US dollar is getting pounded

[Malibook]

Canadians with any US dollar denominated assets might want to take a look at the state of the US dollar.
I have to call my broker first thing tomorrow morning.
A significant amount of my money is sitting in a US money market fund.
Some economists are calling for the Canadian dollar to hit 69 to 70 cents US this year.
I am not a currency trader but some factors seem to indicate this trend may continue.
Canadian interest rates are on the way up where the US is holding tight.
Canada will have a trade and budget surplus this year where the US will have a massive trade and budget deficit.
US stocks are still historically extremely expensive.
The US depends on fresh money inflow which will be less attractive with a falling dollar.
Foreigners holding US cash, stocks, bonds, and treasuries may start unloading creating even more pressue on the US dollar.

[Fine Wine]

Originally posted by Malibook
Foreigners holding US cash, stocks, bonds, and treasuries may start unloading creating even more pressue on the US dollar.

Substitute the word 'ARE' for the word 'MAY' and your statement is 100% correct. This has already begun to happen and will continue for sometime to come. I would be holding a minimal amount in US$ denominated assets and focus on the C$ and the Euro as well as having 15 - 20% of a portfolio in gold mining shares such as Newmont, Kinross, Agnico Eagle, etc. All these companies have production costs that are well below the current price of gold so every increase in that price falls right to the bottom line. Gold was up $5 yesterday on the VPs comments on the weekend and wants to go higher. It won't happen all at once and it will be volitile along the way but, I believe it will break up through $350 by the fall and may test $400. If that happens a stock like Kinross could trade at $10...!

FINE WINE

[E_B_Samaritano]

Do you have even the slightest idea of what you are talking about? The Canadian dollar hasn't even recovered to May 2001 levels and you're screaming the bottom is falling out of the market? US interest rates are holding due to low inflation, partially offset by a higher than average unemployment rate of slightly more than 6%. The U.S. economy has operated on deficits almost historically for the past several decades. This is nothing new. Stocks overvalued...again nothing new. What you might want to do is throw away your outdated notion of traditional valuation as applied to todays DOW. That DOW is comprised of a lot of tech stocks that are governed by different rules. The balanced budget of a couple of years ago was an aberration caused by the "exuberant" state of the economy. The deficit was introduced by an increase in defense spending to a level of around 360-370 billion..that would be about 3 times the entire Canadian national budget.

So if they suggest a rebound in the Canadian dollar, where is the economy that will outperform the US with the same safety level? If you can identify that, then that is where I'd look for the action. Japan has been and will be out of the running for a long while. And I just checked the sky and it is still there, although the earth has been a little shakey here in California lately.


EBS

[Sheik]

What you are seeing is just a minor market correction...just like ebs said. Some dollar traders are dumping the US greenback for the funny coloured CDN money because our interest rate is higher and that is basically the only reason...

Another thing to remember is the US is at war and traditionally when a nation goes to war, the value of their currency does drop. I wouldnt panic and most of my US investments are spread out over a large spectrum.

[Malibook]

Like I said, I am not a currency trader and do not try to predict where the US dollar is headed.
What I do know is that I have lost around $5000 very recently and I just do not see any benefit in holding US dollars.
When I need to trade a US stock, I will just pay the days rate.

BTW, budget deficits are a serious economic burden.
The numbers are so mind boggling, they are hard to put into perspective.
The US spends more evey year on debt interest than it spends on the entire military/defense budget.
Congress must raise the debt ceiling for the government to continue to pay it's bills (around $7 trillion I believe).
Several states are having extreme cash crunches right now.
Even the resent so called US budget surpluses were proforma according to the Federal Reserves Flow of Funds Report.

It is just a thought possibly worth looking at.
I did not suggest anyone to do anything.

[BBW_Morgan]

I invested all of my money in the 'sock under the bed' market. So far it seems to be holding fairly strong, although it's accumulating dust bunnies at a rather alarming rate.

Morgan

[james t kirk]

Actually, if what i read is correct, the american peso is overvalued.

There are many in the US who would like to see the dollar come down a wee bit because US exports are too expensive.

A 70 cent canadian dollar is a very real possibility, and i say possibility, not certainty.

The other consideration is that in any economic recovery, commodity prices will rise, and with that the canadian peso.

Of all the G-7 nations, Canada's economy is the strongest (believe it or not) we are still running a budget surplus thanks to mr. paul martin. Last week, the globe and mail reported that our surplus has even suprised most, and we are actually creating jobs while the americans are still shedding jobs.

The really really bad news is yes, interest rates are on their way up, however, most agree that you will probably see a point added gradually to the prime rate.

Frankly, i don't like that one bit. Why pour any water on the fire as far as i am concerned.

They did that in 91 and again in 2000 and look what happened.

The other thing to consider with the us economy is that greenspan hates deficits. Under daddy bush, he consistantly raised interest rates to stop the gov't from running deficits. Drove ole george sr. bananas, but there was nothing that the old man could do about it.

