Dollar Lows against Euros

Today CBS News reports that the dollar/euro exchange rate has burst through the 1.32 level for the first time. This is big news for people that are traveling to Europe and seek to buy things there. Everything in Europe seems to be getting more and more expensive for dollar-based purchasers. Just a few short years ago I remember when .87 dollars was equivalent to a euro – and things in Europe then seemed cheap to me. But that is not the case anymore.

Many of us are asking why the dollar sinking to such a low value against these foreign currencies. What makes the dollar seem to have such a low value to the rest of the world?
The answer is quite surprising. The U.S. economic numbers that came out just before Thanksgiving were not the reason for the plunge (see this Reuters article). Although these numbers were positive / mixed – the real reason most are citing for the plunging dollar is our soaring current accounts deficit (see this from the BBC). In short, the U.S. is importing more than we export.

By importing more than we export, the U.S. is sending dollars into circulation around the globe. We pay for our imports in dollars – and these dollars end up in foreign economies. But, since consumers in these foreign economies do not use dollars for their day-to-day purchases, these dollars don’t have the same usefulness to them as their own currency.

Because the U.S. economy is so strong right now, our consumers’ level of demand is very high. We like to purchase foreign goods, and so even as the dollar loses its value against these foreign currencies, and even as these foreign goods become more and more expensive to us (in a relative sense) – we keep on purchasing them.

Normally, these dollars would circulate back to the U.S. as foreigners used them to purchase goods from us. As they import U.S. goods, these dollar flows would have a productive use for them.

However, the other economies of the world (Europe in particular) are not nearly as strong and robust as ours. Consequently, their consumers have less disposable income with which to purchase foreign goods. What little they have goes to purchase bread and potatoes (figuratively), all of which are purchased with their own currency, not U.S. dollars. Add to this the unfavorable tariffs that many of the countries have placed on U.S. goods – making them even more expensive, and it is easy to see why these economies are not importing from us. They have more pressing, domestic expenditures to make.

Their weak economies and their tariff structures mean that their spending focus is in their own markets – and tend to be in their own currencies. As we flood their markets with our dollars – their consumers have little use for them – and so they begin to accumulate... These dollars are not as useful to them as their own currency is. So, what dollars they do accumulate, they tend to trade for a pittance in their own currency – just so that they can purchase the basics that they need (so to speak).

Add to this the global turmoil of late. The dollar has become a safe haven in times of global unrest. Consequently, more and more of the U.S. debt is purchased by foreigners seeking safe investment harbors. This flow of cash into our economy adds to our money supply – heating up our economy even more. And, at the same time, more and more of our country’s interest payments are being made to foreigners – adding even more to the flood of dollars flowing out beyond our borders.

In order for the dollar to become stronger, the global economies (and especially the European economies) need to see more growth. And specifically growth that leads them to be able to afford the “exotic” products and services being offer by U.S. producers. Growth for the Europeans can only come if they make some structural changes – change their tax regimes, change their labor and business policies. And these changes will be slow.

Further complicating the process is the fact that our U.S. economy is experiencing huge surges in productivity – especially in the service sector. (See this):

Studies by the McKinsey Global Institute of selected service sector industries suggest that labor productivity in the United States is greater than in France, Germany, Japan, and the United Kingdom by 30 percent in the airline industry, 30 to 40 percent in retail banking, 20 to 50 percent in telecommunications, and 10 to 50 percent in retail selling. In part because the U.S. domestic market for services is so well developed, the United States is the world's leading exporter of business and professional services. The service sector overall contributed a positive $76 billion to net trade in 1999, whereas goods trade was in deficit by about $345 billion.

It is the more mature economies that purchase these sophisticated business and professional services from the U.S.

The share of services in U.S. exports should increase further as the United States' trading partners grow and mature. For example, services account for about 35 percent of U.S. exports to the mature economies of Europe, where the share of services in GDP is about 70 percent; 25 percent of U.S. exports to South and Central America, where the service share of GDP is about 57 percent; but only 18 percent of U.S. exports to China and India, where the service share of GDP is 37 percent.

We buy basic goods from the world – because they are cheap and desirable to us, and the world is buying complex services from us, because we are simply good at providing them. This means that mature and strong economies are some of the best candidates for our best exports (i.e., these services). We buy from poor countries, but only the developed buy from us. These are difficult trends to turn around.

