Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Bilow who wrote (15353)	1/2/2002 10:28:02 AM
From: Hawkmoon	Read Replies (2) \| Respond to of 281500

there is too much US dollars held overseas. Bilow, this is one of those "is the glass half-empty, or half-full" debates... What they call rainy day SAVINGS using "safe" USD denominations, is what we call a currency debt, since the bearer can request payment in some other denomination upon demand. THUS, THE KEY is really what form of conversion will be chosen, another currency, or some precious metal. Right now, there is a strong tendency to convert foreign currencies into USD. Now the dollar can decline in several differents ways. Either investors find greater safety and value in another currency or physical asset, or they find it in precious metals... My argument is that, without fundamental changes in economic policies in Europe and Japan, they will not be able to compete with more vibrant economies, including the US. And even the US has to watch out for folks like the Chinese, who's demographic make-up alone, could make them an economic powerhouse that could rival, or replace the US within several decades. As for balance of payments, I still recall when the European economists and bankers were croaking about the trade deficit and how it could lead to the crash of the USD and the Euro was take over. But here we are 2 years later and the Euro has declined by some 20% against the USD, or put another way, dollar denominated products now cost 20% more than they did 2 years ago. And European goods cost 20% less here in the US. Can you imagine what the European economy would look like were the USD and Euro both trading at equal valuations? And you still have to remember that those dollars obtained from selling us stuff are being placed back into US denominated assets, like stock and bonds. Relatively few other liquid assets are appreciating except the USD. So we're "borrowing" on money they are depositing back into our economy from stuff they have sold us. And when that cycle should bust, what will lose value are those foreign savings, whereas Americans will be able to effectively devalue the cost of their loans and pay back these foreign depositors in cheaper dollars. Now I have no desire to see the USD utterly collapse, nor do I predict that event (unless all currencies collapse in the face of global hyper-inflation). But neither is this like in Japan, where the people there hold some USD$12 Trillion in domestic savings accounts for use in their retirements, and where any devaluation (inflation) of the currency will directly impact the value of those retirement assets. There's something to be said for being a debtor, when your debt holders are foriegners who lack the military power to force you to pay up. Hawk