Deficits are not to be underestimated. By spending like drunken sailors, the gov't drives up the demand for money and fuels inflation. Higher demand for borrowed money and higher inflation drives up the interest rates. The higher the interest rates, the slower the economy.

If canada did not have a deficit, we could save approx. 28 cents of every tax dollar.

That is incredible.

W bush has driven his country into deficit to fight the war on terrorism with mainly new military toys rather than intelligence.

I can understand his position, but to me it seems like politicing for re-election. The americans will like an president who buys new military toys. Mom and pop can get their heads around buying a new aircraft carrier, they can see that. But doing what it takes to fight terrorism with increased intelligence, well, mom and pop can't SEE that.

The money w has marked for new war toys could be far better spent to fight terrorism. But you wouldn't get to thrill the voting public.

Lastly, there is a herd mentality when it comes to investing. When people start perceiving the us dollar as weakening, they get the hell out.

Personally, i would love to see a Canadian dollar rise back to about 90 cents, then we should adopt a single N.A. currency, because the us peso is for sure the bench mark currency of the world and that isn't going to change until china surpasses the us in the next 20 years as the leading global economey.

Yes kids, the sun is setting on the american empire.

[clipper]

I LOVE to say I told you so!!!!

I told everyone on this board to buy Kinross at $1.57. All I heard was a bunch of crap about overpaid CEOs!!

Well, it hit $3.80+ today. Small-cap oils like KCH and PEY are also making me money.

The US dollar will ALWAYS be the world reserve currency because it's the largest economy in the world, BUT the US currency has appreciated a TON against all other currencies in the world and there WILL be a correction. It won't be a disaster, but it wouldn't hurt the prudent investor to diversify.

The biggest thing weighing down Canadian stocks is Canadian
lack of self esteem. People that got hosed on Nortel bought into a fairy tale, but there are many real success stories in Canada.

We tend to see the Canadian buck's low value as some kind of punishment for our so-called lack of productivity. The truth is the CDN dollar has held up very well against the run-up in the US dollar.

GOLD OIL GAS is where it's at.

[Malibook]

I'm glad I dumped that US money market fund.
I ended up losing around $6k but I would have lost another $1k in the past 2 days.
This "minor market correction" was turning into a major expense.

:cool:

[lars72]

Hope the CDN dollar stays low until I can exchange my "SP allowance" next week! ;)

[torex]

Of all the G-7 nations, Canada's economy is the strongest (believe it or not

are we not classed G-8 now??

[Malibook]

Originally posted by E_B_Samaritano
Do you have even the slightest idea of what you are talking about?EBS

Friday, June 13, 2003
1 US Dollar = 1.33520 Canadian Dollar
1 Canadian Dollar (CAD) = 0.74895 US Dollar (USD)

Median price = 1.33450 / 1.33520 (bid/ask)
Minimum price = 1.33250 / 1.33310
Maximum price = 1.34940 / 1.35040

Hmmmm.
Looks like a fresh 7 year high for the Loonie to me.

[Malibook]

Originally posted by Sheik
What you are seeing is just a minor market correction...

This "minor market correction" would have vaporized another $20k of my money if I did not dump my USD money market fund.

[Cosine]

Touche! BTW, is it still a good time to buy gold/oil/gas stocks now? Or will tech continue to rise? I'm just a clueless newbie investor...

[Alien (<>..<>)]

Originally posted by E_B_Samaritano
Do you have even the slightest idea of what you are talking about? The Canadian dollar hasn't even recovered to May 2001 levels and you're screaming the bottom is falling out of the market?

So if they suggest a rebound in the Canadian dollar, where is the economy that will outperform the US with the same safety level?
EBS

The US economy is backwards while the Canuck economy it's the BEST and HIGHEST of the G-8 gang.

LOL eat your heart out El Buen Samaritano, boy is fun to read old posts and see how people stick their foot in their mouths!

[E_B_Samaritano]

It is also funny to see how half wits who are otherwise imposters have a habit of talking loud and saying nothing. The apparent plummet of the dollar is a well managed activity down south of the border. The dollar devaluation in many senses is a good thing for our export market. Somebody mention trade deficit surpluses? The day we don't have massive trade surpluses will be the day a lot of assholes pucker in the rest of the world, not to mention those North of our border.

Here's a simple excercise that even a halfwit like you can understand. Let's let the loonie trade on par with the USD. How long do you think it will take before Canada looks like Argentina?

Now go back in your hole before I report you to Canada Immigration...or should I dare say you're an imposter who is a native Canuck, posturing as a deranged alien. Only part of its true..you are truly deranged. As an alien, I understand you have multiple buttholes. It's in evidence that you blow out of at least one of them when you post to this board. Any time you think you want to launch an ad homenim this way, I'll be glad to cut you a fourth.

