Anyone else watching the US Dollar? Last 30-days:

Euro Exchange Rate Graph - US Dollar - Historical Exchange Rates

That's a continuation of the long USD slide as investors continue losing confidence in the USD (which means the USA) due to US fiscal irresponsibility.

Any thoughts on future ramifications as the Fed has proven to be Wall Street's bitch and again lowered the federal funds rate in attempts to save equity market positions at the expense of increased inflation to US consumers?

Please, no government parroting of US exports being more attractive unless the accompanying reaction of higher prices (inflation) to US consumers is included in the opinion.

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Inflation seems to be overlooked by "most" as a critical factor in retirement needs in ones forward planning .

For instance according to an inflation calculator:

What cost $1000000 in 1976 would cost $3619708.52 in 2006.

If for instance apart from taxes a person retired at age 50 and received 6% return on the investment of $1,000,000 or $60,000 per year for the 30 years that sum being used for living expense. At the end of 30 years the $60,000 would have a purchasing value of only $16,800 and the $1,000,000 would (in purchaasing power) have shrunk to $280,000. (correct me if I'm scrambled
:-) )

You're not scrambled and you know it. I wish more people understood the impact US government fiscal irresponsibility has had and is having on the consumer. When I read posts stressing belief in percentages of manipulated GDP as acceptable spending points and inflation quoted that excludes the market driven commodities energy and food, all in USD that has lost a third of its value (and purchasing power) in a few short years, I wonder what America's youth is doing just standing by as their economy and currency declines in their most productive years. I read further and there it is, they're all depending on 401k and other controlled equity investments in markets that have a 5% historical ROI for the little man. Pretty sad.

Last year another old friend passed with me as his estate executor. He had done extremely well in his accumulation of assets and the portfolio is heavy on revenue generating property investments (he preferred syndication participation in medical buildings) which are contractually leased with annual adjustments for inflation based on several indicators and good bonds having dedicated revenue streams for liquidity purposes. The trust lawyer recommended an investment team analysis by a smaller international bank specializing in estate management for high worth individuals with both their accountant and lead investment manager recommending immediate liquidation of 80% of the bonds and putting that capital to work in currency markets to hedge what has become chronic USD devaluation. I quickly agreed and it already looks like the trust has dramatically increased its liquidity position.

So is the US economy totally boned ?

Is it undergoing some sort of transitional change, will it pick up and the good teach manufacturing type non service growth return ?

The US is experiencing a post-industrial migration to a service economy while attempting to maintain a standard of living predicated on former global goods and services trade dominance. Unfortunately we're using public/personal debt and aggressive foreign policy in attempts to bridge our past and present standards of living, neither of which inspire any confidence in our currency. Some countries in the EU are in the same fiscal position, but due to their semi-socialized status and lack of war mongering, they don't have as far to fall. Same old declining conditions repeated throughout history by various empires.

[quote=Americano;1100703] "I wonder what America's youth is doing just standing by as their economy and currency declines in their most productive years. I read further and there it is, they're all depending on 401k and other controlled equity investments in markets that have a 5% historical ROI for the little man. Pretty sad".

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I enjoyed reading and agree with your analysis of the road we travel and where it can end up.

The die is cast in my case and what remains is concern for the bulk of our population "still living" and lacking the fundamental awareness of future needs or resources to arrive at a satisfactory reirement.

One way is of course is to amass enough money and place it in the safest possible spot to draw interest that regardless of inflation and passage of time will be adequate for ones perceived needs. Not fool proof and extremely difficult but but affording comfort and less strain. (Still dependent on a financially stable government to cover catastrophic loss such as major health problem costs and bank failures)

Another requires an accumulation of risk capital for investment in the market used in such a fashion as to arrive in the same position as the first illustration without the protection afforded in respect to C,D s in banks on the way there.

From reviews of IRS reports on income brackets each year it is hard to forecast the possibity of more than just a few of the young who will be successful in reaching either of the goals illustrated above considering the moves to exclude many "company" benefits from the menu including shedding retirement plans through mergers and bankruptcies and the exporting of American jobs and importing of cheap labor.

Not insurmountable but it will require some extreme sacrifice IMO to get there.

[quote=skeptic1;1100736][quote=Americano;1100703] "I wonder what America's youth is doing just standing by as their economy and currency declines in their most productive years. I read further and there it is, they're all depending on 401k and other controlled equity investments in markets that have a 5% historical ROI for the little man. Pretty sad".

