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A Strong U.S. Dollar Weighs on the World

nytimes.com

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Re: A Strong U.S. Dollar Weighs on the World

#41

Post by realusername »

ilikerashers wrote: post #39
realusername wrote: post #36

Earlier quoted context omitted.

I'd say that it's more a statement of China doing significantly worse than expected more than anything else. You can be sure that the day the USD isn't viewed as the global currency, all this printing will come bite back hard and probably cause a collapse.

Seems like China will do as well as the US lets it. It has little domestic consumption and is reliant on exports to the US. Maybe China will have strong consumers in the future but then it'll have to ensure it can compete with US wages which erodes its competitiveness. House always wins.

I personally think it's due to Xi Jinping idiotic economic policies more than anything else, sure US policies helped but it wouldn't work either way.

They based their economy way too much on export and real estate to grow at a normal rate. The worst covid lock down in the world certainly didn't help.

The country is lagging behind because of their contradictions.

Re: A Strong U.S. Dollar Weighs on the World

#42

Post by po »

danielheath wrote: post #35
bamboozled wrote: post #30

Earlier quoted context omitted.

you can borrow JPY and invest in USD and make 4-5% on it. I have JPY, can I make money on it, or do I need to borrow it? Is the idea here to buy USD, wait for the price to go up, and then sell it back in JPY?

A spread on interest rates means you can e.g. borrow some JPY at 2% interest, spend it to purchase USD, then loan the USD to someone else at 6% interest. After you pay back the 2% interest to the original lender, you're left with 4% as profit. This usually happens when one government pushes banks for lower interest rates (to stimulate the domestic economy). It creates a large volume of trades buying USD with JPY, and…

This is exactly right, and also demonstrates why the Japan is in a bind.

They don't mind the currency going low as it helps exports but going too low, too fast is a problem. Increasing interest rates to narrow the spread will affect the economy. So they are walking a very tight line here between JPY/USD spreads and domestic economy/interest rates. All global economies are to some extent but since JPY is trusted and has had low interest rates for decades, it's popular within the finance industry for this kind of trade.

Re: A Strong U.S. Dollar Weighs on the World

#43

Post by ilikerashers »

realusername wrote: post #41
ilikerashers wrote: post #39

Earlier quoted context omitted.

Seems like China will do as well as the US lets it. It has little domestic consumption and is reliant on exports to the US. Maybe China will have strong consumers in the future but then it'll have to ensure it can compete with US wages which erodes its competitiveness. House always wins.

I personally think it's due to Xi Jinping idiotic economic policies more than anything else, sure US policies helped but it wouldn't work either way. They based their economy way too much on export and real estate to grow at a normal rate. The worst covid lock down in the world certainly didn't help. The country is lagging behind because of their contradictions.

I agree with that. The thing that made them grow so quickly is now going to force them into reliance.

Encouraging consumption by creating more welfare programs, spreading corporate wealth to citizens via share schemes etc would be a way of changing this but I don't see this fitting into the Marxist production machine.

Re: A Strong U.S. Dollar Weighs on the World

#44

Post by p_l »

avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

The relative value of different currencies is not at all related to "how much is printed". Heck, even internally the actual value of money is unrelated to how much is printed.

Main drivers of exchange rates are international trade of all kinds and its requirement to use specific currencies in specific places (you can accept payment in JPY when your company is in USA, but you need to pay your taxes in USD!), and speculation.

Essentially for FOREX, the exchange rate is essentially determined by entities needing specific currency for something - for example to pay for purchases or services, pay wages, taxes, etc. - when you have money in different currency.

The rest is plain market - you put an offer like "I will buy 100k USD in exchange for 11m JPY", but others were willing to offer more, and thus the averaged (I know, simplification) exchange rate goes up.

But you might be able to catch a trade at lower price because someone might need JPY right now (or other forex-compatible asset you have) quicker than it could sell USD at higher prices, etc.

You can of course also purely speculate on the prices and make money from "nothing", pure financialization, pure capitalism, close to zero value being produced.

