Video: The Inevitable Collapse of the Dollar

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Stocks plunge with dollar; Dow down 360


By TIM PARADIS, AP Business Writer

NEW YORK - Wall Street suffered its second big drop in a week Wednesday, with investors worried about spreading fallout from the credit crisis at banks and about a dollar that just keeps getting weaker. The Dow Jones industrial average fell more than 360 points — just about matching its pullback of last Thursday.

A passel of worries tormented investors, including comments by New York Attorney General Andrew Cuomo about conflicts of interest in the mortgage industry that exacerbated declines among bank stocks.

Meanwhile, the dollar swooned amid speculation that China will seek to diversify some of its foreign currency stockpiles beyond the greenback and General Motors Corp. further dampened sentiment by posting a record loss tied to an accounting adjustment.

Oil hit a record, rising above $98 per barrel before retreating, and gold pushed higher, moves exacerbated by an anemic dollar.

Rest of Story: [HERE]

oh sh-t! there goes the neighbourhood.

someone make a punk song out of the collapsing dollar

Yep, we all know they prevented a depression from happening back in the late 20s.....oh.....wait.....


Most of the car companies' factories are in Michigan. It's destroying the Michigan economy even further, because they already had the highest unemployment in the country. As for outsourcing, those jobs are just more jobs being taken out of the United States economy. All those outsourced jobs that uneducated people or college students can do? Sent to India! All it does is wind up with the rich corporate execs putting more money in their pockets.
How are either of those good?


Just because our net exports increase, it doesn't mean that will create more jobs here. It'll create more jobs in the poor Asian countries that they're exploiting to create all the things that we will export.


If our incomes don't change, and there's inflation, then yes, it is destroying the currency and our economy.
Does this great West European growth include France? Because when I checked, France's unemployment rate was around 10%, and their growth is around 2%/year...I don't think any Western European countries (except Ireland) have growth rates above 3%. The Czech Republic, Slovakia, and Hungary are all doing pretty good, though.


Also, the economy is changing in a way that's hurting the poor. Stagnant wages + inflation = more people slipping into poverty each year. I don't see how this new printed money is going into the economy. Wouldn't we be seeing more of it if it actually was?

And as an American living in Europe any dollars I had put aside are disappearing like fairy gold.

Depends how much is being printed and where it's going. If it's all paper money with no actual value, then you could see something similar to hyperinflation in the German Weimar Republic, or it could go the way of another great crash before that.

The dollar is much lower value than the pound, and people are losing confidence in it rapidly. It'll affect the US economy. All this borrowing beyond means is partly to blame.

the problem with printing more money is that it's fraud. it's like getting into credit and then using more credit to get out of it. we're borrowing against nothing and we're outsouring our exports and devaluing the dollar.


the middle class will be decimated in a few years at this rate.


and on that note: i'm voting ron paul.


paper* =/= money


by paper i mean greenbacks. which will soon not even be used to price oil.

The Great Depression? They tried, but they did not know what they were dealing with and thus the money supply did decline. However, to look at this more seriously, in the time before the fed the shifts in the price levels were frequent and horrible, afterwards they were reduced a lot. "But because economies under the gold standard were so vulnerable to real and monetary shocks, prices were highly unstable in the short run. A measure of short-term price instability is the coefficient of variation, which is the ratio of the standard deviation of annual percentage changes in the price level to the average annual percentage change. The higher the coefficient of variation, the greater the short-term instability. For the United States between 1879 and 1913, the coefficient was 17.0, which is quite high. Between 1946 and 1990 it was only 0.8."

http://www.econlib.org/library/Enc/GoldStandard.html

Now, .8 and 17 show a great amount of variance.


Ok, I know that the car companies are in Michigan but they aren't efficient at creating cars compared to other parts of the world. So? The US economy can create more jobs, heck, looking at the jobs is rather nonsensical if one just thinks about it. The purpose of a job is to fulfill a want, and where this want is being fulfilled is not the biggest issue. The fact that people have many many wants also means that more jobs can be created to replace the ones lost. What these processes do is make the economy more efficient and these jobs are moving to areas where they are done with less resources. Really, I think that you are looking at a few trends and conflating them all, the rise in CEO pay is more likely a function of more CEO competition as companies are not simply raising their own leaders but hiring from an outside market, there are also matters of corporate corruption that are possible but I think it is the former trend more than the latter. The fact that outsourcing is occurring isn't that major as the CEOs aren't making tremendous amounts of wealth for the number of workers, and what I mean by that is if their wages were split amongst all workers then the amount of money would be around $100 a person.

How on EARTH does that even work????? We will export our imports??? Why on earth will the US run a re-export trade like that???? China and India will sell to other nations and already have begun doing so and the same with other nations.


No, it doesn't. As I said
The East(did I say west?? I meant East which is growing) has very very high growth rates. You aren't thinking about the Baltic Tigers such as Estonia which had a growth rate of 11.4% in 2006 and Ireland is doing very well as well. Heck, Germany is the world's top exporter, that alone merits some currency revaluation.


Well, right, and most people recognize that some of these changes are hurting the poor and there is concern about how to deal with that. The issue isn't that wages are stagnant + inflation but rather that real wages are declining. The real wage is the concern and it may even decline if inflation were nothing. Not necessarily, the fed wants low inflation not high inflation, the issue is that certain jobs are becoming less desirable.

A few years ago, people were talking about deflation as a great monster to fear. I actually thought that it was great. I could buy more for the same amount of money by just waiting. If I thought that a new computer or camera was too expensive, I could just wait for it to come down in price.