EBS

[papasmerf]

Some would believe the dollar is sliding to bolster the econmy. That is to say when the dollar is low the EURO and YEN is high making US god more attractive. BUT since the CLITHEAD administration moved US manufactuing off shore this is a misconseption. Now let's us look at the rational behind raising the EURO and YEN. Once these are higer the off shore manufacturing will be less attractive, as quality will begin to matter. In the past 100 units made at 40% with a 22% failure rate was profitable. This is no longer true as the gap narrows.

Yes US manufactuing is more expencesive BUT with a lowered failure rate and and even economy they become the VALUE added production.

[train]

Originally posted by papasmerf


Yes US manufactuing is more expencesive BUT with a lowered failure rate and and even economy they become the VALUE added production. \

Alien is , of course , a total twit and his comments on world economics are just further proof . The above comments by Papasmerf are equally silly . The most obvious example would be automobiles where most evidence would suggest that the failure rate of US made cars is higher and their reputation for quality is only slowly recovering from a pathetic level in the 80's and 90's . Clinton didn't move manufacturing offshore . The simple fact is that higher quality and lower manufacturing costs , once unencumbered by protectionist tarrifs , caused American companies to choose to manufacture offshore as well as making imports of foreign goods more attractive .

Two opposite examples of nationalism clouding judgement .

For those cheering a higher Canadian dollar watch the employment rate in Canada plummet as companies that were competitive because of the low dollar are suddenly out of business .

Have a nice day .

[papasmerf]

Why dont people take trians any More???????


Becaure they are slow and pollte the environment. Besides that they are costly compared to modern transports

US manufactuing moved trawards the 50 cent to a dollar mark per hour in payroll. There was a preceived value in it. this value is thwarted by a weaker US dollar.

[E_B_Samaritano]

Papasmerf,

I believe your dogma and too much fun at the pub on Friday night is truly distorting your ability to reason rationally. But then knowing that you voted for Bush, and would support the man even if you caught him with his dick in Cheney's mouth.

Clinton had nothing to do with moving jobs offshore. You forget, the Democratic administration is decidedly pro union. And please don't tell me about NAFTA. NAFTA decidedly improved the economies of every participating country. Under his administration, we experienced the lowest unemployment rate in decades. The collapse of the high paying blue collar sector is a phenomenon that has been going on for at least 25 years. The steel industry got hit reapeatedly by foreign competition..albeit some was due to unfair dumping of Japanese steel on the market. The auto industry got the shit kicked out of them by a highly productive and modernized Japanese manufacturing sector anchored by superior robotics that significantly reduced labor and increased quality. We copied the Japanese and threatened them with sanctions if they didn't start producing cars in the US. My old man was GM buyer, and my first two cars were GM out of habit. Haven't owned a US made vehicle in 20 years..and proud of it..LOL.

Now I'm sick and tired of Repugnicans constantly blaiming the failures of this administration on a President who is no longer in office. Let's for the sake of argument, assume that the real economic problems came under the Cllinton administration when the repubnican controlled congress refused to accept any of the Clinton administrations legislation that would have mandated corporate accountablity and put more teeth into the SEC..i.e. it would have prevented fiascos like Enron, and the thousands of other Enrons that have lead to a massive loss of wealth and will mean a subsequent decline of standard of living in the US, until and unless we take drastic measures to controll the growth of the deficit. IF I were President and had to make recommendations as to how to fix the problem i.e. provide a more short term boost in the economy to kickstart a recovery, what is the absolutely most asanine thing I could do...even if it is a fundemental dogma of being stuck with a hard right agenda?

Answer: Do and propose exactly the things that Bubba is doing right now.

Question 2: Who is the most unlikely ally of the US right now and what could they do to guarantee that Bozo doesn't get another four years to demonstrate his ineptitude in handling the domestic agenda?

Answer: Any country in the Middle East that wants to make life miserable for the occupying US Forces there. You see, after a while, even the Bush robotic idiots won't be able to defend why Americans are dying for oil.

EBS

[papasmerf]

NAFTA diid improve the economy in all but the US

I did not Vote for BUSH (sorry)

As for the WTO???????????
Bout as useful as your theories.

[Alien (<>..<>)]

Originally posted by E_B_Samaritano
As an alien, I understand you have multiple buttholes. It's in evidence that you blow out of at least one of them when you post to this board. Any time you think you want to launch an ad homenim this way, I'll be glad to cut you a fourth.

EBS

What? Aw c'mom Samaritano Tonto, we are talking about the economies here, if you can't debate and accept your foolish pre-emptive predictions then don't participate in these debates, I caught you with your pants down, you were dead wrong 13 months ago. Canada has always had the highest standard of living and better conditions the world over, about 6 times in a row according to the United Nations, what about the USA? Oooops I forgot they have been in about 14th place behind Holland, Sitzerland, Australia and even behind New Zealand.

