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Aaditay

Weak dollar, ailing economy. Could this all be due to the disapproval of administration's policies?

Aidtopia:

Administrative Policies: heed this warning, this type of blogging will not be tolerated.

Aidtopia:

Ok it will be tolerated. I have nothing to say about that anyway. I'm new here and have no position from which to speak on these matters. My apologies before a reasonable time runs out in which to apologize. Mea Culpa, mea culpa down the road on which we travel....

Jossie:

You are right Spyder. Especially opinions against God-fearing Patriots!

MamaV:

Hello Cemil, It is so good to see you. I for one have missed you. :) Once again you have hit the nail on the head. It is scary to think that the other nations have such an affect on what the U.S. does or doesn't do, and your right. I don't think in other time of history has there been so much influence from outside the U.S. The American people better wake up and realize this is so much more important then race or gender, it is about who can lead us out of this mess. Take care my friend :)

Cemil:

Thank you MamaV, Its so good to see you too.
I know that all Americans are as proud of their country/nation as other world nations are. But that does not change the fact that the US has become a hostage to its policies on global capital.
As I have commented on Lorelei's answer, US has thinned itself out in the financial area, and now the world sentiment is turning against the US dollar, the financial might that once enjoyed a rampant demand. The real threat is that the dollars the US has exported over last 60 years following Bretton Woods could now come back haunting the US economy.
Today there are more US dollars in circulation abroad than at home, and likewise foreign investors, economies and sovereigns abroad hold more US dollar denominated financial products than domestically held at home.
So even a fraction of these assets constitute a real threat to the US economy. Should some of this volume to come back to the US to purchase goods and servoces this could mean an unimaginable hyperinflation for the US economy. Should these assets be dumped on the world markets this could mean many financial failures much worse than the S&Ls of the 70s.
Thus I know that it is hard to accept the dominance of global capital on the US economy/politics but one should also consider the stakes foreign interests have in US financial assets.

Jossie:

So we have a choice: a strong White man OR a woman or a...well, I guess I can't go THAT far, even here. The SUPEREOR willRULE!! Therest wipll die and burn in Hell.

Swifty:

i think just plain american corporate greed and bad business is to blame. they don't care about the average worker having decent work when they can get children in a third world country to do it for near nothing. think about it. no (one) president didn't do that although i think one president should do something about it and corporations need to stay out of politics so people can afford to live in this country and have jobs in this country before it is too late.

Cemil:

Hi Lorelei,

thx for your answer. But weak dollar is not because the US economy is weak, it is because people who hold US dollar assets perceive that US economy's future is bleak and thus they start selling those assets putting a pressure on the value of the dollar worldwide.

Now who owns those assets? Nearly 2/3 of the total US debt which is over 9 trillion dollars is owned by China and Far East economies, Russia and other OPEC countries. Again as for other USD denominated financial assets held by such sovereigns and countries amount to some 5 trillion dollars. Together they amount to over 10 trillion USD.

This is a tremendous trust extended by the monetary world to the US administration, and they don't like their assets to lose value due to aggressive policies.

As for the US corporations, they operate no different than the nonUS ones since by now they are all global corporations and no longer US corporations. They are mostly owned by other nationals and they just happen to operate out of US tax base.

Swifty:

there was a time when the work was strong in this country, the country was strong. we need to bring back this strength and stop letting it slip through our hands like sand through our fingers and it will get strong again.

Cemil:

corporations today became multinational, money went global, only taxes are still paid locally in the country of respective operation. many socalled US giants have operations abroad, creating jobs and livelihood for those countries. their shares are owned by foreign funds or sovereigns. production goes where it makes more for the corporation and not for the nation.
thats what globalization caused. its alternative is isolation and protection.
my point is this Lorelei, US has been under attack for quite some time now, but not that of military but financial arsenal ...

Swifty:

very true but i guess the multi-trillion dollar question is, what are we going to do about it if anything and what can we do about it?

