Double dose of bad news for US economy

[Amazing Rando]

News: [URL=http://www.cnn.com/2004/BUSINESS/11/18/dollar.high.reut/index.html

Dollar hits new low against euro[/URL] ]TOKYO, Japan (Reuters) -- The dollar sank to a record low against the euro and a 7-month low against the yen Thursday, pressured by expectations that nothing will be done at an upcoming G20 meeting to arrest its fall.

The U.S. currency hit an all-time low of around $1.3065 per euro, and fell to around 103.65 yen, a level not seen since the beginning of April.

The tone of comments from U.S. Treasury Secretary John Snow led many traders to conclude that the weekend meeting of the G20 developed and major developing nations is unlikely to produce any coordinated effort to deal with the dollar's weakness.

"I think Snow's comments dealt a final blow to the dollar," said Shogo Nagaya, forex manager at Nomura Trust and Banking.

"I guess the dollar will continue to fall."

© source where applicable

And this one too-

News: [URL=http://www.cnn.com/2004/ALLPOLITICS/11/18/congress.spending.debt.ap/index.html

House debating huge debt limit increase[/URL] ]House debating huge debt-limit increase
Measure would increase ceiling by $800 billion
Thursday, November 18, 2004 Posted: 12:16 PM EST (1716 GMT)

WASHINGTON (AP) -- Democrats and Republicans clashed over deficits and tax cuts Thursday as Congress moved toward sending President Bush an $800 billion boost in the government's debt limit.

The bill would increase the debt ceiling from its current $7.38 trillion, marking the third massive increase since Bush took office in 2001. The government reached the cap last month, paying its bills since with cash from a civil service retirement account, which it plans to repay.

The Senate approved the legislation Wednesday by a near party-line 52-44 vote. With no alternative but an unprecedented federal default, the House debated the bill Thursday and planned an evening vote.

Democrats were ready to oppose the measure en masse, saying it should have been accompanied by a requirement that tax cuts or new spending be paid for with budget savings. They blamed Bush's tax cuts for the relentless increase in government debt, a trend analysts expect to continue indefinitely, and noted that Republicans delayed the vote until after the November 2 elections.

"That didn't take long," said Rep. James McGovern, D-Massachusetts. "On just the third legislative day after the election, we are yet again confronting the need to raise the nation's debt limit."

© source where applicable

What do we make of these two stories?

[Spiritus Naturae]

The ecomomy has been lousy for my family for quite sometime now, so not sure how it could affect us...

[C. D. Ward]

It is indeed bad news...see http://www.theologyweb.com/forum/showthread.php?t=42156

[Amazing Rando]

Isn't it great how they waited for the "lame-duck" session of congress to vote on raising the debt ceiling by an additional $800 billion?

[guacamole]

A weak dollar isn't necessarily bad, well, for americans. A weak dollar means that goods produced beneath the dollar are cheaper than goods produced beneath the yen or the Euro than when the dollar was stronger. True, the dollar buys less- but it only buys less of goods that aren't produced beneath the dollar. In fact, the stronger currencies buy more american goods compared to a strong dollar, so it's good for american manufacturing. It helps sell product overseas.

As an example, the Latvian Lat currently trades for nearly 2 dollars. The dollar is very weak against the lat, yet it doesn't bode poorly for the US.

[Amazing Rando]

Well, a weak dollar is very good for US businesses but bad for consumers, right? That means the businesses get to raise prices a lot but consumers' salaries and wages cannot buy as much as they used to. This can't be a good thing.

How about the other issue- the debt. Got any choice words to say to Mr. Bush on that subject, guac?

[CatholicSage]

Stop (the preparation for) spending so much money!

[Amazing Rando]

Stop (the preparation for) spending so much money!

Now that's what I wanna hear! Let's send a message to Bush- balance your checkbook!

[Ryokan]

The debt sucks. But the US economy is lets say $11 Trillion this year. The Debt increase this year will be $800 billion. our average economic growth has been around 3% over the last fifty years, higher if you ignore the 70s. 800 billion isn't even one % of our GDP. So, we can handle debt increase like that forever, even though it would be better if we didn't. Its when the debt excedes growth for an extended period that we will be in trouble.

[Benster]

The debt sucks. But the US economy is lets say $11 Trillion this year. The Debt increase this year will be $800 billion. our average economic growth has been around 3% over the last fifty years, higher if you ignore the 70s. 800 billion isn't even one % of our GDP. So, we can handle debt increase like that forever, even though it would be better if we didn't. Its when the debt excedes growth for an extended period that we will be in trouble.

Wait, 800 billion is 7.3% of 11 trillion.
(Or is there a difference between GDP and the total value of our economy?) 800 billion happens to be one percent of 80 trillion dollars! Our GDB is nowhere near as big as that. You may have forgotten to multiply by 100 to get percent.

(Or is it the trillion problem?: http://www.jimloy.com/math/billion.htm )

Anyway, other than that I follow. So, hypothetically, if we could only suffer a single year of 100% taxation of the economy, then we could pay off the entire debt and have $3 trillion left over! Great.

OTOH, it's a bit like a household with an income of $50,000, and they're $35,000 in debt. And their expenses every year are about $54,000 and increasing. Sounds pretty bad to me.

[Ryokan]

Wait, 800 billion is 7.3% of 11 trillion.
(Or is there a difference between GDP and the total value of our economy?) 800 billion happens to be one percent of 80 trillion dollars! Our GDB is nowhere near as big as that. You may have forgotten to multiply by 100 to get percent.

(Or is it the trillion problem?: http://www.jimloy.com/math/billion.htm )

Anyway, other than that I follow. So, hypothetically, if we could only suffer a single year of 100% taxation of the economy, then we could pay off the entire debt and have $3 trillion left over! Great.

OTOH, it's a bit like a household with an income of $50,000, and they're $35,000 in debt. And their expenses every year are about $54,000 and increasing. Sounds pretty bad to me.

I screwed my math up, sorry. Yeah, I guess it is kinda bad. Why we shoulda voted for Kerry.

[Benster]

These new spendthrift Republicans are the worst scoundrels.

[guacamole]

Well, a weak dollar is very good for US businesses but bad for consumers, right? That means the businesses get to raise prices a lot but consumers' salaries and wages cannot buy as much as they used to. This can't be a good thing.

How about the other issue- the debt. Got any choice words to say to Mr. Bush on that subject, guac?

I'm not sure that there are any economic developments that are good for consumers other than low interest rates and government price controls. Simply because the dollar is weak doesn't mean that companies are going to raise prices alot. They will if they pay for raw materials from countries with stronger currencies, but that's not necessarily true either. A lot of times foreign producers will be forced to lower prices to stay competitive with domestic sources. The weak dollar is similarly independent of inflation, irc, because the market adjust itself to compensate for price differences.

Got debt? Spend less, pay more debt off quicker... I dunno, I'm not yet convinced that it's as big a problem as people think it is. People tend to think of national debt like consumer debt, which isn't quite accurate.

[CatholicSage]

The problem that a fiscally responsible politician faces, though, is that running on a platform of getting rid of the national debt and creating a balanced budget is not nearly as inspiring to ordinary people as increasing funding for education, health care, etc. even though it may be necessary to get rid of the debt (or at least deficit) before putting such ambitious plans into place.

[NeilUnreal]

Goodness knows I hate taxes, but balancing the budget is one of the few things I wouldn't mind seeing my taxes raised for -- especially if it's accompanied by a decrease in pork-barrel spending.

-Neil