Ok, first a note about the rules: only myself, werekoala, warthur and jgants can write on this thread. Anyone else, I ask you to please create a new thread if you want to make commentaries.

The rules for the panelists: You cannot bring up topics; you can only talk about and disscuss topics that I bring introduce. You can respond and discuss with me or with any of the other panelists.
I declare a new topic open, and declare it closed and move on to the next topic; when I do the latter, you can NOT keep talking about earlier topics, except inasmuch as it somehow relates to the new topic.

The thread itself will last for 150 posts after which we'll be done; and depending on its success I might choose a whole new panel and go at this again.

So, our first topic for this evening: The american dollar is in the absolute and utter crapper; to the point that the OPEC nations are bitching and moaning about it because of the petro-dollar. The euro seems to be gaining on the dollar at every turn.  For some countries, this is disasterous, for others (like here in Uruguay where the national debt has actually seen a massive reduction in its real value just because of the weak dollar) it is a boon. But what will it mean in the bigger picture? Is it a blip, or how things are going to be from now on? A minor and unimportant adjustment, or the collapse of the american empire or possibly civilization as we know it? Hulaballoo, or Fooferaw?

Jgants? Werekoala? Warthur?

RPGPundit

The dollar is not based on anything but confidence - confidence in the United States, specifically. THAT is its biggest weakness. We've been the country that the rest of the world has envied for the better part of a century now; we had the manufacturing base, the technological innovation and know-how, and the moral standing to be taken seriously by people worldwide. Love us or hate us, they had to respect our abilities.

Now, not so much.

We can't make anything. We aren't respected. Nations that hold huge portions of our debt (such as China) are seeing this as a chance to squeeze us - the first chance the rest of the world has had to bring America to its knees since the 1940s. And I think they're taking it.

No conspiracy, just a chance to take the Big Guy down a few notches.

Will it continue? I say yes. When you have people like freaking Giesel Bundchen saying she dosn't want to be paid in dollars anymore, and rappers flashing Euros in their videos, then you know its a trend that will continue.

Will it mean the end of the world? Hardly. Will it mean the continued decline in the value of the dollar? Most likely. However, I say that might not be all bad. Why?

Because as the dollar drops, American goods will become cheaper. It could lead to more balance in our trade deficit, a possible return of some of the manufacturing base that we have lost over the years. A return of outsourced jobs to the US as it becomes cheaper to employ skilled Americans instead of half-competent Indians. I know that in order for that to happen, of course, the dollar will need to fall a good bit farther, and that means inflation and impending recession. But it won't destroy us, necessarily.

My bigger concern is what this trend, coupled with a retiring population and a depletion of the funds invested in 401k's and such, will do. THAT could cause much bigger problems as capital is removed and the dollar declines.

Will we weather it? Yes. Will it be pretty? Not so much.

Ok, I'll admit straight up that I'm not an economist and only have a hazy idea of how money works, but here's my best stab at the topic.

What we're seeing isn't a brief blip or a sudden crash - it's been happening too gradually for that. The dollar has been gently getting weaker and weaker for years; it's only recently that the news media in the US and worldwide has started to really shout about it, because it's slipped past some pretty important benchmarks - it's now worth less than the Canadian, less than the Euro, and less than 50p in British money.

There's a couple of factors behind this. There's the economic ones, of course, such as the wave of foreclosures and the aftereffects of such things as the Enron scandal and people getting ever-more nervous about the US's budget deficit. On the other hand, some of the people advocating switching over to Euros are doing so for brazenly political reasons. North Korea switched from dollars to euros in currency trading ages ago. In OPEC, Venezuela and Iran are throwing their weight behind the push to switch to the Euro at least partially because they have long-running beefs with the US.

That probably shouldn't be surprising. On the international stage, the US simply isn't cool any more, for all kinds of reasons. Out here in Rest of the World, we used to like the US - even people who strongly objected to American policy could often, unless they were actually crazy-left down-with-America wonks, be cajoled into admitting that the US had its heart in the right place and was often a force for good. We might giggle at Clinton's sex scandals, but we'd also be glad when the US prodded and poked us into overdue interventions in Bosnia and Kosovo. That's not the case any more.

