thins... I have never fully understood this stuff...
US dollar going down toilet
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The plot thickens...and thins... I have never fully understood this stuff...
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Of course, the whole issue boils down to this.
Paper currency has no value. It is an accounting artifice to try to equate otherwise unequal amounts of work. In theory, the price of something in a particular currency is a statement of how much work it took to get the components, convert them as needed, and assemble the final result.
When a currency floats against its GDP or whatever other floater it uses, then the exchange rate fluctuates as well. It becomes an issue of supply and demand at the international level. Personally, I believe that the dollar is getting its butt kicked because of overpriced labor, now that foreign markets are making greater inroads into USA's trade profiles. As the global economy intertwines itself more and more, competition seeps in at odd levels.
The latest headlines about the auto industry bailout represents another issue of labor differentials. Detroit's "big 3" have bloated union labor contracts that make their expenses unmanageable. My take is that they need to take a structured bankruptcy organization that allows them to cancel ALL labor contracts and return to the table with the ultimatum, drop your labor prices or lose your jobs.
I know, having seen the published statistics, that many assembly-line workers with no college and a very narrow skill-set make more money per hour take-home than I do with a PhD and a fairly broad, high-tech skill set. That's insanity. No, I'm not jealous. I'm merely stating that it represents an inversion from salary practices not found in other industries. Nor do I limit this to the automotive industry.
Here's another "for instance." For a long time, it was cheaper for US parts makers to ship scrap metal on ocean-going cargo vessels to Japan, have them refine that metal, and ship it back, than it was for us to do that here. The price of fuel oil skyrocketed recently, inverting that cost model to return the advantage to doing such refining in the USA again. However, once that happened, new shipping contracts tanked, leading to sudden cataclysmic drop in demand. Leading to incredible price cuts. This fluctuation is the economic equivalent to "ringing" in an improperly terminated circuit.
Paper currency has no value. It is an accounting artifice to try to equate otherwise unequal amounts of work. In theory, the price of something in a particular currency is a statement of how much work it took to get the components, convert them as needed, and assemble the final result.
When a currency floats against its GDP or whatever other floater it uses, then the exchange rate fluctuates as well. It becomes an issue of supply and demand at the international level. Personally, I believe that the dollar is getting its butt kicked because of overpriced labor, now that foreign markets are making greater inroads into USA's trade profiles. As the global economy intertwines itself more and more, competition seeps in at odd levels.
The latest headlines about the auto industry bailout represents another issue of labor differentials. Detroit's "big 3" have bloated union labor contracts that make their expenses unmanageable. My take is that they need to take a structured bankruptcy organization that allows them to cancel ALL labor contracts and return to the table with the ultimatum, drop your labor prices or lose your jobs.
I know, having seen the published statistics, that many assembly-line workers with no college and a very narrow skill-set make more money per hour take-home than I do with a PhD and a fairly broad, high-tech skill set. That's insanity. No, I'm not jealous. I'm merely stating that it represents an inversion from salary practices not found in other industries. Nor do I limit this to the automotive industry.
Here's another "for instance." For a long time, it was cheaper for US parts makers to ship scrap metal on ocean-going cargo vessels to Japan, have them refine that metal, and ship it back, than it was for us to do that here. The price of fuel oil skyrocketed recently, inverting that cost model to return the advantage to doing such refining in the USA again. However, once that happened, new shipping contracts tanked, leading to sudden cataclysmic drop in demand. Leading to incredible price cuts. This fluctuation is the economic equivalent to "ringing" in an improperly terminated circuit.
Fifty2One
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Do not worry about the US dollar going down the toilet, the Bush administration and the US automobile manufacturers are going to drive it directly to the cesspool with the help of some major financial institutions.
The economic crisis will continue as long as there are greedy people who are permitted to drive the economy down for the rest of the population. US automakers is a perfect example - why bail out a company to produce more comsumer commodities that are not being consumed - it is the hugest make work government plan there has ever been.
Why continue to bail out the most mismanaged companies?
The economic crisis will continue as long as there are greedy people who are permitted to drive the economy down for the rest of the population. US automakers is a perfect example - why bail out a company to produce more comsumer commodities that are not being consumed - it is the hugest make work government plan there has ever been.
Why continue to bail out the most mismanaged companies?
Rich
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And the unions who are refusing to accept pay cuts
The Doc Man is closest but not quite.
Eventually the dollar will reflect the real market value, the value set by the global market.
The world economy is being artificially slanted to shift work from the USA to China. And you have to wonder who is responsible for this.