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I'm in the same chronological status and position of curiosity. I say curiosity as there's no empathy from not experiencing the same circumstances and my sympathy level is sustained by volunteering to assist the truly disadvantaged. While every generation often belittles succeeding generations (I do feel I had the very best of the US in the latter half of the last century), conditions have dramatically changed in our economic structure.

Agreed, but working for a living is now seemingly the most common form of employment in a time of high inflation, declining wages and excess consumerism, allowing only a very few the necessary circumstances to accumulate assets and risk capital necessary to fund a comfortable retirement.

IMO only the ones who inherit adequate personal wealth and those who completely distrust what has evolved into an entirely self-serving government and plan accordingly will make the cut.

A few months ago I read analysis on the financial status of the baby boomer retirees. The bulk do not have the means to fund their own retirements and their opportunities to accumulate capital were during the very best period of US prosperity. What lies ahead will require enormous sacrifice for them, their children and a defined change in the system of US government.

[QUOTE=Americano; "IMO only the ones who inherit adequate personal wealth and those who completely distrust what has evolved into an entirely self-serving government and plan accordingly will make the cut".

"A few months ago I read analysis on the financial status of the baby boomer retirees. The bulk do not have the means to fund their own retirements and their opportunities to accumulate capital were during the very best period of US prosperity. What lies ahead will require enormous sacrifice for them, their children and a defined change in the system of US government".

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Yes, "Generally" speaking it would seem the only way to sustaining great wealth these days "WOULD" be to inherit it or develop a successful firm and profit from the efforts of its employes until the pendulum as it will swings in a different direction, or be blessed/Cursed as a member of the "in" group of influence peddlers with government connections.












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interesting...


Lifelines for the Drowning Dollar
By DAVID MALPASS
November 9, 2007; Page A19

Dollar weakness is neutralizing the positive effects of the Federal Reserve's interest-rate cuts. As the dollar spirals downward, weakened by Washington's indifference and market expectations of more rate cuts, liquidity drains from the U.S. into inflation hedges like gold and, in the case of entrepreneurship and risk-taking capital, to countries with strengthening currencies. This drain undercuts the growth impact of the Fed's recent rate cuts, complicating the recovery from the August credit-market turbulence. Question: What's harder to sell than a complex loan during a credit crunch? A dollar-denominated one.


Foreign countries are suffering the opposite phenomenon. Global investors want to buy more in strong-currency countries, heating up those countries' economies, land values and stock markets. If their central banks hike rates, as China has been doing and Australia did on Nov. 7, it invites even more capital inflows in search of higher yields and currency appreciation, reinforcing the upward currency spiral.

Europeans, Canadians and others revel in their wealth relative to Americans. It's their chance to grow their risking-taking capital base, set global standards, and begin to dominate geopolitical issues. But ever-strengthening currencies run risks as well, as the U.S. found in the economic boom/recession cycle of the late 1990s, when stock prices were bid higher despite declining profits.

The U.S. should stop the currency rollercoaster. Other countries would applaud. On Nov. 8, the head of Europe's central bank called the euro's upward spiral "brutal." It's never been clear to them why the U.S. wanted a super-strong dollar in the 1990s, at the expense of global deflation, and now wants a super-weak dollar, driving innovation away from the U.S. and enriching our competitors.

The Bush administration frequently repeats the Clinton-Rubin policy position that "a strong dollar is in our national interest." By any measure, though, the dollar has weakened steadily under this administration's policies. The impression is that the "strong dollar" phrase is a throw-away, or worse, cover for a weak-dollar policy.

Currency momentum can be broken. The dollar wouldn't be hard to strengthen if the Treasury included dollar weakness in G-7 discussions, and the Fed singled out dollar weakness as a concern. Fed Chairman Ben Bernanke passed up an opportunity to change the dollar's direction in his testimony yesterday to Congress's Joint Economic Committee, noting mildly that the rise in the price of oil and other commodities, and weakness in the dollar, "were likely to increase overall inflation in the short run and, should inflation expectations become unmoored, had the potential to boost inflation in the longer run as well."

The Fed's in a good position if it wanted to strengthen the dollar. By cutting rates well before economic weakness, it has room to express stronger interest in the dollar's recovery even if that comes across as hawkish. A clearer preference for dollar strength would increase the demand for dollars, breaking the weak-dollar momentum without requiring currency intervention or rate hikes. As the dollar strengthens, capital would return to the U.S., providing extra liquidity and making the Fed's stimulus job easier.

Answering a question at the Economic Club of New York on Oct. 15, Mr. Bernanke said: "No central banker can be entirely indifferent to the exchange value of the currency of their country and we certainly will pay attention to that issue." But the formal statement accompanying the Fed's Oct. 31 rate cut was careful not to mention the dollar in the inflation discussion: "Recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation."

