Anyone Else At The Panic Point On The Dollar?

[Exsubmariner]

I'm not panicked.

Not by far.

I'll tell you why....

The financial markets are a system. That system has feedbacks. Right now, American products are looking really good overseas. Capital equipment manufacturers are reporting really good overseas sales. Farmers are raking it in with cheap American food exports. The dollars outside the borders will flow back into the capital markets. There will be no capital shortage and everything will be fine.

The economy is diverse and robust. The sub-prime crisis is the result of a bunch of money spewing banks making bad decisions. Who is really going to be hurt by the value of their house dropping 5%? Really? Think about that. There has been excess supply in the housing market for a long time and a correction is way overdue. There are plenty of other sectors in the economy that see opportunity and are roaring right along. This is all a cycle. It will pass.

[disjunction]

[ QUOTE ]


The financial markets are a system. That system has feedbacks. Right now, American products are looking really good overseas. Capital equipment manufacturers are reporting really good overseas sales. Farmers are raking it in with cheap American food exports. The dollars outside the borders will flow back into the capital markets. There will be no capital shortage and everything will be fine.


[/ QUOTE ]

Yes but you can argue that this system is the reason why the American standard of living must decline. All things being equal, there is no reason why an hours work by a person in America should allow him more purchasing power than a similar person doing a similar job in Romania. But of course historically all things haven't been equal.

But that's not the natural state. The more you allow free trade, the more you allow the water to find its own level, the more that everybody will have equal purchasing power. This means Americans losing some, and other countries gaining. In a state of equlibrium, that farmer exporting cheaply will make the same amount as a Chinese farmer.

[Ray Zee]

disjunction, my claims exactly and the american standard of living has peaked and over time will erode towards the waters level. it will take a long time i hope but needs to be prepared for.

there has to be many ups and downs as capital flows to the best buy. so right now tons of money is coming in from europe and others to purchase the great american products and services. this holds a so called bottom on the dollar and the economy.

the next hit could be a transition away from u.s. dollar based oil and world goods.

the final hit if it ever comes is when the u.s. is no longer needed for world protection. that is the main thing that keeps our dollar up and respect for our wishes.

[Exsubmariner]

[ QUOTE ]
Yes but you can argue that this system is the reason why the American standard of living must decline. All things being equal, there is no reason why an hours work by a person in America should allow him more purchasing power than a similar person doing a similar job in Romania. But of course historically all things haven't been equal.

But that's not the natural state. The more you allow free trade, the more you allow the water to find its own level, the more that everybody will have equal purchasing power. This means Americans losing some, and other countries gaining. In a state of equlibrium, that farmer exporting cheaply will make the same amount as a Chinese farmer.

[/ QUOTE ]

One point. That is, capitalism makes things cheaper. The more that gets produced, the lower the price. The dollar may loose value on the world stage, but developing nations will still produce goods attractive for export. Increased competition makes prices lower.

Also, the market may drive the price of some equal quality goods toward equalibrium, but all goods are not equal. American rice, for example, is actually a higher grade than most of the rest of the world. It is more nutritious and better tasting, for example than rice in Japan. My Japanese friends have all commented about this to me at one time or another. An edge in quality is a major reason to buy goods from one producer as opposed to another, even if the better quality costs more. The China-free Christmas movement is witness to this.