If we want a stronger dollar, then we need to ensure that these other economies grow and hope that they change structurally to allow their consumers to purchase goods (and services) from the U.S. Global peace would help too. But for now, let us look to help Europe's stagnating economies get out of the doldrums.

One Dutchman's View

A great friend of mine, one who happens to be from Holland, recently opined on the changes in Dutch sentiment over the noteworthy events there. Even Fox is picking up on the groundswell change in Dutch tolerance as the country digests the asassination of Theo van Gogh.

My friend's answer (in his non-native English) to my question about the change in the Dutch view of tolerance is insightful:

Which bring me to your question. As you may remember my thesis will touch upon culture differences and I have studied most there is to know about the subject. I believe I understand why this field of study has not received wider attention in other fields of our societies, yet I am afraid that this state of ignorance is causing lots of unnecessary harm. I furthermore subscribe to ontological relativism, where one assumes that people live in different worlds (realities) and that there are hardly any ways of bridging our differences. This seems amongst other problems to be the case between "western modern societies" and those coming from area's where Muslims live. Muslims - at least great part of them - like the ones coming from northern African countries (Algeria and Morocco notably) have little to no tolerance to other cultures and worst is that they reject the culture they have accepted whilst deciding to live in them.

The murder of Pim Fortuyn and the one on Theo van Gogh have more differences than commonalities. The first one was shot on the day that the polls indicated that his party was going to win elections and that he was going to be the prime minister of Holland. He was murdered though by a Dutch extremist with a background in the environmental movement: a lunatic. The van Gogh killing though was done by a 26 year old Moroccan who - after his mother died of cancer - felt attracted to orthodox extremist or fundamentalist branches of Islam. He killed him in a sacred way (with knifes, cutting his throat, wearing his testimony and accepting that the police would shoot and kill him afterwards. (jihad and the prospect of being received by Mohammed in heaven with 7 virgins).

Theo van Gogh was even for the average Dutch an extreme provocateur. Although this was (barely) acceptable for the average Dutch who advocate tolerance and freedom of speech, it did provoke fundamentalist from all area's of society, but especially the Muslims. In Holland we have 950.000 Muslims, of which according to most recent calculations, 50.000 may be considered extremist. (not even fundamentalist, just extremist). This has been a problem for decades in Holland, leading to social unrest especially in large cities, such as Rotterdam, Amsterdam, The Hague, Utrecht and the like, but till Pim Fortuyn, the politicians were not concerned with doing something about it, as it was not done to criticise any minority - especially those with a different colour, race or religion.(this stems to some extent from the Dutch collaborating with the Nazi's in their haunt for Jews) They advocated and cheered our multicultural society and prided themselves with having been able to integrate all these differences. I believe that they now come to realise that this was all a mistake.

I have no idea how on earth they will try to resolve the problems they have created during so many decades of ill policies and leaving things to rotten. I only now that Western world has steep challenges to face on all areas ...

The question remains as to how the normally tolerant Dutch will deal with the upswing in violence involving the pro- or anti-Muslim groups. This certainly has touched off a spirited debate.

The Criminal Circus

OK, OK... So they finally have announced the death of Arafat.

Now the media circus has begun in earnest. Why all of this fuss over such a petty criminal who maintained an iron grip over an impoverished people? Arafat was probably the main reason that Palestinians have so little today - and yet the MSM celebrates.

It is interesting that the Jerusalem Post mentions Arafat's ill-gotten money so casually. They note that Arafat's wife shook them down for $22 million a year, just so that they could gain access to the billions that Arafat had stashed away.

Abbas and the Palestinian leadership were forced to strike the deal with Suha after she refused to allow them to visit her husband in hospital.

The Palestinian leaders reached the conclusion that it would be better to make a deal with her in order to solve the crisis surrounding Arafat's possessions and secret bank accounts.

According to Palestinian officials, the money that Suha is expected to receive will come from secret accounts held by Arafat and his cronies in various countries. They estimated that at least $4 billion were being held in these secret accounts.

