Gisele, Jay Z, and currency
Posted on November 6th, 2007 – 4:11 PMBy Kara McGuire
Imagine my surprise when I clicked on the WSJ’s Real Time Economics blog and found a link to Chaska Herald writer Mark Olson’s insightful blog entry about rap star Jay-Z flashing a stack o’ $500 euros in his latest video.
He writes:
It
8 Responses to "Gisele, Jay Z, and currency"
The dollar can continue to fall until the market corrects the US trade deficits. In addition, if dollars held abroad begin to return to the US in anticipation of a weakening currency, it will continue to pressure the dollar.
Owning a dollar is like owning a share of stock in the United States government. The support for the dollar comes from its scarcity; as dollars have become less scarce with low interest rates and liberal money supply expansion policies, there is little reason to expect the dollar’s decline to continue until the market corrects for these imbalances.
If the US government becomes unable to repay its debt without substantially increasing the money supply, it will further pressure the dollar. Finally, private debt tends to pressure the dollar as foreign investors who lend money to those in the United States eventually want goods in return for the dollars they lent. This causes foreigners to compete for goods Americans would have purchased, decreasing the purchasing power of the dollar.
I’m investing in expectation of continued declines in the dollar.
“When I start seeing rap stars throw around the Canadian Loonie, then I know our economy is really in trouble” LOL funny
When I was in Canada this summer (late August), most places just took US dollars interchangeably for Canadian dollars. I think it was $1US to $1.02CA at the time, or something like that. They just didn’t bother to convert anything.
We were in France this fall and the feeling there was that the high value of the euro relative to the dollar was hurting French business. Not necessarily the tourism, but things like Airbus sales of airplanes due to the relative cost being higher than buying a Boeing airplane.
I think for our trade deficit, the low dollar will be a boon, but no one likes to see the dollar’s value reduced, even if we do want to see the value of Chinese currency increase.
Ryan, nice post.
This morning, Bloomberg & WSJ are reporting that China may diversify its foreign reserves, which could have a further negative impact on the value of the US dollar. On the positive side, WSJ also reports that China is seeing inflation in energy & food costs. Seems like this could boost demand for US goods (agriculture anyway), helping offset the trade imbalance & thus helping support the dollar.
Regarding personal investing, like Ryan, we are “investing in expectation of continued declines in the dollar.”
Right now, I’m dreading the dollar’s decline, especially against the euro. We’re looking to relocate to Finland in the next 4 months, so anything in the bank and the home equity are now crap compared to what it used to be.
For a number of years, I had been predicting that something was going to happen, especially since a ton of people were using houses like piggy banks and not thinking about the consequences. Well, now my predictions have come true. The subprime crisis is happening, but it’s affecting everything. I just hope the dollar somewhat recovers in the next year!
Economies move in cycles.
I hope the dollar goes lower.