[sage advice]

Just an update on current street talk ( Bay ) about our dollar as work for RBC. Our feds are looking to drop
our rates for the next little while, to encourge our export trade and with overall concerns of the greenback
being too low versus the euro dollar.

[greentshirtman]

This my friends is the gradual and long waited challenge to the mighty greenback that the world has been looking for. Before the US dollar was the standard exchange mechanism, and while it still is, it is slowly being shifted to the Euro, as world economies try and difersify their risks. And although we will constantly see currency swings both ways, the long term effect is a devalueing of the US dollar.

[Malibook]

Originally posted by E_B_Samaritano
Do you have even the slightest idea of what you are talking about?


Originally posted by Sheik
What you are seeing is just a minor market correction...just like ebs said. Some dollar traders are dumping the US greenback for the funny coloured CDN money because our interest rate is higher and that is basically the only reason...


http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20041008.wdoll1008/business/Business/businessBN/ctv-business

http://www.oanda.com/
Saturday, October 9, 2004
1 US Dollar = 1.25240 Canadian Dollar
1 Canadian Dollar (CAD) = 0.79847 US Dollar (USD)

Median price = 1.25190 / 1.25240 (bid/ask)
Minimum price = 1.24930 / 1.24980
Maximum price = 1.26260 / 1.26320

[WoodPeckr]

Just checked:

http://www.xe.com

Rate was 1.25200. Sure do miss those 1.60 & 1.55 rates of a few years ago!

[WhOiSyOdAdDy?]

This is terrible???

It is great for cross border shopping and travel in the USA... hopefully oil keeps going up (could hit $100/barrel!!) and the Canadian dollar will hopefully be at par.. or worth more than the US$

but I guess the down side will be when the US economy grinds to a halt in the near future

Maybe the price of oil is being manipulated by someone who is trying to make it more difficult for Bush to be re-elected.

[james t kirk]

The Canadian dollar hit 80 cents yesterday, though settled back to 79 and change.

In talking to someone in the know lately, they are betting on a 90 cent dollar within a year.

Incredible.

And I remember that twit Sheri Cooper at BMO saying when the dollar was at 60 cents that we should all just adopt the American peso because our dollar was most likely going sub 50 cents.

And that twit still has her job???

Oil prices are being driven sky high by pure speculation. The speculators believe that there will be another major terrorist attack, or more destabilization in the middle east which will interupt the supply pipeline.

When that happens, you will see oil going for 100 a barrel.

That's what these guys are betting on, and why they are buying oil futures.

One thing is for sure, the oil prices aren't going to fall anytime soon because the entire middle east situation isn't getting any better, it's getting worse.

[kat19]

i will be going to school in the states in may. i have saved quite a bit so far, as it is pretty expensive. i was wondering if i should change some can. $ now at .79 or if i should wait. also, there are companies on the net that offer the highest exchange rates, where u send them $ through a wire and they put the US $ in ur account. does anyone know if these companies are credible, or has anyone done this before. i wanted to try and avoid a paper trail, but i don't know if that is possible. thanks.

[Don]

I always thought a high CDN dollar is not so great for Canada other than cross border shopping. We are predominately an export company and a high dollar hurts that. Also Canada is a place where US jobs are outsourced (just doesn't get the exposure of India and China) and a high dollar makes exporting jobs to Canada not as attractive.

Personally for me I love it since I visit the US quite often but it is a mixed bag for the economy...

[ice_dog]

When everybody hates the USD, then maybe it is time to buy. Remember when everybody loved Nortel 4 - 5 years ago, it was the best time to sell, even short sell.


If crude oil goes to $100/barrel, how many of you can still afford to drive SUVs ? The whole world will go to recession. It is true that price of crude oil won't come down soon, but in a year or so, I believe , it will settle below $40.

In terms of CAD, if it moves to 90 cents, our exports will suffer. The Canadian economy will slow down. Our SPs will loose the American customers, but, it will be good news for Canadian hobbyists....lol

[WoodPeckr]

Originally posted by ice_dog
Our SPs will loose the American customers, but, it will be good news for Canadian hobbyists....lol

How so? Will they give discounts to Canadains ? :D

[ice_dog]

Originally posted by WoodPeckr
How so? Will they give discounts to Canadains ? :D

What I meant is there will be less competition(from the demand side) and hence the price will tend to go down.

[Speedo]

Originally posted by ice_dog
What I meant is there will be less competition(from the demand side) and hence the price will tend to go down.

I suspect that would take quite awhile...

[WoodPeckr]

Originally posted by Speedo
I suspect that would take quite awhile...

Not really.....in some areas it has already begun.:D

I still miss that stronger USD though.

[Malibook]

Originally posted by kat19
i will be going to school in the states in may. i have saved quite a bit so far, as it is pretty expensive. i was wondering if i should change some can. $ now at .79 or if i should wait.
thanks.
I hope you changed your money.

