6 Comments
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Oct 08.09
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Foreign Exchange
/ by Ro Econ
User techy246 from our now defunct economics forum posted this question that had a few responses. We're reposting it here in the blog for your view.
1. Since Europe exports to usa a lot, how can they let their currency keep going up?....is it possible that they are not using USD as the currency of trade but EURO instead??
2. from everything i am reading, even though nothing is for sure right now, it looks like the USD is going to fall atleast 30-40%. and at the same time FED will have to decrease interest rate to support the slowing economy.
lets say slowing US economy leads to:
1. high unemployment, wage decrease
2. decreased consumer spending (leading to worse economic conditions)
3. lower interest rates (falling USD)
4. Slowing china/india economy because of decreased exports
in the previous downtime in 2001, they decreased the interest rate, and people kept spending by borrowing from the equity of their home....i wonder what will bail us out if things go south this time??
one more thing i am not able to understand, how can the stock market keep ignoring things??
isnt the analysts 10 times more knowledgeable than layman like me, or is it possible that all the doom reports are false??
i think if the economy starts to go down.....stock market will go down atleast 20%
1 Comment
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Oct 06.09
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Foreign Exchange
/ by Ro Econ
Q. why exactly is 1 yen worth only 0.008201 dollars?
A. I'll answer half of your question.
If country A pegs to a vehicle currency from an economy larger than itself (let's say a small Asian country against the USD), then it doesn't want to peg itself 1 to 1.
Why? If you peg 1 to 1 with a crappy little economy then you are bound to LOOSE purchasing power overnight because foreign investors get out of your crappy little economy. Any instability (which fluctuates more in your crappy little economy) will be faced with depreciations of your currency. So you keep loosing money faster than you really want. That means your exports now become cheaper but you can't afford to buy anything from imports cause your dollar is worthy junk! That's a reason why you don't want to start off at par.
The whole FOREX market is constantly pushing money here and there based on economic security and return. If you don't really have an economy that is equal (all things being equal) to the country you peg to then you're in for a RIDE.
(originally posted in the forum)
1 Comment
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Oct 04.09
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Foreign Exchange
/ by Ro Econ
Q. The Bank of Canada held steady on interest rates maintaining the key lending rate at 4.25 per cent, what happened, among other things, was the drop in the loonie. Can you explain why?
A. Well to make a long answer short, the dollar fell less than it would have had the interest rate decreased. When the short term interest rate declines it sends signals to the market that the economy needs a boost, that any increases would actually have a negative impact on the markets. This in turn affects investor confidence, hence the exodus in investments of Canadian currency.
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6 Comments
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Oct 02.09
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Foreign Exchange
/ by Ro Econ
A user techy246 posted this in the forum at the end of 2006. We're now moving it here.
I am trying to make sense of all the talks in media about a recession in 2007 and falling usd.
so right now dollar is in a bad position because:
1. huge trade and fiscal deficit..being funded by china and others....who dont want any more usd
2. slowdown in economy and housing which means interest rates has to be lowered.
3. people moving out of investment to some other country
to keep the dollar strong, FED will have to increase interest rates....but thats almost impossible because it will kill the already weak housing sector and the economy.
that means i am betting that FED will decrease interest rate in second quarter of next year....to help the economy......and it will let the dollar fall........am i right??
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No Comments
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Sep 30.09
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Foreign Exchange
/ by Ro Econ
FOREX is short for "foreign exchange". When we discuss the FOREX market we are usually referring to the purchase or sale of a currency against sale or purchase of another currency. The largest and most active market in the world is in fact the foreign exchange market. Since the market remains open for 24hrs (never closes, one market closes while the other opens,) it also features some of the biggest daily money moves.
Any type of financial instrument that is used to make payments between countries is considered foreign exchange. The list of instruments includes electronic transactions, paper currency, checks, and signed, written orders called bills of exchange. Large-scale currency trading, with minimums of $1 million, is also considered foreign exchange and can be handled as spot price transactions, forward contract transactions, or swap contracts.
You will find countless online FOREX tools that try to capture the demand for 'quick and easy money'. Online FOREX traders are essentially consumers with money to spare who wish the seek the thrill of foreign exchange markets over their usual day trading.
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7 Comments
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Sep 28.09
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Energy
/ by Ro Econ
We've all read the top 10 lists on how we can conserve our gasoline and drive a few extra stops before our tank runs empty. These stories are particularly popular given the consistent rising price at the pumps. But here's a question: how many of these 'gas saving tips' actually help reduce fuel consumption? With that in mind, here are the...
Top Ways How NOT to Save Money on Fuel
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2 Comments
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Sep 25.09
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Energy
/ by Ro Econ
A post originally placed in our forum and moved here. I thought it would be interesting to relive what we were discussing mid-way through 2007. Oh how times have changed!
Bloomberg seems to think that $100 oil (not only BLoomberg BTW, a lot of people think...) will land come December this year. Is this probable? What are your thoughts, let's open this can of worms.
Mike Moffat over at About.com doesn't think so citing evidence in the futures and options market.
The only way oil hits $100 is if a hurricane destroys 10 refineries, US attacks Iran, or terrorists attack US. That's the only way. Natural market pressures won't send it to $100, but confidence issues may. We'll see come December!
Re: [econmod] Crude Oil to Hit 100/barrel before 2008? [In reply to]
Actually, it depends on whether OPEC can increase their production for the high demand 4th quarter. Many people are now saying that it seems Saudi Arabia might have peaked, since their production was declining well before OPEC put in their quota at the end of last year and they're down over 800,000 barrels/day, or almost 10%. The IEA has practically been begging OPEC to open the spigots, since they expect an increase in demand of 2.8mb/d by December, but OPEC has remained strangely steadfast, and won't even think about an increase until September.
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No Comments
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Sep 23.09
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Investments
/ by Ro Econ
Here is a brief explanation on Common Shares.
Advantages of owning common shares:
1) A marketable asset
2) Potential for capital appreciation
3) Favourable tax treatment
a) Dividends
b) Capital gains
4) Voting - a say in the affairs of the company
5) Dividend income
6) Limited liability investment
Most suitable for long-term investment (10+ years); hopefully your company doesn't go under 
Problems: can be very volatile (risky) over short periods of time.
1 Comment
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Sep 22.09
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Debt Management
/ by Ro Econ
Here is a conversation that happened in 2007 and has relevance today (was in the forum and moved here to the blog. My how 2 years changes everything.)
If you think America will recover and remain a world super power then you may have to think again. This debt may cripple them forever. In the history books it might read America killed themselves by fattening their consumption appetites beyond their means.
According to Forbes, the personal savings rate as a percentage of disposable income (Yd) in the US last year was negative 0.5%, by far the lowest of any industrialized nation. In France, the savings rate was 11.6%. Germany's rate was a robust 10.6%. Japan clocked in at 6.7%. Congrats US on propping up the world economy with your consistent need to buy things! You know what business I should be in , CREDIT CARDS! DiscussEconomics One and Gold for you.... 
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No Comments
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Sep 21.09
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Debt Management
/ by Ro Econ
Q. I've heard alot of about consolidating loans but don't understand it fully, can you give me just a brief explanation?
A. Great question, everyone on the Internet (scammers, some legit, banks, credit cards, everyone) wants you to consolidate your loans with them? So what's the deal.
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