So the things everyone admits about Arafat are:
1. His participation in terrorist activities, his establishment of Fatah and his command to murder the Israeli atheletes in Munich, 1972 (see this or even this list).
2. His theft of money provided by western powers as "aid".
3. His 'authorization' of terrorist attacks by "Hamas, Islamic Jihad, and Fatah coordinated together under the umbrella of the 'Nationalist and Islamic Forces,' led by Fatah." (see this).
etc.

Is this the sort of person we should ruefully mourn? Sure, it is sad when anyone passes from this life, - but I just don't understand the pomp and dignity afforded this criminal in his death.

If he were such a good thing for the world, then how many western powers will rejoice in finding a successor for the Palestinian people that might be JUST LIKE ARAFAT?

I think the answer is none... so this circus is criminal in nature.

It's a "Vision" thing...

For me, the vision that established this great U.S. government was one of individual freedom so that enterprising individuals could survive in a hostile environment. The basic premise of our "American experiment" was a government based on the resourcefulness of an individual locked in struggle. Our pioneer heritage lauded the resourcefulness of the individual in overcoming the challenges of settling a new country. The new government created room for enterprising individuals to all have a say in governance (i.e., democratic principles) - but recognized the opposition of ideas and frailties of man so created ample checks and balances. The American vision was based on individual freedom to make choices in an evironment presumed to be hostile. The hostile forces against which man struggled were specifically viewed to include the environment and other people, to include the government, to include competitive forces, to include other nations. In fact, the American vison was one of a people locked in a struggle even with themselves.

The vision that seems to be espoused by the Left today is quite different. Instead of recognizing man as locked in struggle - and acknowledging the freedoms necessary to succeed in those struggles - the Left presumes that we exist in world without hostilities. They presume that our 'enemies' would be our friends if only we would allow them the chance. They presume that we will all cooperate in a utopian / egalitarian society "to each according to their needs, from each according to their capacity." They presume that criminals are simply a product of an impoverished environment - and that crimes are not really aimed at individuals, but are societal aberrations. The government is our godmother and will benevolently protect us at all times.

This concept of a "struggle-less society" underlies their agenda for change. Eliminate the right to bear arms - as no conflict worthy of violence really exists. Eliminate the economic consequences of indolence or thrift - as we will all happily share what we have. Eliminate acts of war - as all countries are really our friends. There are no struggles to them. "Everything's just fine here, move along." might be their mantra.

Somehow, I just don't see it. How did the concept of man in struggle against a hostile environment get changed to the concept of man at harmony with an idyllic world? Despite the realities of islamofascist violence against us, despite the barrage of crime in the cities, despite the Left's own political vitriol - they continue to belive "Everything's just fine." They espouse an agenda where man is deprived of those freedoms required to succeed against hostilities.

Sir Francis Bacon is purported to have said, "Man prefers to believe what he prefers to be true." I think that the vision of the Left is not based on the realities of the world we live in. I prefer the original vision of our country's founders. I see my own struggle to survive.

Ding-Dong - Arafat's Demise

Tragedy is closely associated with death. There is almost always a friend or a relative or someone near to the deceased who feels bitter pain. Then again, I recall the lilting Wizard of Oz song "Ding-Dong the Witch is Dead" and realize that on rare occasions, and only when a really wicked witch dies, there can be celebration.

Without a doubt, Arafat's wife Suha is among those that feel the particular pain of her husband's demise. In fact, according to at least one report Suha is trying her best to keep her husband alive - but for more selfish reasons than just the pain at departing. Apparently, Arafat didn't transfer to her all of his money yet...

The problem is that Arafat is still the only Palestinian official who can pay the bills. And it is unclear who, if anyone, has access to the estimated $2-3 billion in his personal Swiss bank accounts, according to a report in the current edition of Geostrategy-Direct.com. Even his wife is said to be unaware of how to access the funds.

It has long been rumoured that Arafat had squirrelled away billions (see FrontPage's article on the IMF's own report):

This report was followed by news that in the period between July 2002 and September 2003, Arafat transferred $11.4 million to his wife, Suha's French bank accounts. But recent information reveals that in 1996, Suha Arafat arrived in Buenos Aires with $30 million in cash that she invested in a business with other Palestinians.

