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It looks as though the US Dollar is going to tank badly from here on in. Up until now I've been eating it on the exchange rate because the American market is my largest segment, and most of my competition has not yet upped their prices. As the Canadian dollar has gone from 62 cents US to over 97 cents yesterday I'm finding it very hard to hold the line on pricing. Anyone else in this same boat and have any idea what the best course of action might be? My big concern is that surely a great many business's are in the same situation and are all going to jump their prices as soon as the competition does. This will cause a massive run up in inflation and crash the economy for us all.
Lovejoy
I've been watching the market's disconnect from reality for quite a while now.
The simplest answer to the ridiculous disconnect in my mind is simply based on the fact that:
The Fed is printing money like toilet paper
Why would stocks in US dollars do anything but rise like mad when
The Fed is printing money like toilet paper
It makes sense, but at the same time it doesn't make me feel any better. I sold stocks 2 years ago that had I held, I would have 4X my money now! If anything the tanking dollar has had a huge role in the massive advances in stock prices, and the market as a whole. Without getting into a long drawn out conversation about what most of you already know. Suffice it to understand that historically no currency has survived the test of time without actual backing, especially when:
The Fed is printing money like toilet paper
Anyone following the recent Fed cash "injections" which basically amount to the Fed buying junk sub prime mortgage backed bonds from banks in trouble thereby giving them a cash injection. So not only is
The Fed is printing money like toilet paperTheir's a guy in a room somewhere working for the Federal Reserve sitting at a computer with a 10 key pad, and he's making digital money and transferring it into these banks. We all know that we must factor inflation into our long term financial equations, but lately with these current trends, I can almost hear an eerie creaking sound coming from the US bills in my wallet shrinking.
Since one man's trash is another man's treasure anyone aware of the situation can take advantage of it, since it's especially true when it comes to exchange rates. The dollar may make some temporary gains against other currencies, but unless US fiscal, and foreign policy gets an overhaul, it's going to continue trending the same direction until we're actually using US dollars as toilet paper.
Lovejoy
Suffice it to understand that historically no currency has survived the test of time without actual backing...
Every generation thinks it is smarter then the one before it. They believe:
1. It's never been done before
(and if it has been done before)
2. THEIR generation is actually smart enough to get it right this time. (When that has never been the case either).
The USD will not be the last time A government prints and digitizes money out of nothing, nor will it be the last. And each time, in the beginning, the issuing government will actually believe they can get it right this time.
Lovejoy
Americans aren't particularly big on travelling anyway, eh? I doubt if it will make much difference to the rest of the world. At worst, some Canadian tourism outfits will have to learn to adapt. Might be a good thing. There are a lot of Europeans and Asians with serious cash we should be courting.
My significant other works in Niagara Falls ON. You are correct, what they are losing in US tourists they are picking up in Europeans and Asians. Normally this time of year they start to layoff employees as the cooler weather sets in. However, things are still booming because of the Europeans and Asians.
Now, she tells me they really miss the Americans because they tip better and are much less likely to be part of some discount package deal. I also heard that some Americans are "bitching" because they were so used to the powerful US dollar its catching them by surprise when they actually have to pay extra.
By the way, I was in the Hilton in downtown Toronto last night, the exchange rate they posted at the front desk was $.9355 for US currency ... ouch! But the place was sold out.
[edited by: Rugles at 5:50 pm (utc) on Oct. 16, 2007]
For example, if would be exremely stable (not shifting up or down much, regardless of inflations) to have an evenly mixed basket of Dollars, Euros, and Swiss Francs, and perhaps Yen or Norwegian Kroner. The Dollars and Euros will balance each other out for the most part, and the Swiss Francs and Yen and Kroner have virtually no inflation at all.
So if you can talk to your merchant bank, and ask them to hold a multicurrency account and do a monthly conversion for you, you should be able to hold strong. You won't get the upturns of a stronger currency, but neither will you get the downturns.
Hopefully Canada is not a large part of your business.
