Hows the economy doing?

[akuma587]

NJ5 said:

@akuma587:

1- I was not talking about the short term, of course. The money printing started recently, these things take time. But the problem is not just inflation, it's countries like Russia, Brazil and China making moves to decrease the importance of the dollar.

I'm not an expert on the economy but it seems that all of that will have a consequence eventually.

2- Just because people are investing in the stock market, doesn't mean the economy is recovering. It just means enough people think so.

3- The capital requirements of the big banks were definited by the stress tests, which had too optimistic assumptions even in the worst case scenarios. There must be some consequence to that.

Another thing... aren't many of the banks receiving money through AIG, which got bailed out by several hundreds of billions? AIG is now essentially a way to funneling money to banks and other institutions, with less transparency.

There are so many bailout programs that it gets hard to follow the money these days:

http://www.realestatechannel.com/us-markets/commercial-real-estate-1/bob-knakal-2009-new-york-commercial-real-estate-trends-troubled-asset-relief-fund-tarp-office-market-rates-469.php

 

You're #2 criticism sort of contradicts your #1 criticism.  The higher interest rates mean that foreign investors are more likely to invest in the U.S. dollar (by buying goverment securities).  So I don't really understand why you are criticizing the dollar depreciating (which is different than inflation by the way) and then turning around and criticizing the fact that interest rates are rising.  It would hurt the dollar MORE if interests rates remained low.

As for your #2 point, can an economy recover if the stock market is depressed and no one is buying anything?  Investment in the stock market may not be sufficient for an economic recovery, but it is necessary.

And a lot of people are missing the two big white elephants in the room, China and oil.

As for China, they have really hurt our currency because they do not allow the yuan to naturally fluctuate on the world currency markets.  This more than any other factor has led to our huge trade deficit, which is largely responsible for the depreciation of the U.S. dollar as a world currency.  China is using a protectionist policy to keep their currency artificially depreciated, and that throws off the entire balance and results in a boon to the euro and the yen.

As for oil prices, the price of oil is pegged to the U.S. dollar.  OPEC has a monopoly on oil and wants to get as much money from it as possible.  So when they raise the price of oil, it hurts the U.S. dollar.  Speculators on the oil market are also hurting the U.S. dollar. 

Really both of those things have been the biggest factors in the U.S. dollar taking a beating on the currency markets.  Forcing China to operate by the rules of the free market and getting ourselves out from under the thumb of OPEC by producing our own energy is our best option.

Not to mention the U.S. dollar depreciating isn't all negative.  It makes our goods cheaper overseas and increases our exports while simultaneously decreasing our imports.  This eventually corrects trade imbalances, which are a huge factor in why our currency is not doing well on the world market.  But once again, China is throwing off the equation with their protectionist currency policy.

And as for your #3 point, it sort of contradicts your other points.  According to some people's theory, the government's intervention into the market will be extremely harmful in the long run.  Assuming that premise, aren't you criticizing the government for not intervening into the banking sector enough?

You are kind of all over the map on this stuff.