Redstate

Posted at 7:27am on Mar. 6, 2008 The Dollar Continues To Decline

A New Leg Downward, as we continue to export inflation

By blackhedd

Back in November, I wrote about the fall of the US dollar (here and here). The decline was just getting under way at that point, as cuts in US policy interest-rates started having their effect.

Since then, the Federal Reserve has cut still farther. In November, the dollar had fallen to $1.47 against the euro before recovering somewhat. The trend was intact, however, and now the dollar is all the way down to $1.53. The betting is that the Fed funds rate will fall to 2.5% this month, so the dollar probably has farther to fall.

Is this really bad news? Or more like neutral?

Read on...

Posted in Dollar | Economy | federal reserve | inflation — Comments (50)/ Email this page » / Read More »

Posted at 8:26am on Nov. 21, 2007 What The Strong Yen Means

Currency Strength and Quasi-Depression, Japan-style

By blackhedd

As the US dollar weakens, other currencies necessarily increase. The euro is now trading above $1.48 to the dollar, a record high. And the Japanese yen is stronger than 109 to the dollar, a two-year high.

All currency movements proximately reflect differentials in short-term interest rates. The weakness in the dollar over the last two months was caused by the Federal Reserve's interest-rate cuts in September and October.

Underlying economic fundamentals in each respective currency zone also affect exchange rates, since they have an impact on market interest rates as well as policy interest rates. Speaking very broadly, a lower currency value can reflect concern about the business outlook for a particular country.

This analysis holds reasonably well for the dollar-euro rate. But what's the story with the Japanese yen?

More...

Posted in Dollar | Economy | Interest rates | Japan — Comments (11)/ Email this page » / Read More »

Posted at 10:48pm on Nov. 16, 2007 Re: Dollar Collapse

By Neil Stevens

A dollar collapse combined with an OPEC change to Euros would, of course, be bad for OPEC because it would by necessity trigger a drastic reduction in US petroleum use, I imagine.

That's basic supply and demand. Message: The Saudis care more about extracting from our market than they do extracting from the Chinese or European markets?

Posted at 10:51am on Nov. 16, 2007 Petrodollars flowing to Silicon Valley

The United Arab Emirates shops for computer chips

By blackhedd

Mubadaba Development Co, an investment firm based in Abu Dhabi, just purchased about 8% of Advanced Micro Devices. AMD is based in Sunnyvale, California, and is Intel's competitor in the computer chip business. The transaction is structured as a simple minority investment with no board representation, so it won't trigger a government review.

The first point is political. Let's see if Congress has enough chutzpah left over from trashing our successes in Iraq to try mucking this deal up.

The more-important point is financial. This is the third major news story to come out of the Emirates this week. I wrote about their purchase of Airbus products here, and mentioned their announced intent to consider dropping their currency's peg to the US dollar.

Emirates is emerging as one of the most sophisticated states to come out of the modern era of the oil industry. No longer dominated by huge private corporations, oil is now controlled mostly by governments. Which in effect means, by a tiny handful of exceptionally powerful individuals and their families.

Hugo Chavez gets all the headlines, perhaps because he's so intent on turning his country's oil wealth into poverty and, eventually, bloody social disorder.

The oil-igarchs in a handful of other countries, however, are in the process of building up thousand-year fortunes, that will shape the world's constellation of political power long after the last drop of oil has been converted into global warming.

Disclosure: I personally and beneficially own AMD stock.

Posted in Congress | Dollar | Economy | oil — Comments (13)/ Email this page » / Read More »

Posted at 9:40am on Nov. 7, 2007 The Dollar is Now the World's Most Hated Currency

America's Newest Export Is Inflation

By blackhedd

The US dollar is in a full-fledged rout. It's trading at historic lows against every major currency except the Japanese yen, and against a raft of minor currencies as well. Dollar-prices for commodities like oil and gold are at record highs.

Dollar weakness is an expected consequence of the Federal Reserve's two recent cuts in its benchmark short-term interest rate. But dollar sentiment around the world has become extraordinarily negative over the past week or so, and people are starting to pile on.

Is this behavior normal? Or is something new and different going on?

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Posted in Dollar | Economy | gold | oil — Comments (25)/ Email this page » / Read More »