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20041204.wxdollar1204/business/Business/businessBN/ctv-business

According to figures compiled by the IMF, the U.S. Treasury, and the Bank for International Settlements, the net debt owed by the United States to foreign creditors is around $2 trillion dollars. That's a big number, even in relation to the total amount of money in the world. Currently the total amount of currency reserves in the world is $3.36 trillion. And 64% of these reserves are held in dollars, or $2.15 trillion dollars. Thus, we owe foreign lenders almost most as much money ($2 trillion) as is currently in existence ($2.15 trillion).

"In all my years of investing, there's one rule I've prized beyond every other. Always bet against central banks and with the real world... When a central bank is defending something — whether it's gold at $35 or the lira at 800 to the dollar — the smart investor always goes the other way. It may take a while, but I promise you you'll come out ahead." Jim Rogers

[rama putri]

Originally posted by E_B_Samaritano
Do you have even the slightest idea of what you are talking about? The Canadian dollar hasn't even recovered to May 2001 levels and you're screaming the bottom is falling out of the market?

Bla,bla,bla...

So if they suggest a rebound in the Canadian dollar, where is the economy that will outperform the US with the same safety level? If you can identify that, then that is where I'd look for the action. Japan has been and will be out of the running for a long while. And I just checked the sky and it is still there, although the earth has been a little shakey here in California lately.

Wonder what EBS has to say today?

[MuffinMuncher]

I tend to agree Winston, although it is the deficits that are going to be our undoing.... trade deficit and budget deficit. The economy is going OK right now, unemployment is below pre-9/11 levels, and even with a series of small interest rate increases, rates are still at historically low levels.

The problem is that the boom funded by refinancing and low interest rates is over. You cant go back to that well a second time since most homeowners already have sub-6% rates.

There needs to be a drastic correction in the trade imbalance, and only a lower dollar will help that. The euro will eventually be the international currency of record anyway....

[happygrump]

The dollar's getting pounded for a few reasons:
[list=1]
The economic boom of the late 80's and 90's was fuelled primary by personal debt and corporate leverage. Now the economy is starting to pay the price. According to Jeremy Rifkin, more people are expected to file for bankruptcy this fiscal year than will file for divorce;

The more protectionist the US gets, the harder the economy will fare. Undoubtedly the biggest internal market used to be the US, but not any more. Protectionist policies are not an effective way of expanding an economy;

Much attention is being paid to China as a market. Undoubtedly, China is a huge and expanding market. Strangely, though, the EU is a far larger market than China, but the EU gets short shrift when it comes to trade with the US;

Approximately 2% of American males are incarcerated. Aside from the huge cost of keeping men in prison, that number represents a huge untapped labour pool that is inaccessible. A large percentage of these incarcerations are a direct result of the misguided "war on drugs", whereby someone caught with a joint ends up, on average, doing more time than someone who's been convicted of a violent crime. Yes, really;

Estimated deficit of half-a-trillion dollars, a number so large as to be incomprehensible;

Primary and secondary schools in Europe and Canada consistently outperform their American counterparts (though the US college and university system is second to none... so far);

The US ranks 41st in infant mortality, beaten by the medical powerhouses of Macau, Czech Republic, Slovenia and a socialist Canadian system;

The real unemployment rates is estimated to be approximately 9%, rather than the 4 or 5% number that continues to be spewed forth by policy hacks;

The American dream of rugged self-interest and limitless economic growth is being eclipsed by a more holistic view of sustainable development, environmental stewardship, quality of life and the building of community;

Bush got re-elected. 'nuff said.
[/list=1]
Now, ask yourself: Does this sound like a healthy basis for an expanding economy?

(Most, but not all, data is taken from http://www.foet.org/European%20Dream.htm. A fantastic and chillling read.)

[Malibook]

http://moneycentral.msn.com/content/P93626.asp

[RogerRabbit]

Originally posted by Malibook
http://moneycentral.msn.com/content/P93626.asp

Would you agree with this strategy, to make $$$:

http://moneycentral.msn.com/content/P100069.asp

[ocean976124]

The US Government is letting the dollar fall against the Canadian Dollar just to ruin my vacation in Canada. I know it...

[RogerRabbit]

Devaluation to head off deflation, very risky business, at best.

Another suggestion on making $$$$:

http://money.cnn.com/2004/12/07/markets/investing_weakdollar/index.htm

http://money.cnn.com/2002/06/03/markets/dollar_winners/

[islandboy]

Boy what a difference living south of the Boarder brings. Canada will hold off on raising rates as it is being hurt by its strong dollar.

The US will hold off on rates as our growth is so low. New jobs creation is below the monthly need for jobs due to population growth - about 150,000/ month.

