OPEC Dumps the Dollar

Here is a link to GDP stats by country:

www.infoplease.com...

Reality is western EU economies are performing worse than their eastern counterparts and US is doing better than those in the west.

As for debt, our debt as a percentage of GDP is actually one of the lowest around and a far more important number to look at versus simply the total size.

Also, money supply is what impacts dollar value - and we boosted money supply recently to stir economy. Countries buy our debt paper because they get a nice return from it. Currency speculators trade to make a buck and provide liquidity to the market. Sure, counties will reduce dollar holdings and pick up Euros because there is the expectation of some growth, possibly better than with dollars. Our gov buys back paper all the time and if dollar is depressed, we can buy them back more cheaply. You really think because OPEC will quote in Euros that we actually have to buy Euros to pay them - nope, currency calc is made and money flows appropriately.... Smart companies trading globally also play the currency game to hedge their returns.

It's a very complicated game and not one you can just grab some stats quickly and go - bingo....

Just a few points.

Yes, eastern EU countries are growing more quickly but you have to look at the position they started from and the recent influx of investment EU membership has brought.

The other point you make about the US having to buy Euros to buy oil is eroneous and not the point I was making at all. You've missed the pojnt entirely.

It is not whether OPEC quotes oil prices in Euros that is the issue it is selling their national reserves which are predominently in US dollars for Euros and accumulating Euros rather than dollars in the future that is the point.

But let's run with the quoting oil prices in Euros. It would not mean that the US would have to buy Euros to buy oil it does mean that the US would have to spend more dollars as the value of the Euro increases.

You make the point that people buy bonds and securities.Yes but if the interest on them does not reflect the risk then people will sell. There is no sign that the US intends to increase interest rates which would be the normal response to a devaluing currency.

Yes you are right about debt as a percentage of GDP but with no sign of a policy to decrease the debt, greater spending and tax cuts. ie spending more while getting less money in, and interest on that debt it is the long/mid term prospects that are effecting the market.

More dollars around ? Yes people want to sell them so there are more dollars around.

You're right, Supply and demand but I think you've got your logic backwards.

Originally posted by American Mad Man

Originally posted by Blackout

Originally posted by SIRR1
The Bush administration says don't panic: White House advisers say global debts and exchange rates would sort out smoothly if the rest of the global economy would follow the growth path America is walking.

What growth path?

The US economy is growing faster then that of almost every country in the UK...I know I know, you probably don't want to hear that, but it is a fact.

Perhaps in the private sector that would hold true. However, euros and pounds are worth more than the dollar (due to US government spending) and I'd hardly consider that growth.

John bull 1

I wouldn't say my logic was flawed - I was only pointing out that it's a complicated game.

All countries look inward first and set money supply to match their economic goals - well most that is. On the global stage, it's correct to assume that we are not as attractive an investment as we once were (9/11, tech bubble), thereby depressing our currency due to simple supply and demand considerations. The EU is now an attractive investment, as combined they are a major economic player, but what OPEC does in terms of setting how they quote prices is not really important.

Is it bad - maybe, but that's why I pointed out the more important debt to GDP ratio and correct me here but didn't we just raise our interest rates not too long ago?? Sure, if we stop the war spending and grow our economy things will be better, but we are still the economic powerhouse and a very stable and attractive investment no matter what. Supply and demand and hence our currency rate take all of this into account and while I'd like a higher dollar to make my travel costs lower, it does not stop me in any way and still typically buys me more. I actually like that McDonald's table that I can't remember who compiled, where they compare the cost of a Big Mac around the world - interesting data....

the good thing about this is that finally, american products will become american made again, will be cheaper to the american public and will rebuild the american manufacturing and industrial centers, as well as farming, ranching and other trades and businesses that come with that sort of territory.

hopefully, anyway.