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  1. #1
    Protocol Droid Athenian200's Avatar
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    Default "Not worth a Continental"?

    I've heard recently that the US dollar is now worth .60 Euros and .48 British Pounds. I've also heard that it's abnormal for it to be that low.

    What I want to know is what the consequences of this are. I've heard opposing views. One view is that a weaker dollar will actually improve manufacturing by encouraging people to buy our exports. Another is that the increased cost of importing oil and other materials will hurt the economy.

    The term "weak dollar" sounds bad, almost as though the money is literally worth less, and makes me nervous about only having US dollars, making me wonder if finding gold or foreign currency might be necessary.

    There doesn't seem to be an immediate problem, but I'm curious as to what this means. I can't help but think of the early days after the Revolutionary War, when Congress printed up too much money, and it became basically worthless and inflated because there was nothing to back it up. This is where the phrase "not worth a Continental" came from, and I have to wonder if things are going in that direction again.

  2. #2
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    The "not worth a continental" and now are different situations. Currently, U.S. dollars are worth about the same within the U.S. (They may be loosing value within the U.S. right now by a relatively large amount, but not to the same amount as continentals did.) as before the exchange rates changed, while the continentals were worth very little inside the U.S. when they lost value.

    As for the effects, there are a lot of oddities besides imports and exports that occur from the exchange rates. (Some of it is a bit hard for me to understand, let alone explain, so someone else will have to do that.)

  3. #3
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by athenian200 View Post
    I've heard recently that the US dollar is now worth .60 Euros and .48 British Pounds. I've also heard that it's abnormal for it to be that low.

    What I want to know is what the consequences of this are. I've heard opposing views. One view is that a weaker dollar will actually improve manufacturing by encouraging people to buy our exports. Another is that the increased cost of importing oil and other materials will hurt the economy.

    The term "weak dollar" sounds bad, almost as though the money is literally worth less, and makes me nervous about only having US dollars, making me wonder if finding gold or foreign currency might be necessary.

    There doesn't seem to be an immediate problem, but I'm curious as to what this means. I can't help but think of the early days after the Revolutionary War, when Congress printed up too much money, and it became basically worthless and inflated because there was nothing to back it up. This is where the phrase "not worth a Continental" came from, and I have to wonder if things are going in that direction again.
    In simple terms;

    1) Internal transfer of money from importers to exporters (ie: In canada-us, we typically transfer wood to the states for money, but now the US won't import (wood) from us, but will sell us cheaper goods (cars).) This generally means some gain while some lose, but should be roughly a wash.

    2) In relative terms to before (as in, what is being produced and bought), a QOL decrease for Americans. This is mostly because of the loss of purchasing power outside the US (oil, goods from China, etc). Typically this would balance itself out as jobs equalize, etc... however, in cases where it is an actual loss of purchasing power, such as this could be (and likely is at the rate of the falling dollar), the loss is a lot more absolute.

    A weak dollar isn't the problem in and of itself; it's the reason for the weak dollar that is.

    In theory, as the dollar drops, more jobs are moved around, more becomes feasible to produce locally and everything smooths out. When you are undergoing a credit crunch, are fighting wars, spending is rampant, trading deficeit is horrendous and markets are threatening crashses/banks are losing money... then your dollar going down is a failure of confidence... and that is very serious.

    There are also frictional losses, such as salary stagnation etc (ie: for me to travel to the states now costs about 30%-40% less than it did 5 years ago, and there have been no ramifications for me - to put it in perspective, I went from top 40% in the US for my age bracket to top 15%... just on currency! It used to be that Americans earned more on average than Canadians, but this simple currency drop has reversed it dramatically. Internally, however, it doesn't matter much... except now if I move to the states, I have dramatically improved purchasing power. It'd be like moving to Mexico.)

    As an example for how the balance should work;

    Right now, cars in Canada cost about 20-40% more. It's a pretty good deal for us to drive for 1-2 hours and save over $5000 on a car! This would boost the sales in the US, boost manufacturing in the US... But it is a wash if the US has to buy its materials from, say, Europe. In that case, prices for the cars will eventually have to rise and the end effect is that... in theory... Americans earn more money, pay the relative amount for the car (more for materials, so the price rises) and Canadians pay more (roughly the same to Canadian prices). More money to the company should mean more money to the employees. But that's frictional - it won't happen right away (it'll take a long long time.) Worse, the motivation to buy those cars from Europe will prevent as much of a rise...

    In short, changes in currency = disruptions in the supply/distribution chain = severe frictional losses/distortions.

    Normally this isn't the problem, but the American dollar is, for all intents and purposes, in a free fall.

