off to the races ... the Fed cut interest rates today !
... and as a result, US dollar denominated oil prices set a new record high, the price of gold, silver, copper, nickel, wheat, corn etc. all took a major jump upward, the exchange rate of most other currencies increased relative to the US dollar etc. At the same time the US stock market Dow Jones average jumped up over 300 points.
Keep in mind that, from a global perspective, the Euro or Yen or Canadian dollar price of oil didn't really change ... the Euro or Yen or Canadian dollar price of gold, copper, wheat etc. didn't really change ... the Euro or Yen or Canadian dollar price of the Dow stocks didn't really change either. The only thing that really changed from a global perspective is that the exchange rate / purchasing power of the US dollar declined.
As a consequence, in terms of purchasing power, all of our US dollar denominated savings accounts, CD's, etc. also declined in real world purchasing power terms. But also as a consequence, Americans who are heavily in debt will now have an easier time paying off those debts. 'Moral Hazard' strikes again ...
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Re: off to the races ... the Fed cut interest rates today !
As another says in another of our favorite blogs -- it's a "War Against Savers!"
I don't think Americans who are in debt are going to find it easier to pay off their debt though.
Re: off to the races ... the Fed cut interest rates today !
Is value of the dollar still the same relative to the yuan?
Re: off to the races ... the Fed cut interest rates today !
^^^ fractionally the same, because the Chinese gov't can buy or sell their US dollar foreign exchange reserves to control the exchange rate of the Yuan as they please. However, this does not mean that the future price of Chinese made goods exported to the USA stays the same. The reason is that the energy costs of producing those goods goes up in US dollar = regulated Yuan terms, the cost of raw materials needed to produce those goods goes up in US dollar = regulated Yuan terms, Chinese workers start pushing for regulated Yuan pay raises to offset their own loss of purchasing power etc.
The obvious point here is that exchange rate is inversely proportional to inflation rate ! Thus the Chinese have a choice to continue regulating the Yuan relative to the US dollar and live with massive inflation, or they can let the Yuan float and reduce inflation. Unfortunately, Americans don't have the second choice available thus we'll be stuck with the price inflation (but without the offsetting pay raises).
Re: off to the races ... the Fed cut interest rates today !
and speaking of declining currency equalling inflating prices ...
Ultimately, China will have to let the Yuan rise in value relative to the US dollar if they want to avoid widespread internal unrest over rapidly escalating prices for food and other basic commodities. But again, America won't have this choice available if the Fed must hold down interest rates in order to avoid widespread bankruptcies due to ARM resets, due to floating rate credit card debt etc.
Re: off to the races ... the Fed cut interest rates today !
This is not good news. The dollar is already weak, and ther big cut is causing foriegn markets to question whether the dollar is worth the value to be the worlds currency. If OPEC decides to tag the price of oil to the Euro instead of the dollar, the US would be royally fucked. This is a really scary thought. The US would lose it's economic dominance *snap* just like that. Mel, got any more of those shiny hats?
Re: off to the races ... the Fed cut interest rates today !
well if you had some tin foil to deflect the 'glare', you'd clearly see that between Vladimir Putin, Alamenijad in Iran, and our buddy Citgo Chavez in Venezuela, the price of oil is ALREADY linked closely to the Euro, with the US$ price of oil now vacillating in accordance with the US$ exchange rate. OPEC's official sanction may be missing, but Russia, Iran and Venezuela set the price at the margin ...
Of course, Nigeria is very pro-US dollar. By some strange coincidence, every time the US$ oil price takes a major jump, some terrorist blew up a piece of Nigerian oil infrastructure was blown up the previous day !