Ultimately, the value of the nation's currency is to an extent tied in with the prestige, glamour, and respect the nation commands on the international stage, and sadly many nations and investors simply don't have much respects for the United States these days. Ordinarily, this wouldn't quite be enough to wreck the value of the dollar - economic self-interest frequently wins out over such disapproval - but when it's coupled with a US economy which appears to be weak at the moment, the two tend to feed off each other and it's the dollar that ends up suffering.

This could, incidentally, be the Euro's big chance to make a splash on the world stage and join the dollar, pound sterling, yen and so forth as a major currency on the exchanges. Here, I suspect, the Euro has benefited from its perceived neutrality: unlike other currencies, it's not intimately associated with any one country, which combined with its relative good health at the moment makes it the ideal "currency of protest".

Quote from: WerekoalaThe dollar is not based on anything but confidence - confidence in the United States, specifically. THAT is its biggest weakness. We've been the country that the rest of the world has envied for the better part of a century now; we had the manufacturing base, the technological innovation and know-how, and the moral standing to be taken seriously by people worldwide. Love us or hate us, they had to respect our abilities.

Now, not so much.

We can't make anything. We aren't respected. Nations that hold huge portions of our debt (such as China) are seeing this as a chance to squeeze us - the first chance the rest of the world has had to bring America to its knees since the 1940s. And I think they're taking it.

Wow, it looks like we actually agree a lot on this.

What do you think of the idea that the dollar, previous to the current slump, was actually over-valued due to the international pre-eminence and respect the US enjoyed - that the actual state of the US economy didn't justify the high value assigned to the dollar, but people liked it anyway because the US was perceived as stable, powerful, and here to stay? I know you say it might end up help manufacturing by making American exports more financially viable, but do you think when it stabilises it will be at a lower, more competitive level?

Over here in the UK there's been a certain amount of concern for a good while about the strong pound. It's superb for buying stuff on E-Bay and what have you, but it's not great for manufacturing for all the reasons you cite.

Before, when there wasn't a viable global currency to compete with the dollar, I think the weakness could have spelled trouble on a global scale. With the Euro to compete, I think the rest of the globe can weather it quite nicely. And that is why the US won't go belly-up because of a weakening dollar - unlike the Great Depression, we won't take everyone else down with us this time. Which is good, because it means a faster recovery.

The dollar was overvalued because it was the only game in town. Now, not so much. I honestly thought the Euro would tank when it first came out, but as it held on to its value and the dollar began a slide, I think its become a much stronger currency. Clearly - after all, everyones going off the dollar and on the Euro. We'll start to see more capital investment in the US from Europe now, because it'll be affordable.

Now, the problem with that is - the Euro isn't based on anything but confidence either. If something happens to shake that before the dollar bottoms out and begins to recover - then we've got problems.

Solution: Gold standard. Bring it back - someone, anyone.

I have to disagree that it's a matter of people's confidence in the US and its international policies.  I doubt very much that whether or not people agreed with the invasion of Iraq, that it had much, if any, direct impact of the value of a dollar.

On the other hand, I do believe that the economics of the invasion in Iraq have a lot to do with it.  We are spending billions of dollars to fight the war and for the country's reconstruction.  And that means piling up our national debt.  It's the debt itself that's driving the force of the dollar downward.

The other important factor, the way I see it, is the trade gap.  We've had a huge trade gap for years, and it continues to get worse.  As long as we keep importing more and more junk from China, and produce less goods here in the US, we're going to have problems - both because of the economics and because they seem intent on poisoning us.

So what we need is to improve the balance of our budget, and reduce our reliance on imports (while finding ways to increase our exports).  I have a big list of ideas on that, but that would kind of be off topic.

Quote from: WerekoalaSolution: Gold standard. Bring it back - someone, anyone.

That's a nice sentiment, but I'm not sure its very realistic.

Besides, these days it may make more sense to use an oil standard, LOL.

Although, if we could move back to a gold standard (or some other standard), it would be a step in the right direction towards an actual world-wide currency.

Personally, I'd like to see a single currency unit used for the entire world, with no physical form at all.  Physical money and exchange rates are based on  antiquated notions that no longer apply in the 21st century.