The market's view is that the Fed has been proactive in providing liquidity but less so in creating conditions to keep it in the U.S. With gold topping $830 per ounce and the once-meek euro now weighing in at $1.47, it's simply not clear whether the Fed envisions any bounds to the dollar's slide.

Adding to the dollar's latest sell-off, the Oct. 19 G-7 statement said the group's finance ministers "reaffirm that exchange rates should reflect economic fundamentals." Rather than "reflecting economic fundamentals," which are code words for the acceptance of instability, currencies should be "strong and stable" in order to create good fundamentals for private-sector growth.

The market's clear reaction to Washington's reliance on "fundamentals" has been to sell the dollar on the view that U.S. economic fundamentals are bad and getting worse. The communiqué pointedly left out any confidence-building phrases -- like the one in the 1992 G-7 statement that "the ministers and central bank governors . . . will take appropriate additional actions as needed to achieve sustained growth and greater currency stability."

Some argue that dollar weakness helps the economy by making our goods, workers and houses cheap enough for foreigners to buy or hire. This hasn't worked in practice because investors are momentum oriented -- they want assets that are going up, not down. The weaker the dollar in recent years, the more quickly capital has flowed out -- to emerging markets, commodities and foreign real estate. Cheap is assumed to become cheaper when a currency is weakening.

While the U.S. trade deficit has declined some over the last year, most of that reflects the U.S. housing bust -- home-building is import-intensive -- and the foreign economic boom. The trade deficit is likely to remain wide regardless of the dollar's value. It reflects a huge demographic differential -- our major trading partners are aging much faster than we are, requiring them to save more while building and importing less.

Prolonged dollar weakness creates a multitude of problems. Companies have to devote an increasing portion of their time and energy to currencies rather than their operating business. Foreigners, not always friends, are gaining wealth relative to Americans. Rather than making the U.S. more competitive, the dollar's weakness makes it harder to justify investments in the U.S., where growth is slowing and interest rates are higher than in Europe or Japan to compensate for the weakening dollar. The investment killer is that assets in the U.S. keep losing value in foreign-currency terms, so U.S. opportunities have to be significantly better to entice investment in the face of a weakening dollar.

This doesn't mean the Fed was wrong in its Sept. 18 and Oct. 31 interest-rate cuts. By 2007, the Fed probably didn't have the option of undoing its 2003-2005 mistake of keeping interest rates too low too long -- the inexplicable "measured" hikes from a 1% interest rate during a U.S. and global boom. The damage in terms of dollar weakness, the housing bubble and credit market distortions was substantial, and the Fed's rate-cutting action appropriately lowered the recession risk.

The goal now should be to create the best future environment for growth. Alan Greenspan's new book conveys a long-term pessimism about the value of the dollar in an entitlement-heavy society. That should be addressed. The remedy is clear -- a new "strong and stable" dollar policy, personal accounts for Social Security, productivity improvements in medical care, and confidence in low future tax rates to restore growth and invite investments in dollar-denominated assets.

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No individual can plan his own existence in their view.

So the state planners must arrogate to themselves the right to manipulate any sector of the economic system if the good of “society” or the “general welfare” is paramount.

Ipso- if the rights of the individual get in the way, the rights of the individual must be sublimated.

The Road to Serfdom
FA Hayek (interpretation)


Mortgage Backed Security survivor

it is a price we pay for letting the government sell us out with not a peep in the meanwhile.

it is a price we pay or not having our interests as a nation formost in trade agreements
it is a price we pay for allowing US based companies to outsource the manufacturing to 3rd world countries.
It is the price we pay for the globalism mindset
it is the price we pay for refusing to reelect NOONE to congress... despite their misuse of their power ( both parties ) and lack of representation of the interests of the US citizen.

It is the price we pay for being complacent

__________________
I just neutered the cat , now he is a Liberal

It gets worse, most of their "paper assets" have been driven up in price by all the money pouring into retirement plans, just like with social security, the tide will turn and these retirees will be pulling out money rather than putting it in, and the value of those paper assets will suffer greatly.

One thing the Boomers will have is power at the ballot box, look for expansion of Social Security and Medicare benefits, young taxpayers may grumble, but most of them won't vote, and the pols know it.

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“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

Even China, as the "banker" for the United States
government keeping it afloat, is looking to deversify
it's holdings away from the dollar into other currencies.

Just my $0.02 (which may have lost value while I wrote this!)