The Exchange Rate Could Get Worse

[RawAlex]

SirMoby, what americans don't seem to realize is that short term, a dropping dollar helps to prop up your internal economy by making is possible to manufacture things in country that you use to get from other places. It creates a bunch of bottom feeder assembly line jobs.

Except: China wisely pinned it's exchange rate hard to the US dollar, so no matter what happens, the cost of chinese produced goods remains the same. They will always have a manpower cost advantage (and few OHSA style rules), so there is less job shift.

As a result: The costs of many imported goods goes up over time, creating an undertow of inflation, all the while the internal economy is creating nothing but cheap ass bottom feeder minimum wage jobs, so the actual average buying power in the economy goes down, as does the realtive standard of living when compared to other countries. The value of all american assets (housing, business, whatever) drops in relative terms.

5 years ago, 100,000 US would get you about 165,000 canadian. Now 100,000 US gets you 109,000 canadian. If you took US dollars and invested in Canadian value stocks, you have made a huge net return (on the intial 100k, you would be holding over 150k us right now not including any growth or interest... 10% shift per year average in 5 years).

Combine that with a decent investment strategy, and you could be up net 100% in 5 years without a blink. Meanwhile, net net, you US based property has dropped probably 30% in relative value... the gap is something like 130-150% in five years.

That kind of shift of value and net worth is a significant indicator of what will happen in the next 5 years. Some are talking 2 us dollars for a Euro.

Alex

[DJilla]

Originally Posted by RawAlex

As a result: The costs of many imported goods goes up over time, creating an undertow of inflation, all the while the internal economy is creating nothing but cheap ass bottom feeder minimum wage jobs, so the actual average buying power in the economy goes down, as does the realtive standard of living when compared to other countries. The value of all american assets (housing, business, whatever) drops in relative terms.

I don't read papers so I'm out of the loop on a lot of things but a simple confirmation of your general thrust (pun) was delivered to me at about 3:30am this morning when I walked into a White Hen and was blown away by the finance headline in a paper on the counter. Gold is at $745 and change. All precious commodities are up big time and in some cases almost double a few years ago like zinc. FYI, copper is $4 a pound for delivery in July. It takes 114 copper pennies (the old ones not the new) to make a pound. Do the math and see what your local smelter is paying and if you're not making any cash in porn one might see this as an opportunity in spare change .

Back to the point, gold at 745 and rising AND the market at 11,000 is INSANE, its a financial non sequitar. Basically what its telling you is that the brightest financial minds are in agreement that inflation and the value of paper finanical instruments (including mortgages which no longer reflect the underlying value of the asset in most metro areas) are in for one big helping of whoop ass. IMHO

[Ramster]

Originally Posted by RawAlex

5 years ago, 100,000 US would get you about 165,000 canadian. Now 100,000 US gets you 109,000 canadian.

Alex

That MISSING $59,000 makes me cry.
Even one year ago the $100,000 US was worth $125,000 so today that is $16,000 missing in 1 single year.