The US deficits do damage to the US' long term prospects as the world's reserve currency. The pound retained it influence 40 years after Britain lost it commercial leadership. It will take time and depends on how other countries do in comparison over time. The US population growth is strong enough (Europe's is well below replacement) that we at least have some prospect - if we cut our deficits - of being able to pay off our public debt. Unfortunatly, no one is really accounting for the fact that, like Japan, we have been pushing debt onto state and local governements (hiding it) ever since Regan.

With all your natural resources and good budget policies recently, you currency should remain a good investment - AS LONG AS you do not let everything become priced in dollars. You really need to stop the practice of pricing your internal contracts and services in dollars.

[WoodPeckr]

Even drug dealers are giving up on the dollar.
By Daniel Gross
Posted Tuesday, Dec. 28, 2004, at 3:20 PM PT

The dollar's decline against the euro shows no sign of ending. Clearly, currency traders have made a long-term judgment about the relative value of the currencies of the Old and New Worlds. That sounds bad enough. But now there are signs that we're losing some of the most devoted fans of the greenback: drug dealers, Russian oligarchs, and black-market traffickers of all kinds.

James Grant, of Grant's Interest Rate Observer, whose animadversions about the dollar and other subjects are as droll as they are pricey, highlighted the latest indignities to befall the once-mighty dollar in his Dec. 17 issue. (Alas, it's not available on the Web.)

People the world over—central banks, companies, and individuals—like to hold the dollar. It's stable, liquid, easily convertible, and never goes out of style. The dollar is popular in the official global economy—the money that changes hands through computer terminals, checks, and wire transfers. But it has also been extremely popular in the world's vast cash economy. For American tourists, Chinese smugglers, Ukrainian arms dealers, and African dictators, the dollar has long been the currency of choice. The fearful and shady, those who subsist on tourism, and residents of countries with unstable domestic currencies love the greenback. Citing Federal Reserve estimates, Grant writes that "between 55% and 70% of the $703 billion of U.S. currency outstanding circulates outside the 50 states."

The United States benefits greatly from the fact that the dollar is the world's reserve currency. Many of the $100 bills circulating throughout the globe are essentially loans that we never have to pay back. Americans use them to buy goods, services, or other currencies. But many of those bills never return to our shores to be redeemed for anything we make or produce. Instead, they stay under mattresses in Bogotá, circulate in Iraq, and are stashed in bank accounts around the world.

But among a subset of global cash connoisseurs, the dollar is losing ground to the euro—and it has nothing to do with concerns over U.S. multilateralism. First, the euro zone has been expanding with the addition of new countries and the continued integration between Eastern and Western Europe. So there are simply more people who accept and use euros now. Since 2002, the growth rate of euros in circulation has far outpaced that of dollars. Add in the euro's recent strength against the dollar, and the case for Eastern Europeans and euro-neighbors to use euros becomes more compelling. In the 1990s, the dollar was remarkably popular in Russia, where residents had long been deprived of coveted Western imports. But between January 2002 and August 2004, Grant notes, the percentage of private Russian currency transactions employing the dollar fell from 94.1 percent to 84 percent while the euro's share rose from nothing to about 15 percent.

Finally, in the past two years, euros have also become easier to carry, store, and hide than dollars. Generally, the largest denomination of U.S. currency readily available is the $100 bill. But in the past two years, the European Central Bank has started to print 200-euro and 500-euro bills. These larger bills thus allow for the concentration of wealth in smaller packages. At today's rates, a 500-euro note is worth $682.

So if you wanted to, say, hide cash by swallowing it temporarily, euros would the obvious (and more comfortable) way to go. And indeed, as Grant notes, in October a drug mule traveling from Spain to Colombia was found to have an unexpected form of contraband in his stomach: $197,000 in euro notes. The same month, Fidel Castro declared that the dollar, which is tolerated as a means for Cuban-Americans to support their relatives in Cuba, was officially currency non grata and that the euro was most welcome.

For most products, losing international drug cartels and corrupt Third World dictators as customers would seem to be a desirable outcome. But these guys represent part of our long-standing and faithful base. If you think pundits are fretting about the slumping dollar now, just imagine what might happen if we start to lose the arms dealers.

Daniel Gross (www.danielgross.net) writes Slate's "Moneybox" column. You can e-mail him at moneybox@slate.com.
Photograph of euro paper money from Royalty-Free/Corbis.

[onthebottom]

Maybe the Chinese will start pegging their currency to the Euro.

OTB

[Argocock]

The Chinese would never dream of pegging the Yen to the Euro.

The Euro is so high that European countries, which used to be world leaders in exporting manufactured goods(Germany, Italy, France,etc.) are losing ground with each day to China and other Asian countries, even Vietnam is turning into a manufacturing powerhouse now.

The Chinese especially are so much more competitive(CHEAPER) selling their products in USD to the rest of the world they would be foolish to increase their prices by 35% by switching to Euros.