Cemil:

Well I suggest that you read my comment #9 to Penny. What we should do is to reduce the US dependency on foreign capital, on foreign credit (not foreign oil or energy). the US can squeeze its belts and save energy but it can not grow a cent without capital and credit which itself is no longer capable of generating...
think about this. how did this great nation of capital and credit became a hostage to foreign capital, foreign credit? Should China, Russia, India or OPEC members and alike do not lend, extend credit to the US, there would be no growth, no health insurance, no jobs, nothing... the US should immediately see/address this horrendous flaw and remedy it asap.

Billarysdone:

Blog or not I always like reading your Q's. It's been too long. I think the dependency on oil and the illusion of being a wealthy nation is catching up with the US. Many Americans live off their credit cards, finance their cars, and mortgage more than their homes are worth. Many have debts which exceed their assets. The time to come clean has come and the future does not look too bright no matter who is at the helm. The banks can't pay their debts because the debtors can't pay the banks. Many Americans have a sense of entitlement and I suspect the majority are waiting on the government to bail them out. I see big problems ahead, but am quite enjoying the weak dollar.

Cemil:

You know what the weak dollar will do to the US economy though? More foreigners will come to purchase US goods and services. Fine. At first this is gonna boost production and create more jobs, but only until capacity utilizations reach 100%. As capacity is filled and no more new is coming onstream then prices will start to soar. Interest rates will go up making the currency more vulnerable and weaker. As more and more US dollars return home to purchase US goods and services, US inflation rates will hit at first, 20%, then 40% and then 80% and onward. These are ranges that the US consumer is never used to. This could create an economic chaos. So has to be prevented at all costs.
This means the adminstration will have to build trust and consensus abroad before a domestic one is reached. No one in the US would want the dollars the world uses as currency come back. Certainly no one in the US want the US dollar denominated financial assets be dumped back onto the Us soil.
That is the power the global capital holds today.

Billarysdone:

I agree, but with the weakening dollar many including the company I work for are shifting to the Euro. It's a big blow to receive all your income in USD and have to convert that into Euros to pay your employees. Some of our customers are not too happy, but most are going along fine with the transfer of currency. We would go probably go broke otherwise. Any failing in the US economy will certainly affect the world economy. For me it's great since I have a daughter in school in Boston. The Euro trading at nearly 1.6 these days!

Jodi:

There are many factors involved in any manifestation. The world does not revolve around the USA and it's problems, even though in a global political and economic arena all are effected by the actions of one member.

Swifty:

very perceptive. this is a usa big headed problem and not a world wide problem and the usa can fix their own problems if they only would.

Gbob_north:

So the world doesn't revolve around the US, but the US president can be blamed when other countries go down with us...so we can't take credit for making things better, but we can get blamed for things getting worse...great day to be an American isn't it?

Jossie:

The world DOESrevole around the USA. We are Supereor.

BMC:

"US is going through rough times, maybe the toughest times of her history, both economically and politically." You are kidding right? There is not one single person who knows the history of the great depression who could agree with you on this one. Do you recall the late 70's and early 80's at all? I don't like where we are any more than you do especially since my business is held by fuel prices but get real, this isn't the first time we've been here so until they start handing out coupons to buy gas and farm tractors your comments make you the very fear-monger that you speak of. I don't care for Bush that said I can trace the origins of where we are today back to the Clinton administration. The system started to fall apart long ago but this is not by any means the worst the US has suffered, it's not the fault of one man or one administration.

Swifty:

good one penny. i love your answers and this one in particular.

Cemil:

I am citing here the facts Edwards kept mentioning in his campaign until few months ago, that of homeless, underemployed, uninsured, etc. I don't think that bulk of voters would think that the economy would be the number one issue in this election had it not been for the rough times. Plus given the size of the US economy/debt today and the stakes foreigners have in the US economy, I think the health of the US economy is a much more serious concern for the global capital than at the times of the depression and back in the 70s.
And please bear in mind that my analysis covers weak dollar and ailing economy. Greenspan and Warren Buffet also acknowledge these facts making them fear-mongers as well.
I am not saying that the state the economy is in today is the making of a single adminisration. On the contrary. It is a collective effort of many past adminisrations, but the matter of the fact still remains. The US dollar is weak today not because the US economy is weak, but because the global capital has lost its confidence, its trust, in the adminstration's policies and are looking elsewhere for stability and refuge.

