The dollar's in decline. Great news!

[José]

November 23, 2007

The dollar's in decline. Great news!

Critics think it's in a crisis, but in reality America is in decent health

Gerard Baker

Americans paused at Thanksgiving yesterday for the traditional annual audit of their blessings. If they'd been listening at all closely to the morose lucubrations of their opinion leaders, however, it would have been pretty slim pickings.

The pundits have finally run out of bad news to report from Iraq, where, unmolested by the morbid fascination of misery-seeking reporters, the locals actually seem to be belatedly enjoying the first fruits of their liberation. So attention has turned again, as it has tended to do from time to time these past 50 years, to the inevitable collapse of the American economy.

The declining dollar is for many an ominous indication that the long period of US economic supremacy is at an end. In the past month especially, a nation that usually remains in blissful ignorance of the daily fluctuations of the foreign exchange markets has been repeatedly reminded that the dollar now buys a fraction of what it used to — down 35 per cent against the pound in the past six years and 40 per cent against that fledgeling monetary superpower, the euro.

Much has been written about the eschatological symbolism of the dollar's fall and the financial problems that have accompanied it. The apparent consensus among commentators here in America and especially in Europe is that the US has become a kind of Third World country, awash in debt and sinking fast because of a collapsing housing market and a banking system in meltdown. And all this is supposed to reflect in turn a seismic shift in the balance of global economic power away from the US and towards Mighty Europe and Emerging Asia.

Let me take a moment in this season of cheer to raise a few objections. The first and most obvious point is that there are many reasons why currencies move against each other, often in quite dramatic fashion. Seismic, epochal, geopolitical shifts are not usually the best explanation.

Rather, more prosaic facts such as differentials in countries' short-term interest rates, the rebalancing of temporary financial and economic imbalances and sudden changes in demand for and prices of commodities such as oil produced by particular countries — all of these help explain the dollar's recent decline.

US interest rates are on a downward trend, while European rates are steady and might even rise. The US still has a vast trade deficit, which is being reduced by a continuing fall in the value of the dollar. Countries such as Canada, which has seen the largest increase in its currency against the dollar, have been beneficiaries of the steep increase in the energy products they export. Another factor behind the current movements is the sensible shift by the world's central banks to a more balanced portfolio of foreign exchange reserves.

For the historically short-sighted, let's remember we have been here before. Between 1985 and 1995, the dollar declined by 43 per cent against the world's big currencies — somewhat more than it has in the past six years. That period was also marked by dire proclamations of the end of US economic power. But it turned out that in those years the foundations were laid for the strongest period of US economic growth in the past 35 years.

If you're still sceptical, ask yourself this: is it probable that the shift in the relative value of the dollar and the euro represents a bet by the world's investors that Europe — strike-torn, productivity-challenged, demographically doomed Europe — is the world's economic future, rather than the US, or, let's say, China? All right, but this is different, say the Cassandras. The US has been living on borrowing for years now. The world has finally woken up to America's addiction to debt — all that growth has been bought on the never-never and now, at last, the bill has come due.

The first thing to be said is that the level of public sector borrowing in the US is very small. The fiscal deficit, at just over 1 per cent of national income, is smaller than in most major European countries. It's true that America faces a large long-term fiscal challenge from an ageing population. But it's a smaller challenge than that faced by most of Europe, Japan or even China.

So if government borrowing isn't the problem, it must be the private sector that's neck-deep in debt, right? The general view is that Americans have irresponsibly fattened themselves up on widescreen televisions and gas-guzzling four-wheel drives, all paid for with easy credit.

If you look at a simple measure such as the savings rate — the proportion of income that is saved rather than spent — Americans do look pretty spendthrift. It is close to zero in the US, compared with 10 per cent in Europe and much higher in Asia. But focusing on this one measure distorts the full picture of America's household balance sheets. The reality is this: why save when the value of the investments you own is increasing at rapid rates? The total value of mortgage and consumer debt is indeed up by a massive $5 trillion since 2001, according to the latest figures published by the Federal Reserve.