Printing money can be used to artificially change the exchange rate by offering "cheap" money for other currencies. The reason why you might want to do is simple - your currency being "weaker" tends to benefit exports (at the same time exports drive currency "stronger"), while stronger currency benefits imports (but imports drive currency "weaker")

Re: A Strong U.S. Dollar Weighs on the World

#45

Post by p_l »

cherryteastain wrote: post #19
avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

US printing is not the same as everyone else printing. Almost all trade deals worldwide are done in USD. Everyone except the US must export goods and services (i.e. actually work) to acquire the dollars which will finance their imports; US can just print. Goods and services that are traded internationally are priced in USD. Other currencies do not end up directly representing goods and services; they are relative to…

Goods and services traded internationally are priced in whatever the parties want.

Ultimately they want to exchange for the currencies they need to pay bills, wages, and taxes in.

"Reserve" currency has little to do with it - if anything it's the high volume of trade with USA that makes it worthwhile to keep reserves of USD, because the high volume of US trade means you get many chances to exchange USD for whatever currency you actually need.

Re: A Strong U.S. Dollar Weighs on the World

#46

Post by sampa »

bamboozled wrote: post #29
sampa wrote: post #25

Japan monetary policy is a ponzi scheme waiting to crash been that way for decades

Do you have some more info on this, or is this just your opinion ?

their debt is 230% of GDP

when global crisis hits again (pretty soon, I'd say), they will have major problems

for now people (carry traders) are happy to borrow yen for 0% and convert and earn 5% in USD, hence the falling yen

Re: A Strong U.S. Dollar Weighs on the World

#47

Post by nebula8804 »

a_wild_dandan wrote: post #40
Moto7451 wrote: post #33

Earlier quoted context omitted.

The Federal Reserve (The Fed) is supposed to work independently of the political process which is why we have the same Fed Chair as we did during the Trump years. Ironically this means the Fed Chair keeping rates high is the same one that set a zero base rate. The various Fed leaders operate under the same guise of serving outside the political cycles. They’re still human so they can be swayed by Presidents and obvio…

FYI, Trump has vowed to purge the executive branch of unloyal employees, aiming for unitary rule during his 2nd term. It’s unclear how much of this his conservative SC majority will allow, but…the norm of stable, institutional independence might be gone soon.

At least we can replace all those Biden stickers next to the gas pumps that say "I did that" with Trump stickers... :/

Re: A Strong U.S. Dollar Weighs on the World

#48

Post by Yoric »

servus45678981 wrote: post #17
rdm_blackhole wrote: post #8

I think the main reasons of the strong USD are: - it's status as world reserve currency - it's seen as a safe heaven - The US is still the most profitable market to launch new product - the US job market is still performing well compared to the battered economies of Europe where unemployment is starting to go back up If the ECB decides to lower interest rates before the US Fed does, then even more capital will flow i…

I still don’t get why anyone would invest in a regime like the US or China. Europe will show its glory again; no matter what. We will get back what was stolen.

I'm a EU citizen and I have no idea what you're talking about.

Re: A Strong U.S. Dollar Weighs on the World

#49

Post by oytis »

pineaux wrote: post #26
avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

You should read "the global minotaur" by yanis varoufakis. It explains exactly why this is the case. This is true only for the US and it is because other countries buy dollars in bulk to keep the dollar high because: 1) not keeping the dollar high will devalue their dollar reserves. 2) they need large reserves of dollars to be able to facilitate trade in dollar denominated resources like oil. 3) they buy us treasury…

> because it ks historically a safe investment.

That's the key IMO. USA has a long history of being a safe country for investment. It has uninterrupted democracy and rule of law since it was founded. It hasn't had a war on it's territory since the Civil War. It has a lot of free land and natural resources.

It's just good fundamentals first - and then of course you need not to fuck up massively to ruin that, which USA has not.

Re: A Strong U.S. Dollar Weighs on the World

#50

Post by resolutebat »

po wrote: post #15

> The yen is at a 34-year low against the U.S. dollar I live in Japan and this has happened so quickly it's been stunning. While not much has changed domestically so far, I am hearing and starting to see foreign people question whether they could work and live here long term if it stays like this. It's fine if you are earning USD and visiting Japan (wow there are so many tourists this year) but if your salary is pric…

The other side to this is that after decades of zero to negative inflation (deflation), prices in Japan are finally starting to go up. My personal economic barometer, the Yoshinoya nami gyuudon beef bowl that was 280 yen from the 1990s straight through to the mid-2010s, is up to 448 yen at last check. Not by coincidence, their primary ingredient is imported beef.

Japanese salaries, however, are by and large not going up (certainly not at the same rate), which is obviously causing even more pain and further dividing the haves from the have-nots.

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