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14 Responses to “Who Wins When the US Dollar Falls?”

1. bsneath Says:
   December 7th, 2009 at 12:11 pm

   New money (wealth creation) wins.

   Old Money (wealth preservation) loses.

2. Marcus Aurelius Says:
   December 7th, 2009 at 12:17 pm

   bsneath:

   interesting idea, but I think it’s misstated. I think it goes more like this:

   Weak dollar, the indebted win.

   Strong dollar, the indebted lose.

   More (weaker) dollars do not create wealth.

3. bsneath Says:
   December 7th, 2009 at 12:34 pm

   MA: I agree with your first two observations. Also the reverse is the case for the holders of the debt, the old money wealth who are lending out to the indebted.

   Weak dollar, lenders lose

   Strong dollar, lenders win

   But if you are competing globally, a weaker dollar increases comparative advantage, profits and wealth creation (equity valuations).

   Lots of ramifications both ways, I know.

4. tagyoureit Says:
   December 7th, 2009 at 1:04 pm

   So for a weakening dollar it sound like: dollar givers win and dollar takers lose. The first giver wins the most, and the last taker loses the most. Middle losers mileage may vary…

5. Adult Franklin411 Says:
   December 7th, 2009 at 1:13 pm

   Weak dollar/strong dollar is relative to other currencies and doesn’t necessarily impact a “closed system” between US domestic lenders and domestic borrowers. Strength of the dollar is relative to other currencies, not a function of inflation here.

6. b_thunder Says:
   December 7th, 2009 at 1:38 pm

   NYT forgot one of the largest (and imho the most important) category of losers: Us, The People.
   More precisely, the vast majority of Americans draw vast majority of their income from wages, salaries, pensions and social security. They are workers first, investors distant second. They (we, I) are LOSERS. They may not be readers of this blog, but if they lose significant purchasing power, the investments of those who live off of investments will soon tank.

   Another questionable “fact” that NYT presents is that the lower dollar leads to higher domestic employment. In the late 90s, as the US dollar strengthened, so did the employment. On the contrary, the economy created ZERO net new jobs during the 9 years of the “Bush-Obama Great Currency Debasement Experiment.” I’d guess 9 years is enough time to debase the notion that low dollar will lead to new job creation of any significant size.

   P.S. Shame on NYT!

7. bsneath Says:
   December 7th, 2009 at 1:47 pm

   Let me suggest the question is somewhat irrelevant. The dollar will fall and there is little if any that can be done about it.

   Perhaps we can manage the timing of its decline somewhat but the structural changes that are needed to remove the imbalances in our economy will dictate a decline in the dollar.

   I suggest that there is no set of policies that Government or the Fed could undertake at this juncture that would counter act the inevitable decline of the dollar.

8. phb Says:
   December 7th, 2009 at 2:24 pm

   bs-neath: It is information. What you choose to do with it is your call, but there is plenty to be done about managing your portfolio around the US greenback. To roll over and waive the the flag of surrender is not an educated response. Best wishes.

9. phb Says:
   December 7th, 2009 at 2:27 pm

   b_thunder: Correlation/causation – not always the same. Be careful throwing around notions.

10. gordon Says:
    December 7th, 2009 at 2:56 pm

    The CNBC and financial media propaganda about 401Ks increasing is refuted because if you look at the MEDIAN 401K value, it’s around $35,000, but that isn’t all stocks. Americans live off wages,(as another poster said so well) not CAP GAINS, on Main Street, correct me if I’m wrong. Americans owning stocks is vastly overstated as a boost to the economy. Obama thinks it’s the tail wagging the dog also.

11. bsneath Says:
    December 7th, 2009 at 3:10 pm

    phbs: Was just making a point in my customary antagonizing style.

12. CTB Says:
    December 7th, 2009 at 3:13 pm

    b_thunder:

    With currency pegged to the dollar, a weak dollar only further grows China’s export machine. Over-valuation of the yuan vs. the dollar has probably been sapping US employment for some time now.

13. phb Says:
    December 7th, 2009 at 3:29 pm

    bsneath – my mistake, I confused antagonizing style with dollar capitulation. Cheers!

14. bsneath Says:
    December 7th, 2009 at 4:37 pm

    phb: I suppose you can call me a dollar capitulator. I honestly cannot think of another scenario where this economy will recover other than via a weak dollar; more exports and more domestic substitution for imports. If you can postulate a strong dollar scenario, I am all eyes.

    I see our options as:

    A. Either the dollar weakens now and forces the global economies to grow in a more balanced and orderly fashion, or

    B. The dollar is artificially propped up for a period of time during which the imbalances become even greater and leading ultimately to a dollar collapse, or at a minimum an even weaker dollar than under Option A.

    I believe our leaders and those around the world have resigned themselves to Option A. I suspect China will revalue once (and if) they feel confident they are out of the woods and generating sustained domestic demand and jobs.