Why a Strong Dollar Is Bad News for the Economy

People don't remember JPMorgan he manipulated the stocks and commondities mkts at his whim. How did he this, he had more money than anyone else. The point I'm trying to make is, there are people and cos with billons if not trillons of dollars i.e.citibank,that can make the mkts go up or down when they feel like it

To "Yahoo! Finance User - Tuesday August 19, 2008 09:28AM EDT": Only a Dittohead would blame liberal Dems for the trainwreck created by 30 years of 'voodoo' Reaganomics & 7 years of Bush/Cheney criminal insanity.

To "Yahoo! Finance User - Tuesday August 19, 2008 09:28AM EDT": Only a Dittohead would blame liberal Dems for the trainwreck created by 30 years of 'voodoo' Reaganomics & 7 years of Bush/Cheney criminal insanity.

I am really tired of so-called experts trying to explain the current depression based on elements of a very large and complex system that they obviously don't understand. The value of the dollar is an element of the problem. We import $700 billion in oil, guess what if the dollar was worth 1 Euro instead of .67 Euro then that $700 billion cost drops to $469 billion. Since that decrease is roughly 20% of the total annual exports for the U.S., it means the U.S. would have to increase its exports by at least 20% to compensate for a 30% increase in the value of the dollar. Since our exports are not increasing at any significant amount that scenario is very unlikely. In fact the export/import balance has never been positive - we continue to import more than we export even though the dollar has lost over 35% of its value against other world currencies in the last 8 years (guess who who controlled the presidency, congress, and Fed during that period). U.S. Imports are significantly higher than exports (exports - $377B and imports $557B for the first quarter of 2007), that means every time the dollar declines inflation increases as the cost of those imports increase. It is incredible that a second rate financial analyst should suggest that minor declines in the possible export of what amounts to IT junk should be considered relevant to what we worry about at night when we go to bed.

oddheaded: The Reaganomics will work based on the premise that the upper class will use the money they get from tax breaks to invest in and provide venture capital to businesses. The 'trickle down' effect thus becoming equivalent to job creation and market rise. The problem that I don't think Reagan could foresee was globalization on the scale it is today. There are too many people who are here from foreign lands that work their tails off to bring home as much money as possible, just like the Americans do. The problem is the Americans will spend that money (more than we make unfortunately) however they see fit to spend it, for whatever reason, on whatever they deem fit to buy, no matter where it comes from or who made it, as long as they get enough utility from the items bought to justify the purchase. However, the foreigners (I'm generalizing here I know), will take a portion of their hard earned cash and spend it here on what it takes to live, while a portion of it goes back to their home country to help out their families. The fact that the dollars are earned here and are not spent here is the fly in the ointment. Add to that the fact that you are trusting fiscal policy and responsibility to politicians, and you get the deficits and the 'robbing' of Social Security to pay for the Cold War. Thus all things remaining equal, Reaganomics would have come out with flying colors had it not been for the Soviets and the inablility to balance the federal budget (the removal of the tax breaks for credit debt and real estate in 87 didn't help either). Now Bush/Cheney on the other hand, I think we have all seen 'compassionate conservatism' and we all agree it doesn't work, we just need to be aware that there is a disconnect between those that are 'conservatives' and those that are 'liberals' (not Republicans and Democrats) and just agree to disagree with each other. It's basically a matrix with 4 quadrants, liberal and conservative on the X, social and fiscal on the Y. Three of the combinations can work together, ie social liberal/fiscal conservative, it's when you get the social and fiscal liberal that disaster occurs. Don't believe me, look at the last 7 years of public policy to come off the Hill, look me in the eye and convince me that W is a conservative because his record sure doesn't show it. I mean, I don't mind going to War if it comes to that, sometimes it can't be avoided, but you can't start up a heavily capital-intensive campaign at the same time your signing housing bailouts, upping prescription drug benefits and handing out entitlements all over the place. The two just cannot coincide, and once we accept this, we all can move on. The only unfortunate part is the two candidates we have are both in the same quadrant, soc lib/fiscal lib. So everyone has a choice this November you can vote for McCain (entitle and spend) or Obama (tax and spend more), and we can all thank our grand bickering partisan two party system for the offering.

'madmilker' - Point taken. But note that Great Society debt is dwarfed by Reagn debt (& forget GWB debt). And I'm talking economy not just budget. On the dollar, I agree: Weak dollar helps exports, but what are we exporting? Manufacturing has been shipped to China, financial services are in a deregulated trainwreck, and US real estate can't be shipped overseas. And I agree with an earlier poster would not call $1.49 per Euro 'strong.' Try 'out of critical condition but not out of the woods.' I also agree that inflation is a major threat. If you guys want a site with an econ-focused comment boards, try marketwatch.com.

madmilker: thanks for the post and I would hate to hear what the founding fathers would have to say about the US today, I think the review of our conduct would be scathing at best. oddheaded: Don't worry about Bush/Cheney (and you 'conservatives' out there need to quit bringing up Clinton and the Lewinski crap too), the damage is done and their tenure is over, but don't think for one second that these next two are going to be any different. A change in political philosophies - Yes. A change in economic outcomes - No.

