Alarms sounding at Airbus

The severe devaluation of the US dollar is starting to cause problems at
Airbus. Airbus had made its business plans with the Euro rising to a maximum
of USD$1.20. It is now at $1.24

Airbus has announced that should the US dollar fall further, bringing the Euro
up to $1.30, Airbus will be forced to initiate severe cutbacks. If the US
currency stays devalued for much longer, Airbus will have to make cutbacks
anyways.

Seems that the Bush regime realised its tax cut wouldn't help at all but
allowing the UD dollar to fall significantly would give the USA economy a
boost. The low US dollar should help Boeing export planes.

Seems that the Bush regime realised its tax cut wouldn't help at all but
allowing the UD dollar to fall significantly would give the USA economy a
boost. The low US dollar should help Boeing export planes.

Using the price of the USD v Euro to create an anti-W message? Get your-
self into an Econ 101 class, and use that knowledge as a step to learn
about international currency valuation. The US balance of trade deficit,
in place long before W took office, is currently pushing down the value of
the dollar. The trade deficit could have been addressed with two proposals
by W - both which failed in congress. One was tariff protection for the
steel industry (a response to cheap steel produced by cheap labor in
foreign markets), the other was the opening of the ANWR for oil exploration.

Since the economic climate in Europe is - and always has been - far from
consistent, I'm not sure this is the time to panic over the currency
fluctuation of the dollar.

And there is something of a self-righting mechanism into all of this;
countries with a favorable international currenty valuation attract larger
exports.

One was tariff protection for the steel industry (a response to cheap
steel produced by cheap labor in foreign markets),

It is debatable whether cheap steel was being imported. An equally
likely scenario is that American steel producers are inefficient. But
what is not debatable is that those tariffs also drove up the price of
everything made with steel, including high-priced items like autos.
Automakers were not in favor of those tariffs for this reason. Tariffs
cannot be designed in a vacuum.


Casey

On 18 Dec 2003 10:56:32 -0800, (Paul
Middlestat) wrote:

One was tariff protection for the
steel industry (a response to cheap steel produced by cheap labor in
foreign markets), the other was the opening of the ANWR for oil exploration.

Still struggling with this....certain steel had a protective duty but
assembled/manufactured products imported into the US that contained
that steel did not. That helped the US steel manufacturers but hurt
the US manufacturers who used the steel vis a vis their foreign
competition. The result of this would be to reduce US use of steel and
increase US imports of assembled/manufactured steel products.The
higher value add is in the assembly/fabrication, not in the raw
material. Fortunately, it didn't last long enough to do severe damage.

"Paul Middlestat" wrote in message
om...

-sip-

The trade deficit could have been addressed with two proposals
by W - both which failed in congress.

-sip-

It might well be argued that these initiatives would not have helped solve
the US trade deficit. Trade deficit - or perhaps more correctly deficit in
payments - can be seen as a symptom of an imbalance between consumption and
production that neither the amount of trade nor the level of employment need
necessarily have a major impact on. It might even be argued that the low $
is not going to help much either.


Nik

Nik wrote:
It might well be argued that these initiatives would not have helped solve
the US trade deficit. Trade deficit - or perhaps more correctly deficit in
payments - can be seen as a symptom of an imbalance between consumption and
production that neither the amount of trade nor the level of employment need
necessarily have a major impact on. It might even be argued that the low $
is not going to help much either.

One must be careful. Country A can have a huge trade deficit with country B
but still have a balance of payments surplus.

Consider dividends from subsidiaries. Consider investment revenus. In many
cases, they will be bigger than the trade deficit so the USA doesn't complain
too much.

Consider the number of foreign subsidiaries USA multinational have. Each and
everyone of them send all their profits back to the USA headquarters. And thos
represent huge sums of money.

Where there are problems is when there are not many USA investment in a
country which does export a lot to the USA. (Japan for instance).

Another aspect that isn't as obvious with multinationals is the issue of
exports. The USA doesn't need to export cheese because Kraft has subsidiaries
in just about every country of the world. And where it doesn't it can get the
Kraft subsidiary nearest to supply that country. (For instance, Kraft
australia is better placed to supply Indonesia with Kraft products). So while
the USa doesn't export cheese to Indonesia, a USA owned company does and
profits from Kraft cehese cols in indonesia still go back to Kraft
headquarters in the USA.

So on cheese trade numbers, the USA looks like it imports massive amounts of
cheese and exports very little, but once you factor in all the profits from
the worldwide Kraft subsidiaries, I would suspect that it is a positive
balance of payments for the USA cheese industry.

Because the USA has so much money invested abroad, it gets huge sums of money
in dividends, interest payments etc which more than make up for the trade deficits.