    In reality, the value of the dollar is tied to what American's provide to the world vs what the world provides to America. This fall in the dollar will not be "equal" because of the fundamental imbalances in the trade balance. In short, this dollar could indicate an imbalance being removed... and that will be involve a substantial drop in QOL (need to produce more, consume less).

    Instead of money, you can think of it as widgets. America owes the world a lot of widgets. Until they have paid off the widgets (ie: produced them), the dollars that you can exchange for widgets will be less (ie: you buy less widgets).

    Someone with more of a feel for economics can probably explain it way better (and fix all the mistakes I made. I hate economics.)

  4. #4

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    All I know is that from Canadian $0.63 to $1.05 in five short years to the USD has blown my mind.

  5. #5
    Senior Member wildcat's Avatar
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    Quote Originally Posted by athenian200 View Post
    I've heard recently that the US dollar is now worth .60 Euros and .48 British Pounds. I've also heard that it's abnormal for it to be that low.

    What I want to know is what the consequences of this are. I've heard opposing views. One view is that a weaker dollar will actually improve manufacturing by encouraging people to buy our exports. Another is that the increased cost of importing oil and other materials will hurt the economy.

    The term "weak dollar" sounds bad, almost as though the money is literally worth less, and makes me nervous about only having US dollars, making me wonder if finding gold or foreign currency might be necessary.

    There doesn't seem to be an immediate problem, but I'm curious as to what this means. I can't help but think of the early days after the Revolutionary War, when Congress printed up too much money, and it became basically worthless and inflated because there was nothing to back it up. This is where the phrase "not worth a Continental" came from, and I have to wonder if things are going in that direction again.
    Gold may collapse any time.

    It is expressly unwise to buy foreign currency.

    The safest investment is to buy art and have it insured.

  6. #6

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    Quote Originally Posted by wildcat View Post
    Gold may collapse any time.

    It is expressly unwise to buy foreign currency.

    The safest investment is to buy art and have it insured.
    Art is subjective like anything based on collection. A general economic rule is that as the value of the dollar goes down, the value of metals goes up. Gold in and of itself should be purchased alongside silver, platinum, and even titanium or copper.

    Imagine an economy collapsing, may it never happen, but imagine. You can shave off bits of a metal bar and even weight the result in ounces thus giving it some value. You cannot split a priceless treasure such as art, and in fact, in light of economic collapse, most banks and insurance policies fall through. The FDIC claims to secure up to $100,000 in deposits, but who is backing the FDIC? The problem is that the American dollar is owned and operated by a private organization known as The Fed. Want to know something else disturbing? The economy is afloat on expectations, beliefs, and without solid standard! I don't put much stock in the reasoning power of humans especially collectively, nor do I put much stock in the compassion of the same mob.

    I suppose you should best ask yourself: do I have a solid skill or labor with which I am able to be self-sufficient or trade for essential goods and services? If not, consider taking up a tactual hobby or attending classes. Even caring for the elderly with true help and benevolence is a marketable and almost always needed service. I'm really going on a tangent.

    If you are to be concerned it would be because:

    - you travel often and see your dollar buying less abroad in goods, services, or education.
    - you have large amounts of currency saved up via bonds or bank savings/checking, but little variability in your investments overall. (Saving in a bank is good for the economy; but thanks to The Fed's policy on credit, has become almost non-existent which is driving some of our economic problems right now!)
    - inflation, when commodities like milk begin rising in larger increments, then it's sign of an impending recession (hopefully not a depression). The well-being of farmers will always be related to the well-being of the nation whether doe-eyed visionaries want it to be or not. Some things should not change only our view of it should.
    - and last but not least, if you are a foreign investor in the US markets, you may want to reconsider your purchase of government debt bonds, etc. (Shhh. If they do this, then we're in a quagmire in the U.S.)

    I don't have a degree in economics, but this is basically a regurgitation with some theoretical application of what I've learned in business school. Corporate-centered capitalism is the worst system next to nationalized socialism (Nazi Germany) in my opinion. In fact, business owners in the U.S. tried to remove Roosevelt I believe from power in 1931. These same business owner families are intimately involved with modern American politics and transnational business after the brutal rebuff and defeat of Nazi Germany, whom they supported, the overall plan and vision changed.

    I'm rambling. It's all just so awful, it makes me sad for all of us. Thank God for Jesus. (And I'm not referring to oft times phony faith/religiosity of some unscrupulous not specifically named Republicans who like to use moral issues to sway the general populace while slowly draining the life out of the everyday worker and creating automatons by over-educating a percentage of the middle class.) Ah...rant over. Have a good day.

