Imminent Dollar Collapse

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convex02l

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I am seeing a lot of debate about the increasing likelihood of a dollar collapse. there seems to be a lot of agreement that its a matter of if and not when, also found this video link and debate on boing boing today.

http://www.boingboing.net/2008/03/19/documentary-examines.html

I would like to ask what would be the likely effect on the Irish Economy of a dollar collapse? how would it affect US multinationals in Ireland and our trade with the US etc?

any ideas? thanks..

Mark
 
that is not going to happen, it may continue to weaken though, if it were to collapse then no currency would be safe, it would only collapse as a result of a worldwide financial collapse, the weaker the dollar goes the smaller the Us spends on imports (foreign travel etc) and the more foreigners buy of US products , boeing is benefitting considerably from the dollar weakness (one of the US largest exporters), the more attractive american assets become to foreigners, there maybe a few dodgy banks and financial companies, but they wont bring down the american economy, its industrial base will strengthen and will overcome any weakness caused by dodgy financials.
 
[broken link removed]

the strong euro is causing major problems for europe and its exports as this article shows, the weakening dollar may cause more problems for europe than it does for america, the big question over the euro can it hold all th countries in when there is a crisis
 
joe sod said:
that is not going to happen, it may continue to weaken though, if it were to collapse then no currency would be safe, it would only collapse as a result of a worldwide financial collapse, the weaker the dollar goes the smaller the Us spends on imports (foreign travel etc) and the more foreigners buy of US products , boeing is benefitting considerably from the dollar weakness (one of the US largest exporters), the more attractive american assets become to foreigners, there maybe a few dodgy banks and financial companies, but they wont bring down the american economy, its industrial base will strengthen and will overcome any weakness caused by dodgy financials.
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I think the assumption you make (in bold) is wrong. A major portion of imports in the States are due to its lack of energy resources (this respresents a huge turnaround from the 60s and 70s when they had an abundant supply of oil). Without oil, the whole suburban way of life that has developed in the States over the previous decades comes to a grinding halt (in other words, they have no easy substitute for this resource so they will be forced to continue high levels of importing at least in the medium term). If the oil producing countries break away from a declining dollar, oil inflation in the US may even force imports up.
 
Without oil, the whole suburban way of life that has developed in the States over the previous decades comes to a grinding halt (in other words, they have no easy substitute for this resource so they will be forced to continue high levels of importing at least in the medium term).
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What about all that Iraqi oil? - That should keep them going a few more years. Then there's Iran. They didn't spend half a trillion for notions of 'freedom'.
 
leghorn said:
What about all that Iraqi oil? - That should keep them going a few more years. Then there's Iran. They didn't spend half a trillion for notions of 'freedom'.
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They didn't appropriate the Iraqi oil - they still have to pay for it. They merely secured the supply (arguably).
 
Afuera said:
I think the assumption you make (in bold) is wrong. A major portion of imports in the States are due to its lack of energy resources (this respresents a huge turnaround from the 60s and 70s when they had an abundant supply of oil). Without oil, the whole suburban way of life that has developed in the States over the previous decades comes to a grinding halt (in other words, they have no easy substitute for this resource so they will be forced to continue high levels of importing at least in the medium term). If the oil producing countries break away from a declining dollar, oil inflation in the US may even force imports up.
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this is hardly unique to the US, europe is a first world economy and uses an awful lot of imported energy (especially from russia), alot of articles about suburban life etc are very american centric, this is because we are english speaking therefore alot of reading material about oil dependancy etc comes from an american viewpoint, there are probably similar german articles on german dependance and french dependance etc but they are not referred to here because we read the american ones. In other words europe is not an economic wonderland that is immune to the problems facing america (which are essentially caused by globalisation and the addition of billions of people to the global economy)
 
There have been numerous discussions along these lines before on AAM, but the most likely cause of a "significant" depreciation in the USD would be caused by some or all of the following:

  • Continued selling of US Treasuries by China reducing its holding of USD denominated debt
  • Commodities trading switching to EUR basis from USD - some have argued that Iraq's switch to receiving Euro from Eurozone countries precipitated US invasion. Chavez in Venezuala has also long argued that the USD is a worthless currency
  • Related to the above is the strong inverse correlation between commodity prices and USD. But obviously weak USD aids US exporters, but if they have to import commodities for production then the cost of production increases for them, while dropping for the likes of China.
  • One thing to consider is that as US has trillions of dollars of trade deficit, in some ways the holders of the offset trade surpluses need the USD to stay at reasonable levels
Meantime - as consumers we can make hay with our strong Euro! Long live internet shopping (GBP as well as EUR)
 
You often here people say that a weak dollar is bad for US multinationals in Ireland.