Remember this point: we’re in a whole new era and none of the old economic policies, or fundamentals apply.
First a little historic perspective:
After WWII the USA enjoyed the most vibrant national economy, and greatest manufacturing capacity. During the next 20 years the US output peeked out at half of the global economy.
At this time the currency of the US was the highest valued in the world, as it should have been based on output. Pure and simple if you wanted a Boeing, a Cadillac, nuclear power plant, or a tanker, you paid for it in dollars. Hence dollars were sought out.
Now for some reason the majority of manufacturing is from Asia and China in particular. But trade with China is in dollars. Meanwhile the Yan is held low by some unknown force. I think that if you were able to actually find out, you would find Walmart sleeping with the enemy as usual.
The big question is; what fundamental aspect of the global economy is going to change to make the currency balance reflect the actual market conditions?
1. As American goods have become less popular or prohibitively more expensive and foreign companies technologies equal or surpass ours , the value of these products drops.
2. One of the biggest concerns to the Chinese’s competitive advantage is oil prices. Since they cannot purchase oil on the international market with the yan, because of the disconnect to traded currencies like the yen, the euro, and the dollar, this makes the percentage of cost in energy, higher for their manufactured goods. Making them less affordable at home (China) and coincide more directly with energy cost fluctuations.
3. The Chinese middle class is growing in both numbers and in individual income. This leads to a shift from pure producer to a hybrid of consumer and producer. This leads to an increase in fuel consumption which is not related to exporting products and building national wealth. The resultant equation points to hyper inflation in the Chinese domestic economy.
4. As the American economy continues to shrink and our dept service continues to rise as a percentage of GDP, American buying power will diminish accordingly. This will create a balance point where building goods domestically will be feasible because the dept is in dollars and a lower dollar compared to the global economy will make it less expensive to service the dept.
The bottom line; market share in the global economy, is the single biggest factor in determining currency values.
This depression we are in, is another correction, leading us back to a more balance of trade in the global arena.
The Chinese and Walmart will have no choice but to relinquish control over the yan, and let it trade on the world market, or switch to a traded one at home, to either avoid hyper inflation, or completely lose their markets in America and Europe.
Eventually the dollar will reflect the real market value, the value set by the global market.
The world economy is being artificially slanted to shift work from the USA to China. And you have to wonder who is responsible for this.
Remember this point: we’re in a whole new era and none of the old economic policies, or fundamentals apply.
First a little historic perspective:
After WWII the USA enjoyed the most vibrant national economy, and greatest manufacturing capacity. During the next 20 years the US output peeked out at half of the global economy.
At this time the currency of the US was the highest valued in the world, as it should have been based on output. Pure and simple if you wanted a Boeing, a Cadillac, nuclear power plant, or a tanker, you paid for it in dollars. Hence dollars were sought out.
Now for some reason the majority of manufacturing is from Asia and China in particular. But trade with China is in dollars. Meanwhile the Yan is held low by some unknown force. I think that if you were able to actually find out, you would find Walmart sleeping with the enemy as usual.
The big question is; what fundamental aspect of the global economy is going to change to make the currency balance reflect the actual market conditions?
1. As American goods have become less popular or prohibitively more expensive and foreign companies technologies equal or surpass ours , the value of these products drops.
2. One of the biggest concerns to the Chinese’s competitive advantage is oil prices. Since they cannot purchase oil on the international market with the yan, because of the disconnect to traded currencies like the yen, the euro, and the dollar, this makes the percentage of cost in energy, higher for their manufactured goods. Making them less affordable at home (China) and coincide more directly with energy cost fluctuations.
3. The Chinese middle class is growing in both numbers and in individual income. This leads to a shift from pure producer to a hybrid of consumer and producer. This leads to an increase in fuel consumption which is not related to exporting products and building national wealth. The resultant equation points to hyper inflation in the Chinese domestic economy.
4. As the American economy continues to shrink and our dept service continues to rise as a percentage of GDP, American buying power will diminish accordingly. This will create a balance point where building goods domestically will be feasible because the dept is in dollars and a lower dollar compared to the global economy will make it less expensive to service the dept.
The bottom line; market share in the global economy, is the single biggest factor in determining currency values.
This depression we are in, is another correction, leading us back to a more balance of trade in the global arena.
The Chinese and Walmart will have no choice but to relinquish control over the yan, and let it trade on the world market, or switch to a traded one at home, to either avoid hyper inflation, or completely lose their markets in America and Europe.
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