  7. #7
    Senior Member wildcat's Avatar
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    Quote Originally Posted by Eternue-MDL View Post
    Art is subjective like anything based on collection. A general economic rule is that as the value of the dollar goes down, the value of metals goes up. Gold in and of itself should be purchased alongside silver, platinum, and even titanium or copper.

    Imagine an economy collapsing, may it never happen, but imagine. You can shave off bits of a metal bar and even weight the result in ounces thus giving it some value. You cannot split a priceless treasure such as art, and in fact, in light of economic collapse, most banks and insurance policies fall through. The FDIC claims to secure up to $100,000 in deposits, but who is backing the FDIC? The problem is that the American dollar is owned and operated by a private organization known as The Fed. Want to know something else disturbing? The economy is afloat on expectations, beliefs, and without solid standard! I don't put much stock in the reasoning power of humans especially collectively, nor do I put much stock in the compassion of the same mob.

    I suppose you should best ask yourself: do I have a solid skill or labor with which I am able to be self-sufficient or trade for essential goods and services? If not, consider taking up a tactual hobby or attending classes. Even caring for the elderly with true help and benevolence is a marketable and almost always needed service. I'm really going on a tangent.

    If you are to be concerned it would be because:

    - you travel often and see your dollar buying less abroad in goods, services, or education.
    - you have large amounts of currency saved up via bonds or bank savings/checking, but little variability in your investments overall. (Saving in a bank is good for the economy; but thanks to The Fed's policy on credit, has become almost non-existent which is driving some of our economic problems right now!)
    - inflation, when commodities like milk begin rising in larger increments, then it's sign of an impending recession (hopefully not a depression). The well-being of farmers will always be related to the well-being of the nation whether doe-eyed visionaries want it to be or not. Some things should not change only our view of it should.
    - and last but not least, if you are a foreign investor in the US markets, you may want to reconsider your purchase of government debt bonds, etc. (Shhh. If they do this, then we're in a quagmire in the U.S.)

    I don't have a degree in economics, but this is basically a regurgitation with some theoretical application of what I've learned in business school. Corporate-centered capitalism is the worst system next to nationalized socialism (Nazi Germany) in my opinion. In fact, business owners in the U.S. tried to remove Roosevelt I believe from power in 1931. These same business owner families are intimately involved with modern American politics and transnational business after the brutal rebuff and defeat of Nazi Germany, whom they supported, the overall plan and vision changed.

    I'm rambling. It's all just so awful, it makes me sad for all of us. Thank God for Jesus. (And I'm not referring to oft times phony faith/religiosity of some unscrupulous not specifically named Republicans who like to use moral issues to sway the general populace while slowly draining the life out of the everyday worker and creating automatons by over-educating a percentage of the middle class.) Ah...rant over. Have a good day.
    Do not buy what goes up too quickly unless you are going to sell it as quickly.
    Manipulation is one thing. To be on the safe side is another.
    I understood the question of Athenian was about safety.

    Economics is image.

    Metal is trash.

  8. #8
    Dhampyr Economica's Avatar
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    I don't know very much about macroeconomics but I know enough to find articles by sources that do.

    Strong Dollar, Weak Dollar: Foreign Exchange Rates and the U.S. Economy

    I'd like to add that one cannot infer from a historical exchange rate trend (the recent weakening of the dollar) what's going to happen in the future (that it will continue to weaken). At any given time, exchange rates are at the level where people are indifferent between buying and selling currency based on all the information available. This means that if there was reason to believe that the exchange rate would fall any further, then it would already have done so. So there's no point in worrying about exchange rates - except when deciding where to go for your vacation.

  9. #9

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    Quote Originally Posted by wildcat View Post
    Do not buy what goes up too quickly unless you are going to sell it as quickly.
    Manipulation is one thing. To be on the safe side is another.
    I understood the question of Athenian was about safety.

    Economics is image.

    Metal is trash.
    Metals hedge risk. Not to be overstated (say no more than 5-15% of any investment/savings plan) but often understated.

  10. #10
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by wildcat View Post
    Gold may collapse any time.

    It is expressly unwise to buy foreign currency.

    The safest investment is to buy art and have it insured.
    Funny enough, Wildcat is right.

    Buying art has historically been one of the best hedges against currency changes as well as inflation. And not "high end" art, but simply decent art.

    It does not, however, protect you in times of crisis the same as gold does. I believe for most people, between 5-10% in gold is the optimal amount for diversification. I wouldn't suggest that, however, until you are nearly an accredited investor.

    You should, however, have about 30% denominated in foreign assets so long as you have more than about $50,000.

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