For example, if would be extremely stable (not shifting up or down much, regardless of inflations) to have an evenly mixed basket of Dollars, Euros, and Swiss Francs, and perhaps Yen or Norwegian Kroner. The Dollars and Euros will balance each other out for the most part, and the Swiss Francs and Yen and Kroner have virtually no inflation at all.
Great advice. That's your best chance for stability. But make the "Dollars" part of it Canadian ;-)
P.S. The last three days has been very, very quiet business-wise, anyone else notice this?
Lovejoy
US sales are steady and not abnormal for this time of the year.
I am now upgrading my currency conversion to include Euro GBP and soon AUD in concert with GeoTargetting.
We raised our US prices about a month ago for items that we dont have fierce competition.
When Americans buy online, is there any connection between rising US$ prices and the fact that their currency is on the skids? Maybe Cnd stores/services should post a notice or something?
Before you see a rise in foreign tourists the brutally draconian customs will need to be loosened.
People explicitly avoid transiting through America now because of the hassles.
I once wanted to cycle through America, but now despite the better exchange rate the thought of all the hurdles to getting a bike to America and the horror stories from travelers in the airports, have turned me off.
Lovejoy - out
Oh boy, that too is crashing down all around them. I have to laugh at how we (Americans) dig their own grave. Exchange a securitized loan for unsecurized debt.
So stupid.
<insert very Patriotic country song in background here> - But hey, this is America! We're the best. We'll never turn ourselves into a third world country. Our Economy is #1. Rock on! </end flag waving Patriotic country song>
[edited by: Freedom at 1:59 am (utc) on Nov. 4, 2007]
Many Canadians are spending weekends shopping in the States then making the dash back only to find long lines at the border. Up to 2 hour waits to get back into Canada yesterday.
This dollar thing is dead serious. Free fall is the best word to describe and we don't know when it will end.
For example; in less financially stable times, employers would offer not only a job, but a job for life with accommodation, education and social support for the families of employees and a company pension scheme into old age. This has declined until it is now very rare apart from in particular niche sectors almost entirely due to financial stability and an ongoing expectation of the availability of rewarding work.
The global economy itself depends upon financial stability. The choice to build factories from China is based on the expectation that it is affordable and will remain as such for the foreseeable future. Financial instability might lead to industry coming home to domestic markets where instabilities have a much lower effect.
Finally, politically, financial instability puts great pressure on a government and leads to increased scrutiny of every action, especially regarding the dispersion of public funds. When the economy is smiling, governments can get away with a lot.
Overall, it might be that financial instability now could usher in a period of increased corporate social responsibility, job security, regrowth in domestic secondary-tier industries and prudent government.
And it's not unknown for governments to look to military belligerence to solve their problems. The population rally round, armaments production feed the economy, and the government can raise taxes because it's all in a "good cause".
The main story is that the US$ is in total freefall. They might have to rename it the US Peso soon ;-)
Freefall is bang on.
$1.10 this morning for the Canadian dollar.
Unbelievable!
The odd thing is that most Americans have no clue that their dollar is in a free fall and have no clue of the long term affects.
This is going to end badly.
I wonder if the Govt' is doing it on purpose to temporarily increase export sales? You can buy a lot of US merchandise these days. The average American just travels through US anyway. Percentage wise, very few travel outside
Why is it not a big issue?
Maybe it is time for conspiracy theories.
The odd thing is that most Americans have no clue that their dollar is in a free fall and have no clue of the long term affects.
The falling dollar is meaningless when those in power have denigrated society, government and democracy so much that we're the United States of Corporate America which represents the Sheeple of this country.
If corporate America is so good at fixing things why have they only profited at my expense and done nothing to fix the issues as the fox news networks and rush limbaughs of the world preach to me they would do?
The sad state of affairs here as simply numbed us to a dollar that has been meaningless for years.
I am stockpiling my USD to purchase a car... before inflation sets in.
While I have seen some very minor signs of increased buying from other countries I have not seen much else happening.
The problem is that the US economy is sooo tied to imports now. Plus raw materials for US manufacturers are much costlier.
We are living in interesting times.