Ooo. No, I disagree. Currency needs to be based on SOME material that has value in and of itself. Paper currency based on nothing but faith is always a risky proposition. And yes, I know, the value of gold is only based on what people think its worth (well, not entirely as it does have industrial applications), but what would you rather have - a pocket full of paper or a pocket full of shiny metal? Gold is valuable because its pretty. Paper is just paper. There's a reason gold is worth over $800/oz these days, and its not all attributable to the weakening dollar.

Actually, the entirety of Economics is based on smoke and mirrors. Anything beyond barter is essentially "magical thinking" in terms of actual value. It only works as long as people keep believing it works. It would make me laugh if it wasn't so scary.

Also, massive budget deficits are partially caused by having a floating currency with no intrinsic value. If you have to go dig up more gold to spend more money, that's alot harder than just printing more money. Therefore, you tend to spend less as a whole, simply because its too hard. Or you borrow it from people who have more gold than you do.

Quote from: WerekoalaActually, the entirety of Economics is based on smoke and mirrors. Anything beyond barter is essentially "magical thinking" in terms of actual value. It only works as long as people keep believing it works. It would make me laugh if it wasn't so scary.

That's actually my point.  Money is a smoke and mirrors show, always has been.  I just think it's time to pull back the curtain.  I think we don't need cash money anymore just like we don't need paper airplane tickets anymore.

I'm not opposed to having a standard that my electronic units of 1s and 0s represent.  I'm opposed to the economic wastefulness of cash money.

I definately agree with you that having a gold standard (or even silver standard) would make currency fluctuation less of a problem.  However, we would still need to improve our own economy through a reduction in the budget and trade gaps if we want any real stability.

Ah yes, the Gold Standard: hallmark of the vanguard of 19th century thinking and 21st century looneys.

RPGPundit

Quote from: jgantsI have to disagree that it's a matter of people's confidence in the US and its international policies.  I doubt very much that whether or not people agreed with the invasion of Iraq, that it had much, if any, direct impact of the value of a dollar.

Its pretty clear that confidence in the government of the US as a whole, however, has an effect on things like the stock market, and currency trading.  These things are all connected.  So the US being seen as either incompetent or unstable creates uncertainty that harms the US economy.

RPGPundit

As opposed to.... ?

Quote from: jgantsPersonally, I'd like to see a single currency unit used for the entire world, with no physical form at all.  Physical money and exchange rates are based on  antiquated notions that no longer apply in the 21st century.

I think this is fine as an ideal but unlikely in reality. A single currency unit would effectively require nations to give up a large amount of control over their economy, and the potential of inflation to go crazy would be extremely dangerous - effectively, economic problems couldn't be "isolated" in single countries. Robert Mugabe screwing up the economy of Zimbabwe would have knock-on effects all over the world, for example. It would also mean that people couldn't make stacks of cash from currency speculation, so the money markets would frown on it.

Drifting toward geekier subjects, I always liked Jack Vance's idea of a currency standard based on labour - the basic unit of measure would be the average wage for 1 hour of unskilled manual labour. I have no idea how such a thing would pan out in reality, however.

Quote from: RPGPunditIts pretty clear that confidence in the government of the US as a whole, however, has an effect on things like the stock market, and currency trading.  These things are all connected.  So the US being seen as either incompetent or unstable creates uncertainty that harms the US economy.

True. And the less goodwill people have towards the US, the less keen they are to do them a favour - and so the less likely they are to hold onto the dollar when its decline in value begins to hurt them.

Ok, final words on this topic: It seems pretty clear to me that the US dollar is in a mess because at least some one is benefiting. So I figure its going to stay this way as long as there is that benefit to be had.

Sucks for the average american, good for certain other people.

Next up: We have the Bush administration currently claiming, on the one hand, that the President has the right to spy on anyone he wants via the phones, and that its not criminal. On the other, they're lobbying to try to grant an "immunity" to the big phone companies that all bent over to the government and let them be used for said spying.  If no crimes have been commited against the American people, why the fuck would you need to give immunities?

Does anyone really want to defend either the wiretapping or the proposed immunity?

RPGPundit