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gwen
gwenix
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April 2011
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gwen [userpic]
Oh, American dollar, how far we fall...

Yah, uhm, ouch.

Well, currently, that page looks like this:



Firstly, I apologize to my non-USA friends who are paid in US currency for various reasons; they are now being effectively much less.

But really, I just want to gasp. The dollar is what the USA proverbially banks on -- it's our political power, really. The dollar falling this far predicts very bad things for the USA.

Current Mood: quixoticquixotic
Comments

Yesterday, the bank teller told me that I was getting less in CAD than my USD check was for. She was kidding, but only barely. :/

At the rate things are going, that may be true soon.

Weak currency is not a universally bad thing. It is bad for us as consumers, in that imported goods and services are now more expensive, and means we can buy less; one of the reason so much labor could be outsourced to China is because they kept their currency low (artificially low, they were often accused). Traveling abroad also becomes much more expensive.

On the bright side, it makes American goods and labor cheaper for foreigners, which might help correct our trade imbalance. It also reduces the load of our foreign debt. I think a weak dollar is good to keep some labor jobs in the country until (hopefully) we can return to being a world leader in exporting ideas and innovation.

Flipping back to the bad, and this is what we should most worry about, is that foreign banks are now less likely to buy up lots of dollars to stick in their vaults; but this is already happening, they predicted this and started buying Euros a couple of years ago, so cause versus effect gets fuzzy.

In the long term, if things go poorly for us, we regress to a more labor/service/manufacturing economy. If things go well for us, we produce more scientists and engineers and high-skilled laborers, whose ideas and services can be exported at a premium so OTHER countries can continue doing all of our labor-intensive jobs.

Note: not actually an economist, I just have a layman's understanding of this.

OK, that is a less bleak view of things.

The bigger problem I have been worried about is that we have been a "world leader" simply because our economy had remained so strong for so long.

As an example of how this has worked, an article from a few years ago (I forget from where now, sadly) pointed out that the reason Clinton's administration was looked upon so favorably by the rest of the world despite a lot of his more questionable foreign policies was because he would donate a tremendous amount of money to struggling countries in aid. GWB reneged on much of these, and then wondered why the rest of the world treated him differently than they did Clinton.

But that's just a small part of it all. I mean, basically, the gist of the whole thing is that we are allowed to politically get away with a lot because we're a rich country. If we cease to be a rich country, we may have to politically pay for our actions finally. And these will probably include past actions more than current.

Given that we have been in the position of "number one economy" for almost a century, I am not sure how well being suddenly shunned or worse by the rest of the world will affect us. The best outcome is that we return to isolationism and industry and fix ourselves integrally as you are proposing. But I fear that the American mindset is, at this point, "HOW COULD YOU DO THIS TO US? WE ARE THE USA!" That attitude will lead to problems not only in foreign policy, but internally.

I would like to think that other countries recognize that we suffer under poor leadership, and they welcome our return to the world stage as an again-rational player in a few years.

As belligerent as we'd like to be, I'm sure that mindset can be focused into pride in making the best damn cars in the world again, or what-have-you.

Yes, I'm being optimistic-- things could ALWAYS go worse. At the extreme, we could suffer another black plague, or be wiped out by an alien race. But as pessimistic as I usually am, I tend to be optimistic about humans in the long run, because we've gone through some pretty bleak times already. It also feels more constructive to imagine a realistic positive outcome and work towards it.

We remained a world leader even when our economy was in much worse shape than it is now. During the late 70s we had 10%+ unemployment, infation rates as high as 15%, interest rates almost at 20%, a significant contraction of our economy and so forth. All in al it was a pretty bleak period but we still had some of the most powerful economic muscle around.

Right now we have a weakening dollar but we also have insanely low unemployment rates, an expanding economy, increased productivity rates, very competative interest rates, and a good amount of liquidity (once the markets get over their irational fears). The real estate bubble is problematic but there have been other bubbles in the past that we've muddled through. The interplay of derivitives market is unique but probably one that will work itself out.

A weakening dollar also makes the US capital markets more profitable for foreign investors as well.

The days of America as the world's only superpower are at an end, but that's not necessarily a bad thing, as long as power is mostly in the hands of rational countries. I'm sure many Britons saw the ending of their empire as the decline and fall of all civilization, but you can't keep a good species down.

I'm more optimistic than you, but I can see an educational turnaround in ten years. In about three or four years, we will hopefully have a sane administration, and tuition costs have already reached critical mass. Overhauling the loan program could get more smart kids in quickly, and they could be turned around and in four years. Optimistic, but plausible.

Okay, I'm just seeing the problem differently than you. In the context of America as a competitive force, making sure we have exceptional individuals get opportunities to excel and innovate is more important (I believe) than educational equality.

I'm not saying it isn't tragic that people fall through the cracks, and that basic education shouldn't be fixed; just that it isn't what I was considering. But I don't think we've ever had educational equality; that's an ongoing problem, and yeah, I can see it taking 30 years to get fixed (if ever). I think it will require at least one sea change-- federal funding of schools based on population rather than property taxes-- and that's a political minefield.

USD vs. SEK

I pay my child support in Swedish Koronor and I have seen a 35% increase over the past year in the USD I have to convert to make my payment.