However, nothing could be further from the truth.

The US multinationals in Ireland are here to trade within the EU. They are incorporated in Ireland, trade in Euro and make their profits in Euro. These Euro profits are then repatriated to the shareholders/parent company/owners in the US.

Look at this from the perspective of a US shareholder.

Say, for example, your company makes a profit of €100m a year.

A couple of years ago, when the exchange rate was 85c to 1 Euro, the US shareholders made a profit of $85 million.

Take the same profit in 2008 with an exchange rate of $1.50 to 1 Euro. This gives the very same shareholders a profit of $150million. Profits in dollars have increased by approx. 76% without any additional investment or increases in sales or productivity.

The US shareholders are laughing all the way to the bank and praising the strong Euro.

In summary, a US multinational with an EU base incorporated in Ireland and trading in Euro becomes a very very attractive investment. Much more attractive than if the very same company was based in the US or elsewhere and trading in dollars.
 
joe sod said:
this is hardly unique to the US, europe is a first world economy and uses an awful lot of imported energy (especially from russia), alot of articles about suburban life etc are very american centric, this is because we are english speaking therefore alot of reading material about oil dependancy etc comes from an american viewpoint, there are probably similar german articles on german dependance and french dependance etc but they are not referred to here because we read the american ones. In other words europe is not an economic wonderland that is immune to the problems facing america (which are essentially caused by globalisation and the addition of billions of people to the global economy)
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I don't think anyone was claiming that Europe is an economic wonderland, however nobody can dispute the fact that the States has a much higher dependence on oil. On a per capita basis the States consumes over twice as much oil than that in Europe. If you compare the layout of the average American city to that of the average European city, especially taking in to consideration the provision of public transport, it's not hard to see why this might be.
Also, don't assume that all the posters here are monolingual. From the articles I've read there appears to be a trend developing where Europeans are focusing on environmental issues such as pollution, renewable energy and safe water resources, while the States are focusing on oil and terrorism.
 
Paddy powers are offerning odds of 9/2 that interest rates will be slashed to 0% in teh states this year.
 
Afuera said:
I don't think anyone was claiming that Europe is an economic wonderland, however nobody can dispute the fact that the States has a much higher dependence on oil. On a per capita basis the States consumes over twice as much oil than that in Europe. If you compare the layout of the average American city to that of the average European city, especially taking in to consideration the provision of public transport, it's not hard to see why this might be.
Also, don't assume that all the posters here are monolingual. From the articles I've read there appears to be a trend developing where Europeans are focusing on environmental issues such as pollution, renewable energy and safe water resources, while the States are focusing on oil and terrorism.
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fair points, it is true that europe is less depndant on oil than america, but an oil crisis would have drastic effects on the european economy just as it would on america, this is because europe is first world and rich , therefore it uses an awful lot of imported energy just like america, the richer a country is the more natural resources it uses, sometimes this is masked by the fact an awful lot of the dirty production has been outsourced to developing countries (therefore it doesn't show up in europes emmisions figures) but consumption of the products of this production is still increasing in europe. i think this is the fatal flaw in europes stategy of reducing C02 emmisions. It puts the onus on the producer of CO2 to cut emmisions rather than the consumer, if they were really genuine about cutting CO2 emmisions then a levy should be imposed at supermarket level taking into account all the CO2 produced in production and transportation of a product, the current system merely results in the continued outsourcing of dirty production to developing countries, europes figures go down but developing countries figures go up because they are doing europes production of CO2
 
1.54 today will it hit parity by year end and save ireland inc from the abyss?
 
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