And whenever a foreigner buys shares of Microsoft or any other US based
company, that capital injection into the US economy goes towards the palance
of payments.


The USA currency remained very strong for the last couple of years, pushing
many currencies to record lows. So, what would have changed in the last couple
of months to cause it to be devalued ?

A country's currency can be devalued for many reasons. Perhaps the massive
deficit racked up by the Bush regime is scaring investors away, especially
since interest rates in the USA are extremely low.

Perhaps the Bush regime has decided to artificially induce devaluation by
making massive increases in its foreign cash reserves (reduce remand on the
USA dollar, and sending large amounst of USD overseas).

or perhaps foreign investors have lost confidence in the USA and decided to
take their money out before it was too late.


I tend to think that the Bush regime used the tools at its disposal to
artificially lower the US dollar. When you consider the steel issue, they
knew that their tarifs were illegal. One way to replace the tarifs in steel
imports and to stimulat the US steel industry is to lower the US dollar. This
automatically makes steel imports far more expensive, and make US steel
products more competitive abroad. (substitute "steel" with "Boeing" to get
back on topic). The timing of the devaluation is very interesting.

In fact, it started just a few days after the USA warned Canada that there
would be some consequences for having opposed the USA invasion of Iraq.
Canadian products suddently became 15% more expsnsive when exported to the USA.

In the end, with a much lower US dollar, the Bush regime will be able to claim
a much reduced USA trade deficit since americans will import less foreign made
goods, as well as stimulated economy since american goods will be more
competitive both in and out of the USA.

The problem for a country such as the USA is that the strength of its currency
is treated like the length of its manhood. It is very hard to publicly admit
that it is good to devalue the currency. And I suspect that the US dollar will
have risen back before November 4th 2004. But meanwhile, it will benefit the
USA economy quite significantly.

"nobody" wrote in message
...
Nik wrote:
It might well be argued that these initiatives would not have helped
solve
the US trade deficit. Trade deficit - or perhaps more correctly deficit
in
payments - can be seen as a symptom of an imbalance between consumption
and
production that neither the amount of trade nor the level of employment
need
necessarily have a major impact on. It might even be argued that the low
$
is not going to help much either.

One must be careful. Country A can have a huge trade deficit with country
B
but still have a balance of payments surplus.

Exactly - this is why the balance of payments (I believe) is the most
important figure in this discussion.


Consider dividends from subsidiaries. Consider investment revenus. In many
cases, they will be bigger than the trade deficit so the USA doesn't
complain
too much.

Consider the number of foreign subsidiaries USA multinational have. Each
and
everyone of them send all their profits back to the USA headquarters. And
thos
represent huge sums of money.


Yes they do - however the imbalance of payments in the US economy has been
lingering dangerously near the five percent of GDP for quite some time now.
A few years ago for the fist time in living memory the balance between
revenues from investments abroad and revenues pained foreign investors
abroad went into the red. In other words, foreigners earned more on their
investments in the US than US earned on their investments abroad.


Where there are problems is when there are not many USA investment in a
country which does export a lot to the USA. (Japan for instance).


In and by itself it is not a major problem. Country A might have a deficit
with country B that in turn has a deficit with country C with witch country
has a surplus. It is, however as big a problems for Japan to have an
imbalance between savings and consumption.


Another aspect that isn't as obvious with multinationals is the issue of
exports. The USA doesn't need to export cheese because Kraft has
subsidiaries
in just about every country of the world. And where it doesn't it can get
the
Kraft subsidiary nearest to supply that country. (For instance, Kraft
australia is better placed to supply Indonesia with Kraft products). So
while
the USa doesn't export cheese to Indonesia, a USA owned company does and
profits from Kraft cehese cols in indonesia still go back to Kraft
headquarters in the USA.

So on cheese trade numbers, the USA looks like it imports massive amounts
of
cheese and exports very little, but once you factor in all the profits
from
the worldwide Kraft subsidiaries, I would suspect that it is a positive
balance of payments for the USA cheese industry.

Because the USA has so much money invested abroad, it gets huge sums of
money
in dividends, interest payments etc which more than make up for the trade
deficits.

Far from. The US pays more interest out of the countries than they get in.



And whenever a foreigner buys shares of Microsoft or any other US based
company, that capital injection into the US economy goes towards the
palance
of payments.


Which is still in the red!!



The USA currency remained very strong for the last couple of years,
pushing
many currencies to record lows. So, what would have changed in the last
couple
of months to cause it to be devalued ?


The demand for US$ has gone down.



A country's currency can be devalued for many reasons. Perhaps the massive
deficit racked up by the Bush regime is scaring investors away, especially
since interest rates in the USA are extremely low.