During the wild inflation of the 1970's, you couldn't do that. If there was something that you wanted to buy, you had to buy it now, because by waiting it would be too expensive later on.

But, at least housing prices are deflating nicely right now.

Oh, I don't mean that deflation has no benefits for some groups of people at all, in fact, it undoubtedly has great benefits for some. What I mean about deflation is that it is worse because there is a greater risk of recession or depression from that. The Great Depression was a deflationary spiral in fact. Part of the negative impact of deflation is that money becomes something people don't want to use to buy but rather to hold and this holding off from economic activity can eliminate economic activity.
Well, the beasts are different. Both usually end up hurting some people.

The bubble is bursting and how much it hurts the economy is a big question. There are of course benefits to most economic changes, but it really depends on what group you are in as there are costs to most of them as well.

But, if people don't spend their money, they can put it in the bank and earn interest, or put it in the stock market and hope for capital gains. A common sermon topic among economists is that savings rates in the USA are much too low, that Americans won't have anything for retirement, and that Americans carry too much debt.

In terms of deflation: what we had going on was rapidly increasing productivity, so that it made sense to postpone purchases, for example, of a new digital camera, because you knew that by waiting six months you could get something twice as good for half the price. With this expectation, you knew that you had to jump in some time and buy and camera, or just go without. Back in the depression years, we didn't have this phenomenon going on at all. Now, we have low-paid Chinese workers producing lots of nice things for us.



That's true. I remember when the bottom fell out of the Mexican peso about ten years ago, vacations in Mexico suddenly became very cheap. There are winners and losers. That's why I think that a universal currency, like the Euro, would provide us with more stability.

Well, no, not really because of the fact that the deflation can cause the real interest rate to be below that which they would receive for just holding onto their money. I know about that pandabear and I agree we don't save as much as would be best in many ways, however, the real savings rate is what will have to do with investment.

Ok, right, I can understand that. I don't think you really were speaking of deflation so much as market changes as deflation is an aggregate effect on price levels. The depression was a deflationary spiral, what you spoke of seems like a rapid change in selected markets.


Possibly and possibly not. A large common currency can lead to issues of monetary policy and whether or not the economy is healthy for the entire region undergoing monetary change. It may be more stable in some ways, however, there is something to be said about some level of economic independence as independent money can protect us from bad economic policies pursued by other nations in some ways, such as by removing many of the short term gains of protectionist policies.

Wouldn't the interest rate have to be negative, in order to lose money by putting it into a savings account versus keeping it under your mattress?

Stocks End Volatile Week With Huge Drop


NEW YORK (AP) - Wall Street finished a turbulent week with another huge drop Friday after major banks warned of further losses on their debt portfolios, raising investor concerns that the credit market slump shows no sign of abating. The Dow Jones industrial average fell more than 220 points.

Bank of America Corp., JPMorgan Chase & Co. and Wachovia Corp. all said the ongoing credit crisis will cause another round of heavy losses during the fourth quarter. Financial institutions took big hits during the last quarter as losses from subprime mortgages hurt their balance sheets, and these three companies were just the latest to report bad news that sent stocks lower.


Rest of Story: [HERE]

The Great Depression is still proof that you can't always count on the Fed to help us out when we need it...Plus it worries me that it's a private company with an unelected leader and executives.


If such a large amount of jobs is cut though, that's a pretty big blow to the economy. The lost incomes of those workers aren't going to be put back into that Economy. With less people buying things, companies can't afford to hire more people. You just have to cross your fingers that some company will feel it's worth it to invest in a highly unemployed area.
And what do you mean outsourcing isn't making CEOs tremendous amounts of money? Like Apple who makes Indonesian kids slave away on their iPods for pennies a day that they sell for a few hundred dollars in the United States? That seems like a tremendous amount to me.



What I mean is that the extra goods American companies make in foreign countries will be shipped directly to other foreign countries without first coming to America. That still counts as American export right?


The problem isn't our losing value to the faster growing East Europe economies, but that we're losing value to the weak West Europe economies.


Don't stagnant wages + inflation have about the same effect as a decrease in real wage?

You can't always count on ANYTHING though. Perfection is never found in human institutions, but at least we find improvement in knowledge. The fed is more government than company, its leader is appointed by our Senate and President, which even if you don't like this one still matters. It is not worse than the supreme court if one thinks about it.


It is certainly a huge adjustment, but if it is efficient for it to happen then it will happen. There is no reason trying to make water run uphill but rather possibly dampen the effects of change.

Wages will drop, people will leave, and the economy will move forward. You speak of short run issues but not long-run concerns.

I am not denying anything about production, but rather I don't think the income of the top is really that dependent upon production so much as other forces. Outsourcing is promoting corporate efficiency, but that does not necessarily translate into CEO pay unless we either have institutional factors(something I doubt given high starting CEO salaries), or a more competitive or oligsonistic CEO market(which may be true as less hiring of CEOs is within the firm).



Not really, no. American exports are exports made within America, not those made by American corporations. Where a company has its headquarters really does not matter at all.


They have the same currency, and what we are losing value to really doesn't matter. The trade value of a currency influences imports, and some of our imports are of import but sudden crippling change is not likely.


Well, I would argue that it is better seen the other way around. A decrease in real wage can be expressed as stagnant wages + inflation, but the blame still belongs with the market forces that are causing these workers to be less valued.

In the long run, we're all dead. Of course we need to be concerned about the short run.