Forum Moderators: buckworks
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
probably the sellers are being forced to absorb a LOT of the cost of the low dollar. As a vendor: try raising prices to Walmar becuase now a dollar is much lower. Walmart still sells in dollars to US and there is no way they will increase prices by x% or whatever the dollar is falling each month. ...
Also, weak dollar should be a boon to large American multinational corps-like Apple, for example, where international demand is strong. Charge in Euros, state earnings in dollars.
All the better because as many posters here state, a $399 item in the US will often cost €399 in Germany and £399 in the UK.
Also, weak dollar should be a boon to large American multinational corps-like Apple,
Why would it be good for Apple? Most of the hard goods they sell are made of components made overseas. Which will now cost them more to aquire.
Most of the hard goods they sell are made of components made overseas. Which will now cost them more to acquire.
Good point.
Here's hoping the margins on luxury goods will be able to absorb the increases.
Hot button panic issues are being ignored or blown over as if they mean nothing.
1. Oil = $100
2. Banks reporting massive, massive losses, CEO's out.
3. Sub-prime mortgages unravelling into chaos.
4. 2 million forclosures set for next year.
5. The Dow starting to slip a bit on all this.
6. Major brokerage houses reporting huge losses, CEO's out.
7. And of course, the dollar collapse.
Why are Americans shrugging all this off?
Hubris is my first guess. Second, as long as no one official (government or media) tells them something is wrong, they will never believe that it is.
The disappearing middle class in America is an all too willing co-conspirator to their own demise, for a number of different reasons. But mostly, have you ever heard someone who was once "doing well" admit that they are now poor? That they made foolish choices, followed the crowd, and now they are in too deep? Someone who is now lower middle-class or poor, due to societal pressures, will never ever admit to being so, - if they don't have to. They will fake their false "status" for as long as they have to.
I see it all the time. I hear it all the time. Poor people acting like they are rich, spending money like they got it all.
It's as if their house is on fire, and they are too embarrassed to tell anyone their house is on fire, so the house burns down. They will let the house burn down before they admit they lost it.
A down dollar might spur more exports, but in the long run, everyone is going to tighten their belt, and I doubt you'll see too much expansion.
And Protectionist measures when you are wired into the global economy will only hurt a country, like it does to North Korea, who opted out of the Global economy a long time ago.
I suspect those hot button issues I mentioned above will eventually start to filter down to the general public in the coming months. The fact that it is now the Christmas shopping season, might post-pone some negative effects, but the first qtr 2008 doesn't look so good.
Why are Americans shrugging all this off?
Probably because a lot of people, especially those in the media, believe that all these problems will be resolved once Bush is out of the White House.
Perhaps whomever is actually in charge of the USA (not sure who that is) is going with what was the Canadian approach before commodity prices forced the C$ up - you use the cheap currency to ensure exports. The problem with that it is that you end up with industries vital to the long-term sovereignty of the country being sold to foreign interests with stronger currencies. Canada might have had its collective ass pulled from the fire because of the oil-crunch, and increase in gold/wheat/whatever prices, but it's only because of the demand that we've been saved. It was certainly nothing we intentionally did. We've benefited from having a large country with a small population and many resources. Our approach for many years was typical beta-dog and nothing to be proud of. I can't see that's a good thing for the Americans to go with.
Of course, maybe those in control really have no control in stopping the drop. The USA consumes much oil but has little, it runs an enormous debt against the rest of the world, and now there's the sub-prime mortgage stuff. I've read it argued that the US$ has been artificially high for some time, because it's been the main reserve currency, with much input from other countries (e.g. China). That status may now be gone, and with that prop gone, it could seriously fade. So it goes. Empires come and go, but the world staggers on nonetheless. Just glad most of my assets are in C$ at the moment :-)
A foreigner, Sarkozy, tells the US Congress and President, that they must do something to slow/halt the dollar's slide.
"The dollar cannot remain `someone else's problem," Sarkozy said today on Capitol Hill. ``If we are not careful, monetary disarray could morph into economic war. We would all be its victims.''