But consider the increases in the wealth of Americans during that period. The aggregate value of houses alone is up $8 trillion. The increase in the value of stocks held either directly or through pension funds and other investment instruments is higher by another $8 trillion. That's an increase in net wealth of American households of $11 trillion in less than six years. That's about $90,000 for every household in the country. As someone once said, 11 trillion dollars here and 11 trillion dollars there and pretty soon you're talking serious money.

All right, but isn't the US going into recession, you say? Maybe, but so what? The US is overdue a recession by the standards of the business cycle in the past 60 years. It's possible the housing market and related problems will tip America into another one. Provided the people responsible get policy right, it doesn't have to be a depression.

So the dollar is falling for good, sound reasons that do not require a millenarian view of the global economy. It is yet another thing Americans should be thankful for.

http://www.timesonline.co.uk/tol/comment/c…icle2925872.ece

[Jesrad]

If you look at a simple measure such as the savings rate — the proportion of income that is saved rather than spent — Americans do look pretty spendthrift. It is close to zero in the US, compared with 10 per cent in Europe and much higher in Asia. But focusing on this one measure distorts the full picture of America's household balance sheets. The reality is this: why save when the value of the investments you own is increasing at rapid rates? The total value of mortgage and consumer debt is indeed up by a massive $5 trillion since 2001, according to the latest figures published by the Federal Reserve.

But consider the increases in the wealth of Americans during that period. The aggregate value of houses alone is up $8 trillion. The increase in the value of stocks held either directly or through pension funds and other investment instruments is higher by another $8 trillion. That's an increase in net wealth of American households of $11 trillion in less than six years. That's about $90,000 for every household in the country. As someone once said, 11 trillion dollars here and 11 trillion dollars there and pretty soon you're talking serious money.

Mouais, je ne suis pas trop convaincu. Si on comprend la situation décrite là comme une sorte de gros crédit avec collatéral, où le collatéral est supposé gagner en valeur plus vite que les intérêts du crédit qui courent, je vois à peu près, mais si la valeur en question de ce "collatéral" n'est pas aussi élevée pour les créditeurs extérieurs, ils sont mal barrés quand même.

Ou alors je n'y comprends rien, ce qui est plausible.

[Sous-Commandant Marco]

The apparent consensus among commentators here in America and especially in Europe is that the US has become a kind of Third World country, awash in debt and sinking fast because of a collapsing housing market and a banking system in meltdown.

Strawman.

[teabag]

Great news également pour ceux qui ont des cacahuètes à investir !

Vous pouvez faire des économies de l’ordre de 50%. (DR)

<h2></h2>Avec la hausse de l’euro, s’offrir un loft en Floride pour le prix d’un studio parisien est attractif. Mais les meilleures affaires devraient se faire d’ici un an ou deux.

«Loft de 60m2 au cœur de Miami, avec piscine privative : 159 000$». Une offre alléchante pour les Français lassés d’un marché immobilier toujours sous pression. En effet, le retournement de la pierre aux Etats-Unis, cumulé à la hausse de l’euro face au dollar, donnerait lieu à des investissements particulièrement attractifs aux Etats-Unis. «Avec le taux de change, cela revient à acheter un bien en solde de 40 %», constate Vincenzo Belfiore, Partner relationship pour First Real Estate, société spécialisée dans l’immobilier en Floride et au Panama. «Le marché immobilier américain est en plein ralentissement. Avant les prix grimpaient de 10 à 12 % par an, c’est fini aujourd’hui», selon l’analyste. Déjà à Orlando, les prix ont baissé de près de 7.4 %, selon l’Orlando Regional Realtor Association, un observatoire informant de la tendance immobilière en Floride. Mais les bonnes affaires devraient avoir lieu d’ici un an ou deux. En effet, avec la crise des subprimes, « courant 2008-2009, on annonce un taux de saisies très important », analyse une notaire spécialisée dans les transactions en Floride. Les prix seront alors fortement à la baisse.

