Foreign countries fear weaker dollar

[Statistical]

Governments around the world stepped up efforts to stem the U.S. dollar's slide, as officials grow increasingly concerned about the impact of the weak greenback on their nascent economic recoveries. Thailand, South Korea, Russia and the Philippines have been snapping up dollars this week in order to hold down the value of their currencies, traders said Wednesday, as the U.S. currency wallowed near 15-month lows.

In Latin America, Brazil's finance minister said the country's currency remained too strong, sparking speculation that the government would intensify recent efforts to curb the real's ascent. On Tuesday, Taiwan banned foreign investors from parking time deposits in the country in an effort to ease upward pressure on the local currency. The fresh buzz over the dollar's fall prompted Treasury Secretary Timothy Geithner, visiting Tokyo on Wednesday, to repeat the Obama administration's commitment to a strong dollar. Still, Washington hasn't taken any concrete steps to arrest the slide. The weaker dollar is actually benefiting the U.S. as it struggles to come out of recession by helping keep U.S. exports competitive.

China is coming under new pressure from Pacific Rim countries to let its dollar-linked currency rise in value. On Wednesday, China's central bank made a nod to concerns about the declining dollar and yuan by issuing a rare change to the official language of its exchange-rate policy. The central bank said it would take major currency trends into account in setting policy, though it wasn't clear what impact that may have on the yuan's future value.

The U.S. wants to see a stronger yuan, though Washington has avoided explicit public pressure on China to abandon its policy of managing its currency. But in the jargon of finance ministers, Mr. Geithner has made clear that's what he thinks should happen. In an op-ed piece in Thursday's Wall Street Journal Asia, he emphasized the advantages of "market oriented exchange rates in line with economic fundamentals."

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http://online.wsj.com/article/SB125798819587744477.html?mod=article-outset-box

Oh the irony now other countries need the dollar stronger. All that BS talk about dropping the dollar as reserve currency. Some many economies utterly depend on the US and weak dollar hurts them. Eventually we need to strengthen the dollar eventually (no free lunch in currency exchanges and physics) however in the short term weak dollar helps jobs tied to US exports. It is unlikely foreign banks can substantially strengthen the dollar without help from US FED.

[Dreamer Tatum]

1. Don't gloat too much

That hand wringing overseas has to do with existing dollar commitments, not future ones.

[Statistical]

3. However it is a cyle.

There will ALWAYS be existing dollar commitments and assets.

The dollar has sank a lot if it was removed as reserve currency it likely would sink 40%-60% more.
At that price US autos would substantially undercut European ones. Europeans may prefer a BMW to Cadillac but if they can get a Cadillac for 15E vs 40E for BMW it becomes no contents.

Foreign banks hold US debt and it is difficult to sell. Can't just sell $1T in US federal debt on open market. Any attempt to move away from it will devalue the rest of it. No way to sell out without losing your shirt in the process.

A tanking dollar would kill US market for 1st world goods. Take that say E 40,000 vehicle. If dollar fell to say a $1.80 : E1 exchange rate that E40,000 vehicle would be priced something like $78,000. Not many American consumers buying a BMW for $78,000 if a similar quality Cadillac can be had for 30% less.

The rest of the world needs the US to have strong dollar:
1) to avoid stronger competition from US exports (cheaper dollar = lower priced US goods in foreign ports)
2) US consumer to still have buying power
3) to not see US federal debt devalue substantially

[Dreamer Tatum]

5. True. There is a tug of war now, regardless of what dipshit Geithner says

On one hand, we are happy to print worthless money to pay off our debts. On the other hand, the world would like us
to simultaneously buy their crap and have valuable dollars at the same time.

Because our economy will continue to grow, we'll be in this catbird's seat for generations to come.

[fasttense]

2. If the dollar drops too extremely in value then

Foreign countries get less money for selling their crap in America.

China, Japan, and India, in particular, make money NOT by selling their crap to their own citizens (most of whom can't afford to buy, or are not interested in buying, the crap.) They make their money by selling their crap here in the US.

If they lose their American market, most countries will be in a world of hurt.

[Statistical]

4. That is it and more so countries like Europe.

If dollar broke then Euro would be the premier reserve currency so expect the Euro to skyrocket making it so that US goods would be insanely cheap in European ports but also make Euro based goods virtually unaffordable in American ports.