Just look at the Chinese trade balance with Canada, and with all the European countries. China exports 10 times more than it imports from any country in North American and Europe....and the only thing it does import is raw materials...so they can manufacture finish goods and ship them back to us.

[onthebottom]

Originally posted by DonQuixote
Disaster for US. Second rate currency status for $US.
Yes it would be unfortunate - good thlng it won't happen.

OTB

[onthebottom]

A real tragedy, after all the last time the USD was .83 against the CAD was in 1990 - 1992, and we know what terrible economic times followed those years...... The US accounted for 60% of WORLD growth (95-2000) - hate to see that happen again.

LOL

OTB

[Ranger68]

As they say - lies, damn lies, and statistics.
LOL
60%
LOL

[onthebottom]

Originally posted by Ranger68
As they say - lies, damn lies, and statistics.
LOL
60%
LOL

Now there is some mind numbing economic analysis. You must be liberal arts major.....

OTB

[Ranger68]

Okay. Here's one for you.
The US accounted for *12%* of economic growth over the period of time you mentioned.
Not my fault you choose such spurious numbers.
LOL
(Try again with the major though, bub. LOL)

[onthebottom]

Originally posted by Ranger68
Okay. Here's one for you.
The US accounted for *12%* of economic growth over the period of time you mentioned.
Not my fault you choose such spurious numbers.
LOL
(Try again with the major though, bub. LOL)

Why don't you provide a source for that number.

OTB

[onthebottom]

Here's my source:

"Some 60% of the world's economic growth since 1995 has come from America."

http://www.economist.com/displaystory.cfm?story_id=2172052

If you need an account, buy one, it would do you some good.

OTB

[Ranger68]

I'll dig up my own percentage, thanks.
From a much more unbiased source than "the Economist".
LOL

Ah, of course a proper reading of that article points out what the author means - not that the USA is driving 60% of the world's economy - but that the US economy has been growing more relative to everyone else's.
Simple.
Pity you can't comprehend your subscription.
LOL
Naturally they are. At the cost of ballooning trade and budget deficits. Simple economics.
:)

[Ranger68]

From the same article:
"These relative economic gains may be reversed. It is hard to see how the country can sustain both its huge trade and budget deficits."
:)
If you need a dictionary, buy one, it would do you some good.

LOL

[onthebottom]

Listen little insult monkey, I said economic GROWTH, it is who can't read. I'm sure you'll souce that 12% from the same place you get the rest of your nonsense - your *ss.

The economist biased, that's rich.

OTB

[Ranger68]

I'll dig up the Guardian article from about six months ago if I can find it - I suppose *you'll* call *that* biased.
LOL

[onthebottom]

Originally posted by yychobbyist The economist is absoluely biased - it promotes the written word and also tends to kinda sometimes be in support of capitalism.

LOL

Maybe it's tha capitalism he objects to - that would explain the Gardian affection.

OTB

[Gyaos]

Originally posted by ocean976124
The US Government is letting the dollar fall against the Canadian Dollar just to ruin my vacation in Canada. I know it...

Yes, that's the real reason. Bush Jr. has been weakening the US Dollar so American males can go into bigger debt, not get huge incomes to simply pay it off and make fortunes, and to stop their interest in sex.

That bastard tsunami has now halted those plans (see how long it took Bush Jr. to react to try and keep the US Dollar weak as long as possible, until President Clinton finally convinced him that you cannot stop sex).

The US Dollar will strengthen in all currencies this year so the relief effort can yield more money in the affected countries and all of Asia and the world as everything is supplied in US Dollars. A stronger US Dollar is a stronger relief effort (and not to take away corruption as well....a stronger US Dollar not only helps those in need there, but helps the crooks controlling the money). So I expect the Thai Baht to be 42.5 in 2 months. The yen at around 109, the CAD around 1.32 in 2 months.

So be ready for a break and good sex coming, at least the first 6 months of this year. Bush Jr. will try and stop it the second half of the year, but it won't work as the next "scandal" will come to light. Then the election and Bush Jr. and the GOPs will be lame ducks.

It's always good to know that getting laid will help the relief effort more than contributing a dollar to an organization (of course every little bit DOES help, but actually being there, making friends, helping re-build and getting relief at night with girls sounds a lot better than hitting pot holes in the USA, getting mugged by US terrorists from ghettos at night by guns and knifes, or being forced to watch jobs getting shifted overseas....hell, I'll go "overseas"!). Bush Jr. said ALL Americans should contribute something to this relief effort.

Okay, strong US Dollar and I'm in. Profit, sex, help.

[ice_dog]

Bottom fishing is always tough as you may get hooked. But I have the feeling that the USD is bottoming out. It is not out of the woods yet, but it will probably trade in the band between 78 cents and 83 cents for the remaining of the year, unless the crude oi price shoots up to $63 and beyond, which is unlikely at this time.