Pour les Français qui veulent vivre à l’étranger, une autre destination de rêve permet de profiter de la parité euro-dollar : l’Amérique centrale. Là aussi, «grâce à un euro proche de 1.50 dollar, une maison qui se vend 200 000 dollars vaut presque la moitié de son prix !», constate Richard Rouzier de l’agence immobilière Terres de rêves. Sur son site internet, il propose des logements au Costa Rica. «Le monde entier veut vivre ici. C’est une démocratie stable, dans un joli pays, ce qui n’est pas si fréquent», poursuit-il. Pour l’investisseur, lorsque le dollar aura retrouvé sa parité avec l’euro, il sera temps de revendre…

[…]

Le Figaro

[Jesrad]

Wet dream: l'immobilier US continue de baisser, l'euro atteint 2 USD au change, et Ron Paul est élu Président.

Hop, tout le monde émigre.

[p.a]

Wet dream: l'immobilier US continue de baisser, l'euro atteint 2 USD au change, et Ron Paul est élu Président.

Hop, tout le monde émigre.

[vincponcet]

Mouais, je ne suis pas trop convaincu. Si on comprend la situation décrite là comme une sorte de gros crédit avec collatéral, où le collatéral est supposé gagner en valeur plus vite que les intérêts du crédit qui courent, je vois à peu près, mais si la valeur en question de ce "collatéral" n'est pas aussi élevée pour les créditeurs extérieurs, ils sont mal barrés quand même.

Ou alors je n'y comprends rien, ce qui est plausible.

Le truc marrant est que l'auteur croit que les montants des crédits en cours valent leur principal. Quelle blague, toute l'histoire des crédits immo pourris aux US est autour de ça. On a prété non seulement à des gens qui ne pouvait pas rembourser, mais en plus, on leur a prété 100% voire plus de la valeur du bien, résultat, avec des saisies en masse, le prix de l'immo chute, et le collatéral vaux moins que le principal, et là, les banques et ceux qui ont les Mortgage-based securities (et oui, ça se structure et se revend en packages de type obligations, les prêts) pleurent.

Aussi, aux US, tu peux utiliser la différence entre valeur de marché et le principal restant dû, comme un nouveau collatéral pour un autre prêt, comme pour acheter une télé, une voiture, voire même faire tes courses, avec une carte de crédit de type home equity line of credit. Et idem, avec un prix immo qui chute, les préteurs et ceux qui ont les asset-based securities pleurent. et là, c'est encore pire puisque c'est une hypothèque de second rang, càd qu'elle passe après le crédit principal, et même, la garantie n'est pas exerçable (comprendre : saisie) sans l'accord du préteur de premier rang dans l'hypothèque. le top étant bien sûr de prendre une carte HELC pour payer les traites de son crédit principal, ne rigole pas, ça se fait… et puis, aller au cinéma en se payant la place avec un crédit révolving basé sur une hypothèque sur sa maison, je ne sais pas vous, mais moi, ça me dépasse.

[h16]

Un petit mieux pour les majuscules. Ne fais pas foirer mon générateur aléatoire, steup.

[walter-rebuttand]

Wet dream: l'immobilier US continue de baisser, l'euro atteint 2 USD au change, et Ron Paul est élu Président.

Hop, tout le monde émigre.

Dans ce cas le Dollar va vite remonter.

[Ronnie Hayek]

Wet dream: l'immobilier US continue de baisser, l'euro atteint 2 USD au change, et Ron Paul est élu Président.

Hop, tout le monde émigre.

A.B ?

[Roniberal]

A.B ?

J'imagine bien la scène: A.B quittant les Etats-Unis avec Kent McManigal pour laisser la place à des millions de Français conduits à Miami par leur guide biarrot.