Although he seems worried about the prices of Airbuses to Boeings, he does make some good points. And it's nice to see a foreigner come into Washington's house, and tell them to clean up the mess they created.
Sad, tho, that the major news outlets are not reporting on this. Or, I didn't see it on tonight's round ups.
Bloomberg [bloomberg.com]
That's not exactly what happened. I've read about the Canadian Dollar and what happened there. Canada's spending was getting out of control and they were brow beaten both abroad and at home (by opposition parties) into making necessary budget cuts and reigned in out of control spending.
Canada lost her way (like the USA has) but they were tough enough to bring it back by cutting back, and buying votes be damned.
Americans will never cut back. It's not in their make-up. They lost that part of their DNA when Roosevelt took office and socialism was introduced, and then the most selfish generation that ever lived was born. The BBs.
Now, I will say the Canadian dollar is largely a commodity backed dollar, and that has helped it move up, but it was some guts and balls moves to cut down on government spending and pay off debt that started the drive back up.
When you're in debt and spending/borrowing/printing lots of $, or whatever your local currency is, the bond rating clubs (like Moody's) issue downgrades and the electronic herd (thank you Thomas Friedman) moves invested money OUT of your country, which forces your currency down because nobody wants it anymore.
I liver through these times in Hong Kong then when in a few short years, property prices collapsed by a whopping 70% on average. There were people committng suicides everyday because of financial problems. All the indications are that it is heading towards a major fianancial and econmomic crisis. I fear that if nothing is done about the situation now, we will see a sudden free fall of the US dollar, property prices and the US economey. Just like the titanic as it suddenly sinks. This is going to pull almost every everybody else down with it.
But if you travelled overseas you were quickly disillusioned. No one was buying our poorly-made two-door Minis when they could buy a quality four-door continental car for the same price. And our aircraft quickly became history. We put in place protectionism, but eventually it led to devaluation of the GBP.
Even today the myth is propogated. UK news presenters and politicians frequently refer to the UK as being the world's 4th most powerful nation, when in reality our GDP level-pegs with France at number 6. And the French do it on far fewer man-hours than us.
Based on the UK experience, it will take decades before the average American comes to terms with the new economic realities.
More bad news from The Washington Times...
China roiled financial markets around the globe yesterday when it asserted that the dollar is losing its luster as the world's reserve currency and that Beijing will swap some of its $1.4 trillion in reserves out of U.S. dollars and into stronger currencies like the euro and Canadian dollar.
"The world's currency structure has changed," Xu Jian, a central bank vice director, said in a Beijing conference, according to wire service reports. The dollar is "losing its status as the world currency," he said."We will favor stronger currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of China's National People's Congress, said at the same meeting.
China Signals Dollar Swap [washingtontimes.com]
Even if they transfer 25% it should shake things up, not to mention just the news of such a decision will make investors even more weary...
don't worry. Once China starts paying for health care, pensions and to clean the enviro mess, they will be a lot poorer
>> Canada's spending was getting out of control and they were brow beaten both abroad and at home (by opposition parties) into making necessary budget cuts and reigned in out of control spending.
oil has gone from $20 to $100 in 5-6 years and Canada exports some 2 million barrels a day, not including other exports. It's easy to balance budgets when you have all that cash all of the sudden.
[edited by: walkman at 11:06 pm (utc) on Nov. 8, 2007]
Lovejoy- Out
Someone just told me a few days ago that one of the big reasons that the doller is doing so poor is due to the Iraq war, is that true or why is it?
What steps can the USA take to help recover the failing doller?
I'm only interested because I make a nice amount in dollers but to take that into pounds its not looking good the past while!
RJ
Raise interest rates straightaway, but this will probably kill the ailing property market immediately and ensure that a deep recession take place.
The alternative would be a co-ordinated intervention with other central banks around the world, just as what it did to prevent the Japanese yen from collapsing in 1998. However this time, China must be involved as it is now a key player...
The world won't let the dollar completely crash because that would hit everybody. But no one is going to help the dollar recover. Why should the rest of the world dig the US out of it's own mess?
I am personally annoyed at the whole scenario. The US sub-prime scandal has begun to affect the UK housing market - just when I am trying to sell my house.