Possibly part of the explanation.


Perhaps the Bush regime has decided to artificially induce devaluation by
making massive increases in its foreign cash reserves (reduce remand on
the
USA dollar, and sending large amounst of USD overseas).

or perhaps foreign investors have lost confidence in the USA and decided
to
take their money out before it was too late.


???



I tend to think that the Bush regime used the tools at its disposal to
artificially lower the US dollar. When you consider the steel issue, they
knew that their tarifs were illegal. One way to replace the tarifs in
steel
imports and to stimulat the US steel industry is to lower the US dollar.
This
automatically makes steel imports far more expensive, and make US steel
products more competitive abroad. (substitute "steel" with "Boeing" to
get
back on topic). The timing of the devaluation is very interesting.


There is a problem here though. The biggest part of the US imbalance is with
Asia. Notably China and Japan. And they keep their currencies rather steady
to the US$. So where the devaluation is needed the most - it is not going to
come..

However, in the case of China a devaluation might not help anyway. Take a
bra as an example (it was a big issue a while ago). The machineries that is
used to produce the goods is traded in US$, the materials used in the
production is traded in US$, the shipping is also done in US$. The only main
thing that is not done in US$ is salaries to the workers which in China
might be about 700-900 RMB a month. It'll be about 100US a month. You can
divide this on the number of bras a single worker might produce in a month
and get an idea about how much a devaluation might change the situation on
that marked.


In fact, it started just a few days after the USA warned Canada that there
would be some consequences for having opposed the USA invasion of Iraq.
Canadian products suddently became 15% more expsnsive when exported to the
USA.

In the end, with a much lower US dollar, the Bush regime will be able to
claim
a much reduced USA trade deficit since americans will import less foreign
made
goods, as well as stimulated economy since american goods will be more
competitive both in and out of the USA.

Well they might not! Trade deficits is a symptom of there being an imbalance
between consumption and production. What the US might get is inflation - but
that seems not to be a big problem at the moment (but who knows how the
situation will look like in a year's time?!)



The problem for a country such as the USA is that the strength of its
currency
is treated like the length of its manhood. It is very hard to publicly
admit
that it is good to devalue the currency. And I suspect that the US dollar
will
have risen back before November 4th 2004. But meanwhile, it will benefit
the
USA economy quite significantly.


Let's see...


Nik.

On Fri, 19 Dec 2003 04:11:00 -0500, nobody wrote:

The problem for a country such as the USA is that the strength of its currency
is treated like the length of its manhood.

Most countries seem to suffer from this, err, phallacy.

On Fri, 19 Dec 2003 16:23:43 +0000, Dick Locke wrote:

On Fri, 19 Dec 2003 04:11:00 -0500, nobody wrote:

The problem for a country such as the USA is that the strength of its currency
is treated like the length of its manhood.

Most countries seem to suffer from this, err, phallacy.

And BTW, I don't think this is true in the case of the US. Most folks in
the US are blithely unaware of the exchange rates. The press ignores the
issue etc.

It's the rest of the world that pays attention, really. Which is why GW
gets away with his cheap dollar policy.

On Thu, 18 Dec 2003 10:56:32 -0800, Paul Middlestat wrote:

Seems that the Bush regime realised its tax cut wouldn't help at all but
allowing the UD dollar to fall significantly would give the USA economy a
boost. The low US dollar should help Boeing export planes.

Using the price of the USD v Euro to create an anti-W message? Get your-
self into an Econ 101 class, and use that knowledge as a step to learn
about international currency valuation. The US balance of trade deficit,
in place long before W took office, is currently pushing down the value of
the dollar. The trade deficit could have been addressed with two proposals
by W - both which failed in congress. One was tariff protection for the
steel industry (a response to cheap steel produced by cheap labor in
foreign markets), the other was the opening of the ANWR for oil exploration.

Mostly not correct. Sure there was a trade imbalance beofre, but it has
been exacerbated singe Bush took office.

As far as the budget is concverend, there was a surplus before, while Bush
has been taking the fed into the most massive borrowing in history. This
plays a big role in the drop in the dollar.

Finally, there is the message that the Bush administration has been
sending: they don't really care if the dollar crashes.


Since the economic climate in Europe is - and always has been - far
from
consistent, I'm not sure this is the time to panic over the currency
fluctuation of the dollar.

And there is something of a self-righting mechanism into all of this;
countries with a favorable international currenty valuation attract
larger exports.

Perhaps not. The bulk of the trade imbalance is with countries which have
their currency pegged to the dollar. Whether they'll be able to continue
to support the dollar forever is of course open to question, but at this
point, they have no intention of changing this.