Aidtopia:

Thank you Penny.

Swifty:

maybe someone should have a little chat with the media then also.

Aidtopia:

I know one thing, McCain won't let the same thing that happened in Vietnam happen in the Middle east. He will supply our troops with enough to get the job done or get out. That man is no stanger to the incorrect and the correct way to fight / win a war. It's too bad the middle east has never taken responsibility for its own problems, There has been an ongoing state to state battle between neighboring countries for so long there is no memory or peacetime within the generations to generations. Each neighboring state including Turkey/Greece, Iraq/Iran, India/Pakistan, go on down the line and you find no hand in hand resolution to any conflicts. The once sparse and undeveloped country of Dubai is now building itself up to a great palace and stomping ground for the rich and multination headquarters huge monetary concerns. I think that is fine, what do you think will happen when the revolutionary jihadists see that local as the unsacred brother and proceeds to attack its shore (it wouldn't take but one good one to wipe that small kingdom out). The real problem there ( middle east ) is the fomenting intolerance of differences, and greed, and the resulting natural uprising of oppressed peoples. When the midddle east starts taking care of its own then the US will not have to be and won't be. I don't think we should bother trying to liberate people that don't want liberation. Perhaps you would like to see the heads of state with billions upon billions oil bucks flying around in jets and wallowing in bathtubs of gold with billions and billions of down trodden people with no education and no social services and no way out of either. The inequality created by the actions is the creator of revolutions and the problematic scource for focusing control issues upon a populace that is not allowed to help themselves. MIDDLE EAST take care of your own problems. McCain will resolve the issue as far as the US is concerned, yet the middle east will still have to deal wit

Aidtopia:

Forgive the few typos, its all off the top of my head and quick unchecked spelling.

Swifty:

yes they will have to take care of their problems and as they should (the middle east) weather we are there to help them or not. i don't think that we can help but for so much and the rest is up to them. i believe in mc cain as well for the same reason that you mentioned and also because i think he is a naturally good natured man who will take care of our domestic issues as well as he is just a down to earth good guy and it would not be in his nature not to take care of the domestic issues. just because he is not a good show boat doesn't mean he won't make a good president.

BMC:

Cemil, REALLY? Somewhere in the far reaches of my feeble memory of history classes there was something about banks being closed and our money having to be backed by gold.... dollars being reprinted one day, what were those, silver certificates???? The whole thing is a bit sketchy now and I'm certain we didn't have that whole global economy thing going on the same as we do now but.... no, sorry, really can't agree with you on this one. I might have figured out the problem though, it may have something to do with you listening to Edwards. Of course we're in trouble! Of course the campaign is running on economics, it ALWAYS runs on American's top priorities.... I'm really not getting your point.

Cemil:

What I am saying is that when the US became the sole super power in the world, so did its politics and economy (its money was made the sole superpower much earlier right after the 1944 Bretton Woods Agreement).
This is why everyone in the world today has reasons and justification to influence the US economy and politics, not just its monetary base. After all the US is the arena where the ground rules are laid for any subject and the world's fate is decided in general. Most countries in the world look up to the US for every move they make. Nothing happens outside the implicit consent of the US - at least that is the general belief.
So, this is why the US dependence on 'foreign credit/global capital' has become the key issue. This dependence is threatening the very fundamentals of the capitalism and the free trade. Contrary to common perception, growth in most industrialized nations is not based on ‘energy independence’ per se, but on ‘capital/credit independence’. In other words energy dependence is a myth, but capital/credit dependence is real (if you have capital or credit you can buy any energy at any cost, so the US doesn’t have energy dependence but instead has credit/capital dependence… think about it).

Aidtopia:

This site is not a blog site? You have just asked a short question and imbedded this site with a political blog. check the Code of Conduct on this.