First step of a recovering alcoholic admit you have a problem. If you cannot admit a problem then it is useless for others to try to help. An alcoholic will usually not admit a problem until rock bottom.
Admiting the US dollar is a problem is definately difficult. Probably won't happen until it hits rock bottom.
ecommerce see immediate results of currency fluctuations because we are globally based. Only a small amount of people are so globally diverse and consequently (in my opinion) better informed.
I believe that USD price increase is just a start. We also also must try to diversify into other regions (selling to Australia, Europe, Canada, Asia) in order to stay afloat.
>> I am personally annoyed at the whole scenario. The US sub-prime scandal has begun to affect the UK housing market - just when I am trying to sell my house.
Did the British banks do the same? if so, can't blame the US for that; our banks do not hold a patent on greed and stupidity. I remember that real estate prices truly skyrocketed in England too so I suspect that banks fueled this just like here.
Let's not forget that the U.S. economic figures are actually quite good. The Dow Jones is still up for the year by a large margin. U.S. job creation is (surprise) surprisingly high. The slow decline in the value of the USD against other currencies is not going to crash the U.S. economy. But how the USD valuation will affect other countries depends entirely on the nature of the economic relationship between each country in question. For example. The Canadian dollar coming into parity with the USD is plain bad for Canada. Fewer jobs will be exported from the USA into Canada. Period. Fewer tourists to be certain. In fact there is a growing tide of Canadian shoppers now crossing the border and purchasing more from U.S. merchants, which is increasing U.S. sales tax revenue for border states. And I think as someone else mentioned here, it's bad for Canadian merchants with a foreign presence in the U.S. market who need to convert into Canadian. The problem is, if you raise prices you'll lose market share to U.S. merchants who are insulated from the declining value of the USD.
Sean
It would take me an hour to write a reply with supporting evidence but it's Saturday morning and I got the wife giving me the hairy eyeball to go out and do something with her today, that I better wait until another time.
[edited by: Freedom at 3:50 pm (utc) on Nov. 10, 2007]
"As a U.S. citizen I'm not too worried about it. Everyone in this forum speculating on massive U.S. inflation, etc., is providing zero evidence to support their opinion".
Well brace yourself, most business's I know of work with a pretty narrow mark up, many with less than a 30% markup. I've held the line on prices to the USA because of the market share, but no one can take 40% hit and not raise their prices. I upped my prices across the board to the USA 20% about three weeks ago, and I'm not alone in this situation. Right now all your seeing is inventory bough six months ago moving on through, once it's gone watch out.
"Let's not forget that the U.S. economic figures are actually quite good. The Dow Jones is still up for the year by a large margin. U.S. job creation is (surprise) surprisingly high. The slow decline in the value of the USD against other currencies is not going to crash the U.S. economy".
The Dow is in Never- Never land and has been held up by hundreds of billions fed into it by the "Fed" . The Fed no longer even publishes the M3 rate. Slow decline? LOL, Where have you been?
"But how the USD valuation will affect other countries depends entirely on the nature of the economic relationship between each country in question. For example. The Canadian dollar coming into parity with the USD is plain bad for Canada. Fewer jobs will be exported from the USA into Canada. Period. Fewer tourists to be certain. In fact there is a growing tide of Canadian shoppers now crossing the border and purchasing more from U.S. merchants, which is increasing U.S. sales tax revenue for border states. And I think as someone else mentioned here, it's bad for Canadian merchants with a foreign presence in the U.S. market who need to convert into Canadian. The problem is, if you raise prices you'll lose market share to U.S. merchants who are insulated from the declining value of the USD".
This will only be a temporary blip my friend, once new inventory hits the shelves prices are going to increase dramatically. Even US makers are in trouble because all raw material and energy will have to be paid for with deflated dollars. The only reason for the lower prices in the USA vs Canada, tax differences, will also disappear when your federal government will be forced to raise Income taxes to cover the debt and deficit.
Lovejoy-Out
Is the falling $ due to the war in iraq?
RJ
Sean
Lovejoy- out