ussinvest - Reaganomics set us on a debt-based economy, both public & private. Dismantled the industrial base, and tripled the national debt. That's what will forever make it 'voodoo' economics. (Clinton went along with deregulation, but at least balanced the budget.) We're seeing the effect now on many levels. While I understand your concern about immigrants shipping money home, please remember that wealth is increasingly concentrated in fewer hands -- and they are not immigrant hands. The wealthy are shipping much more cash out of the country into Cayman tax shelters, private equity hedge funds, etc., than immigrants ever could. GOPers need to face up to their Frankenstein: Big tax cuts (especially for the wealthy) created record deficits for both Reagan & GWB. GWB is the fulfillment of Reaganomics: Borrow & spend into oblivion.

If a strong dollar isn't good news for the US economy, what is? Dot-boom stocks? A housing bubble? High gas prices?

oddheaded: the wealthy shipping their money overseas has been and always will be a fact of life, as will the immigrants shipping their dollars over to buy their families a better way of life and raise their standard of living. As far as the tax sheltering goes, there will always be a shelter for the wealthy to hide their money, that's what makes them wealthy in the first place, knowing exactly what to do with their money. The fact that its outside the nation now is disheartening, but such is everything with the law of unintended consequences, especially consequences that we have legislated our way into. And yes GOPers need to face their demons, but the Dems need to face theirs as well with what Reagan had originally intended with the tax cuts being based on the math of all things remaining equal (ceteris paribus). For instance, you give the wealthy a tax cut and they take it, invest it and make more money with it, then the overall effective tax rate is less, but the taxable income is higher thus ending in a tax cut for the rich but an overall increase in taxes paid for the federal government. Now I'm not one for big government, but one of the serious flaws in Reagan's theory is that he either took it for granted that the feds would maintain an adequate oversight of the public markets and not allow them to get into bed with the politicians, overseers and the auditors, or he thought the rich would just stick to making money the old fashioned way and not inventing "creative" accounting principles. That's where the crux of the problem lies, we gave the wealthy a tax cut and they took the money, bought themselves a Congressman and made a couple more tax loopholes. After 20 years of this, we get where we are today, trying to make up for past oversight with the nationalization of the nation's mortgage debt and still dealing with the fallout of the Enron debacle (Sarbanes-Oxley). Not only that you have one of the biggest disconnects in American political history with all the class warfare, as solidified this weekend with Obama thinking the rich make 250k/year while the McCain thinks it's closer to 5mil. Even though he later stated that he [McCain] was joking at the time, it just goes to show where our thinking patterns are as a nation, and also how out of touch these career politicians really are.

ussinvest - First, I disagree that Reagan's tax cuts were based on all things remaining equal. To the contrary, they were the centerpiece of the 'Reagan Revolution' heralding the 'conservative' vision for government. The Laffer Curve (which you describe) is not supported by the empirical evidence. To the contrary, the biggest budget deficits on record followed the Reagan & GWB tax cuts. Far from being an unintended consequence, this is basic math: Cut your income & less income will come in. Simultaenously, Reagan boosted military spending to levels Ike warned against. Second, I appreciate your criticism of career politicians, and many deserve it. But what's the alternative? As Churchill (another career politician) said, 'Democracy is the worst form of government -- except for all the others.'

oddheaded: Too true my friend too true, but I will never understand why the President can only serve 2 terms of 4 years while the House and the Senate can serve as many times as they see fit (assuming they win their respective elections of course). What's more, the Supreme Court has now decided to start passing legislation from the bench and they have no sunset rule on their tenure. I guess the only thing that's left is to do on the state level iwhat Oklahoma has done, and that is pass legislation that said if the laws, acts and legislation passed by Congress, the Senate or the Supreme Court wasn't expressly stated in the US Constitution, then the state of Oklahoma wouldn't recognize it and consequently would not enforce it. As far as the Reaganomics goes, I can see your point and I guess that we will just have to agree to disagree but very well thought out posts so I applaude you on that, but another point I want to make is where I will end this: I believe true 'conservatism' is dead in America, as evidenced by the swing in sentiment from a more capitalistic to a more socialistic view (the greed of Wall Street hasn't helped out any either). I live in the DFW metro and I heard one of the local radio show hosts say something yesterday that struck me straight to the core. This is the statement he made (paraphrased): "Conservatism is an essential part of this country, its constitution and its society, and society has told us that we are not essential to its survival." I think this statement is spot on, and I pray that my generation (X) can see through the deceit that parades around out there as 'conservatism.' Oddheaded, always a pleasure, and hope this post finds you well this morning.

ussinvest - Likewise, I appreciate your thoughtful posts & your reasoned tone. Those things can be hard to find on web posting boards. You might also want to check out Politico.com: A lot of knuckleheads but some smart & philosophically oriented people too. You can find me there as 'Scott in PacNW.' Stay well! :-)

will someone desribe what a soup kitchen was