I am not saying that it is time to buy USD, but I will definitely not to short it.

[Malibook]

Do you have even the slightest idea of what you are talking about?

So if they suggest a rebound in the Canadian dollar, where is the economy that will outperform the US with the same safety level?
EBS


What you are seeing is just a minor market correction...just like ebs said. Some dollar traders are dumping the US greenback for the funny coloured CDN money because our interest rate is higher and that is basically the only reason...


Live mid-market rates as of: Monday, May 21, 2007 - 11:36:11 AM EST

1 CAD
Canadian Dollar
1 CAD = 0.9222 USD = 0.9222 USD
United States Dollar
1 USD = 1.0844 CAD

This is quite the "minor market correction"!!:p

[Questor]

Live mid-market rates as of: Monday, May 21, 2007 - 11:36:11 AM EST

1 CAD
Canadian Dollar
1 CAD = 0.9222 USD = 0.9222 USD
United States Dollar
1 USD = 1.0844 CAD

This is quite the "minor market correction"!!:p
Thanks for bumping the thread. Its interesting to look back and see how wrong some people were in their predictions. I just wonder how long this can be sustained. It seems apparent that the CAD is riding on the strength of the Alberta economy, particularly the oil sands development. Meanwhile the job market is going into a tailspin in Ontario with the manufacturing sector tanking badly. Our economy is so dependent on export to the US, with the exception of oil and natural gas, it seems like the high dollar is going to bite us in the ass and bring a recession. Even though it will make my next trip more affordable, the trend can not be good for the long term health of the economy, even if the Alberta oil patch executives are happier than pigs in shit.

[onthebottom]

Thanks for bumping the thread. Its interesting to look back and see how wrong some people were in their predictions. I just wonder how long this can be sustained. It seems apparent that the CAD is riding on the strength of the Alberta economy, particularly the oil sands development. Meanwhile the job market is going into a tailspin in Ontario with the manufacturing sector tanking badly. Our economy is so dependent on export to the US, with the exception of oil and natural gas, it seems like the high dollar is going to bite us in the ass and bring a recession. Even though it will make my next trip more affordable, the trend can not be good for the long term health of the economy, even if the Alberta oil patch executives are happier than pigs in shit.

Hey, come on down, do some shopping, take in a show..... spend all you can down here.

OTB

[hunter001]

They should ajust the price of Oil for the loss in value of the American dollar.

One of the reasons for the price of oil rising is the dropping American dollar. As the American dollar drops the oil companies just raise the price of gas based on the rise in the price of oil.

Here in Canadian no one challenges the fact the prices aren't increasing as quickly as in the US because our currency has been rising in comparison. We just get made in US oil pricing...

[Questor]

Hey, come on down, do some shopping, take in a show..... spend all you can down here.

OTB
Thanks for the offer, but I think I will decline. I have managed to avoid the US, since the invasion and occupation of Iraq. I won't even fly on a US airline, even though it is cheaper than alternatives. I like to avoid supporting the war economy when possible.

My upcoming trip is somewhere that requires the conversion of CN$ to US$ before it goes to the local currency. Since the local currency mostly fluctates with the US$, our $ goes farther when the US$ goes down.

[onthebottom]

Thanks for the offer, but I think I will decline. I have managed to avoid the US, since the invasion and occupation of Iraq. I won't even fly on a US airline, even though it is cheaper than alternatives. I like to avoid supporting the war economy when possible.

My upcoming trip is somewhere that requires the conversion of CN$ to US$ before it goes to the local currency. Since the local currency mostly fluctates with the US$, our $ goes farther when the US$ goes down.

You're missing out on a lot of fun down here..... can't say I blame you on the airlines though, all of ours suck.

OTB

[frasier]

Thanks for the offer, but I think I will decline. I have managed to avoid the US, since the invasion and occupation of Iraq. I won't even fly on a US airline, even though it is cheaper than alternatives. I like to avoid supporting the war economy when possible.

My upcoming trip is somewhere that requires the conversion of CN$ to US$ before it goes to the local currency. Since the local currency mostly fluctates with the US$, our $ goes farther when the US$ goes down.

You seem to lead a rather complicated life. I wish i had the time to worry about those things..I am sure the US economy feels the pinch of your actions.
Canada is the largest US trading partner...be careful what you wish for..;)

[papasmerf]

The US dollar began to slip shortly after Bush too office in 2001. As you will recall the bulk of the EU was upset over Gore's loss. I believe they simply began investing in other than US companies and that began the slide. The Canadian dollar was bolstered.


Now conversely should the EU candidate for President win you will see a reversal.

[hunter001]

The "Fed" has also beening printing money at an alarming rating. That also leads to a large hit on the US $.

[emvee]

Let's let the loonie trade on par with the USD. How long do you think it will take before Canada looks like Argentina?

Apparently a long time, but I did have a nice Mendoza red wine with my steak this weekend.