Cemil:

Sorry if it took a long explanation for a short question. But this is not a blog text trust me. If you do not care to read and answer it fine, no problem.

Aidtopia:

OK, I'll answer your question. If that is what it is. In the last line of your blog, you state, This is my feeling almost akin to an analysis. What is your opinion? Correct? My opinion is that your perspective is that of someone who is not from this country and has a completely misinformed concept about what we as Americans are. If feelings, and akin to analysis, is not a statement more than a question. You are asking for someone's opinion on your opinion, which by the way I think is full supposition and broad and sweeping generalization with no foundation leading one fact into another. If you are asking what do I think about your reasoning faculty, I would say you are off base by a long shot. I think the sort of rhetoric that you are using is sophomoric and full of an attempt at the outsiders propaganda to instill the concept of weakness into the liturgy of an otherwize good day. Istanbul, Is stand bull.

Jack:

It weak economy is more of a symptom of the global condition than simply disapproval of US policy. It certainly does make a convenient excuse though. ;-)

Cemil:

Hi Scott. Let me clarify few concepts I brought up here;
'weak dollar' and 'weak economy' are not the same, they are two different things.
'Weak dollar' says that the dollar is not demanded abroad and thus its respective price (exchange rate) is falling. Yet this does not mean that the dollar's purchasing power is eroding (that is in the US).
'Weak economy' on the other hand means that the economy is not healthy due to inherent/structural deficiencies and hence not growing properly.
In that sense 'weak dollar' is indeed the symptom of a worldwide ‘eco-psychosis’ which creates a circulation pathology. In other words, demand failure shrinks US dollar volumes abroad and prevents its free circulation there. Without that base demand, the US dollar ends up vacating those markets and returns home (the US) where it is naturally converted to 'goods and services'.
In healty markets and times, the US dollar is seen as a good investment abroad and the US dollar denominated financial assets sell based on the underlying economy’s (not currency's) perceived strength.
As for those who disapprove the US policy, the natural outcome is ‘to disown’ those policies. This translates itself to disowning the US dollar and not wanting to hold any US dollar denominated assets. Hence such disapproving investors start dumping both the currency and its generic assets on the world markets.

Cemil:

What I'm saying is that you don't need the whole market think the same way to move the market in a particular direction. Few people may be disapproving the US policy but they may be strong enough to move the market in the direction they want. And that creates more than a mere convenient excuse...

Samuel Deva:

By and large,ours is "boom or bust" economy and the added bonus is the current admin's attitude...

Cemil:

You are right but since the globalization, one key parameter has changed significantly and that is the "world"; it just got smaller and smaller and no longer there is a "world" out there to cushion the boom or bust of the US economy. Now the whole world plays along with the US economy, taking the boom or bust to its extreme... thats scary.

Ed:

No. It's disapproval of the debt that the Federal government has piled up for the past 50 years.
While this administration has run up more debt than even LBJ (who was the previous record holder), the problem goes back a lot longer than that.
It's payback time for all the borrowing the federal government has done.

Cemil:

Hi Ed, point well taken.

Just as I commented to Penny (#9) the US has a capital/credit dependence problem. The US government is today extremely dependent on foreign capital/credit.

Every year it has to borrow more and more to meet its current domestic operations. But domestic funds production is limited since most of such funds go to finance businesses and the economic growth.

So the government has to resort to foreign sources for its funds needs. Without those foreign funds, it can not pay its employees, it can not build the future of the country, it can not govern or function.

But this situation is not to unique to the US. Foremost EU countries (UK, France, Netherlands, Germany) are all heavily leveraged and dependent on foreign capital/credit as well.

In fact EU combined generates 3 times more demand than the US alone for foreign funds. With energy prices going up the inflation in these countries go up too.

As a result fund prices go up creating fierce competition or such funds.

Who has the funds? Those who has the riches like the oil and gas rich Russia, Iran, (other) OPEC countries, China, India, Japan, Far East countries, etc.

Very grim picture ...

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