As of August 2002, Arafat's personal holdings also included $500 million of the PLO's money; in all, his holdings were reported at that time, to total $1.3 billion. This money is enough to a) feed 3 million Palestinians for 1 year, b) buy 1,000 mobile intensive care units, c) fund 10 hospitals for a decade, and d) would still leave $585 million to fund other social projects.

The mystery to me is how this man, great in the eyes of far too many, was able to maintain his credibility on the world stage. Arafat was known to have taken money from the mouth of his impoverished people and padded his nest. He, through his radical agenda, encouraged the dismal economic conditions that kept the Palestinian people destitute. Arafat was the greatest enemy that the Palestinians have ever had. Yet they loved him (in a way).

Arafat had the chutzpah to stand up to Israel, to America, and to the Western world. He thumbed his nose at the demands of the West for nearly forty years, and was at every turn reward by the West for doing so. Arafat ignored pleading by the West to acknowledge Israel's right to exist, he ignored their demands that he renounce violence, he ignored their insistance that he negotiate a peaceful settlement with the state he loathed. And at every turn, he was rewarded. He was given fantastic monetary grants - with no controls - from those he spurned (and no expectations, was there ever an investigation into Arafat's corruption?). There were higher expectations on Saddam Hussein than there were on Arafat. He was granted a Nobel peace prize for merely paying lip service to peace. He did nothing to relieve the suffering of his people - yet they loved him for standing up to the world and even more for his being rewarded for his obstinacy. It's like he was one of them and he won the lottery.

Arafat very literally profited from the misery he fostered among his people. He maintained his powerbase by keeping his people destitute and beholden to him.

We shall see if the West really loved Arafat. Will they want another to really take his place? Will his people really want another dictator to assume such absolute control over their plights? Real flattery for Arafat would be the broad acclaim of a successor that would be just like him.

Somehow, I doubt it... [and is that the faint tones of "ding-dong (something)..." I hear in the wind?]

Blogger Traffic Jam Implies Thinking!

It has been impossible to get on any of the most popular blog sites on this Election Day. Either there has been unprecedented web traffic to these sites as seekers of unfiltered information seek news at its source, or there has been a coordinated attack on the blog sites by some sinister force. (The latter idea sounds just a bit too fantastic to me.)

This furthers the notion that we must examine the "old model" of the way we view the world. An increasing number of people are turning to sources of unfiltered news, for one and only one reason. They think!

They believe that they can sort through raw information to extract better news than they can get by watching/reading the twisted and strained quasi-news sound-bites that are delivered by the main-stream media (MSM for those new to blogging). They think, therefore they trust their own minds more than they trust the media's talking heads.

A thinking electorate is bad for the MSM. It is bad for the political class that has reduced its arguments to cute phrases ("the right to choose"). A thinking electorate will continue to demand more raw information and rely less on the stuff that fills our airwaves.

I am so happy that the wildest dreams of the bloggers have been exceeded. "More Bandwidth!" What a rallying cry for the thinking generation!

Will good surf compromise Hawaiian voter turnout?

Surf conditions Nov 2, 2004

Is it possible? Will good surf conditions compromise Hawaiian voter turnout? Latest weather conditions seem unlikely to deter voters, but surf conditions are another story.

Let's see how the day develops...

Meanwhile the radio waves have been saturated with both Bush and Kerry ads. Ads are popping up on virtually all stations. Even the ABC affiliate, conservative talk radio at AM 990 has been fair play for the Democratic dollar. This state has certainly become a battle ground.

Local station KWHE (channel 11) is currently having a discussion about the issues (11:00pm, Nov 1, “Don’t Abort Your Vote!”). To listen to the current discussion one would believe that a MAJOR issue is gay marriage. Hawaiians are typically very tolerant of homosexuality and alternate life styles. But the gay marriage debate has been a volatile issue here. If this becomes a referendum on gay marriage the state could tilt toward Bush.

The Democrats have had a lock on the Hawaiian legislature for the last 50 years. The recent election of a Republican Governor, Linda Lingle, has seemed to many a repudiation of the “old” way of doing business here. Saturation level radio ads from the Republican party have hyped this historic Democratic dominance and have attempted to associate it with corruption within the government (which is very believable to most Hawaiians). To the extent that these ads stick, then the state Republicans appear to be the anti-establishment party. The carry-over to the national election may be significant.

[This is cross posted on the Command Post.]