Foreign currency: Investing in the US Dollar

[Angela Shelley]

When an individual buys US dollars, he/she is "taking stock in America", similar to buying stock in a private corporation. When an investor buys stock, he is trusting/expecting/hoping that the company will produce positive returns.

When foreign investors buy US dollars, they are "displaying trust" in the ability of the United States to "manage their economic affairs properly".

When foreign investors read about foreclosures, delinquency on car loans, and massive overspending in the private and public sector, they begin to wonder "how long can this go on before the lights go out in the USA?"

Question: If you lived outside of the USA, would you buy stock in America?



Foreign exchange transactions carry a high degree of risk and any transaction involving currencies is exposed to, among other things, changes in a country's political condition, economic climate, acts of nature - all of which may substantially affect the price or availability of a given currency.

http://fxtrade.oanda.com/currency_trading/riskwarning.shtml

[ThomWV]

1. You've got it exactly backwards.

You see to invest in our money system you buy bonds and bonds do not convey ownership, they convey debt.

[Selatius]

2. Unless the US gov't reins in overspending, the US will continue to weaken its own currency.

The federal government is leading the charge into the abyss. Each year, the US government has borrowed more and more money to pay for the war and tax cuts for the rich by selling US treasury bonds to private individuals and foreign countries like China, but such an action can really only be temporary in nature. If you keep borrowing, pretty soon people aren't going to want to lend you anymore money unless you demonstrate some amount of fiscal discipline to reaffirm the faith.

Foreclosures and delinquency on car payments is an issue for the markets, but selling treasury bonds to finance a war is an issue of the government.

[Angela Shelley]

6. Is there really a big difference? ...

between massive individual debt and massive public debt?

[Selatius]

10. Yeah. There is no such thing as bankruptcy court for national governments.

If there is no consumer debt and the government is heavily in debt and devalues its own currency, pretty soon those consumers will start witnessing foreign firms coming in to cannibalize American firms.

Currency exchange markets are basically were "bankruptcy for nations" happens. If the US Dollar is low enough, individuals who hold assets in other currencies such as Pounds Sterling or Euros will find they have inflated buying power within the US.

They can come in and start eating up American firms simply because they have more buying power compared to American investors. With that situation comes the threat to job security for many Americans who watched their employer sell out to a foreign firm.

Also, since American workers are paid in American Dollars, they will find goods made with foreign labor, which account for like 90% of all goods on American shelves now, will become that much more expensive. When a few million people foreclose, it is bad, but when the government loses fiscal responsibility, it can be much, much more painful for us.

[Angela Shelley]

11. Leading back to the original question ...

if you were a foreign investor, would you invest in America?

[Selatius]

12. Not until after the US has hit the bottom of the barrel.

At the current rate, the US will continue to slide down deeper. You don't invest if the market is still falling. You only do it when it has hit rock bottom because assets in the US would be cheapest at that point.

[Angela Shelley]

13. That´s what I´m trying to find out.

Where are the assets?

[lectrobyte]

21. Real estate. Companies. Stuff like that. Falling dollar makes it

easier for China to buy IBM, or an oil company or whatever.

[CJCRANE]

22. I agree.

That's why I think the best time to invest would be after the '08 election, especially if Hillary gets in there would be an expectation that Clinton II could implement some of the same successful fiscal conservatism of Clinton I.

(Of course any Democrat would be a vast improvement on Bush-Cheney in terms of global public opinion and fiscal policy - or any other policy for that matter).

In fact I wouldn't be surprised if Cheney's intention is to run the dollar down as low as possible (having moved his assets abroad) then buy back in after he leaves office.

[nightrider767]

3. Welcome Shoppers!

No one is interested in buying dollars right now . There is a huge glut of dollars all over the world and dollar holders are getting antsy, like CHina.

Look for foreigners to start investing in the US, but not in equities, they'll be buying real estate and companies.

[CJCRANE]

4. November 5th 2008 - best time to buy INTO the dollar

(with foreign assets)

if a Democrat is elected to the WH.

[Angela Shelley]

5. Would a "Dem" stop deficit spending?

Would households stop overspending if a Democrat were elected?

[CJCRANE]

7. It's just my hunch

based on the fact that markets respond to confidence and optimism.

Tourism and trade would pick up too once Bush-Cheney had left office.

[Angela Shelley]

8. Are you implying

that foreigners are avoiding visits to the USA?

[CJCRANE]

9. I read that tourism was down 17% since 2001 n/t

[Bodhi BloodWave]

14. I can tell you one thing

I am atleast one person who has been avoiding the us for the last few years(and i loved the US the 3 months i visited), some friends of mine is also waiting on a Dem president before visiting for the first time(they got the money all saved up to)

[Angela Shelley]

15. Since money is not the problem ...

What´s the reason for avoiding a visit to the US?

edit: typo

[Bodhi BloodWave]

20. In a few words

Mainly the patriot act and a number of provisions in it i don't like, that bush is president is another(I've told myself I'm not gonna visit as long as he is in power).

Those are the two main reasons, there are a few others but most of those are local.

I loved my visit tho, the 3 months i was there i lived with a friend in Phoenix and i felt like i was at home the moment i stepped of the plane(which was a rare feeling hehe).

[arcos]

19. You wouldn't imagine how many... nt

[malaise]

16. I switches all my pension finds to Euros

ages ago.

[Speck Tater]

17. Imagine watching a movie in slow motion...

A mile-long passenger train is hurtling down the tracks at 60 miles and hour. As we watch in slow motion, we notice that the bridge ahead has washed out, and the engine of the train is already plummeting into the gorge below. Further back on the train, everything seems normal and the passengers happily go about enjoying their party, unaware that their fate is already sealed.

So the question is, given that the slow motion train wreck is already well under way, does it matter that we elect a new conductor for the train?

[Angela Shelley]

18. Maybe there are "brakes" in the caboose?

[Diamond Dave]

23. No. We would not buy stock in the US. If we had the spare dollars we

would buy gold and leave the US. Tearfully, but yes, if we had the $'s, we would leave.

Why would anyone buy stock in the US? Oh, that's right, our for profit health care system, our private security firms, our amazing weapon manufacturers, our dreamy financiers on Wall Street, our for profit media conglomerates ...........

Guess there are a few good reasons to still invest in the good 'ole US....................

[Angela Shelley]

24. Some information for you

just in case you need a breather:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2433115