Grunt 70

Helps us understand, you finance mavens, has this come true. I'm guessing no.

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leejo

It's not 12/7/08 yet!

Check out this chart.
Yes, the dollar continued to decline for several months after the cuts - everyone expected that. However, since 3/14/08 it the dollar has enjoyed a pretty strong rally. I'm not worried about my bet, which was not accepted unfortunately.

Edit - hmm I see yahoo's stupid chart sharing thing doesn't work so hot. To see what I'm talking about, load the chart from the link above and make the following changes:

In the bottom right part of the chart, change "From" to "12/2/2007"

I believe the trend lines I usually watch will appear for you - 10 day exponential moving average, 30 day moving average, and 200 day moving average. These indicate that the dollar is in a nice upward trend vs. the yen and has been since late April when the 30 day crossed the 200 day.

leejo

By the way, if anyone wants to take me up on the bet now, lemme know!

xTYBALTx

Another chart.

That chart compares the USD vs. the Euro, Jap Yen, Brit Pound, and Can Dollar. It's an inverse graph, so a "-5% change" is actually +5% for the US Dollar.

From 12/7/2007, the USD is up about 8% vs. the GBP; up about 5% on the Canadian Dollar; and even with the Jap Yen and Euro. Throw some commodities into the mix, such as oil, corn, copper, silver, and gold, and you'll see that ALL currencies have had suffered from severe inflation over the past eight months. Unfortunately I haven't found an online resource for commodities - anyone else know of one?

With our recession spreading to the rest of the world, central banks everywhere will be slashing rates to offset some of the pain. This should have the effect of inflating their currencies - in effect, all currencies will be inflating fairly painfully.

This should further increase commodity costs for the rest of the world - and of course for us as well; our currency will still be devalued, just not as quickly as some other currencies.

So, depending on what we want to use to measure inflation, what mix of currencies and commodities, I'll gladly take that bet.

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Switchcraft

Tybalt, what definition are you using to say we're having a recession? No doubt Japan is having one right now, but the U.S.?

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xTYBALTx

Switch - I'll get back to that in a min, don't have time now. But just saw this headline:

Inflation at 17 year high

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A policy of freedom for the individual is the only truly progressive policy. -F.A. Hayek

leejo

My bet wasn't about measuring inflation, it was measuring the dollar against some standard currency like EUR or JAP. When people talk about "the dollar" rising or falling, they're talking about the dollar relative to another currency or a basket, no?

So while I'd be happy to bet you on USDEUR or USDJPN, I'd never bet on the USDBRL going up by much by 12/2008. Brazil is going to clean everyone's clocks for a while on that one.

xTYBALTx

Not necessarily - people frequently judge the dollar based on it's performance against commodities instead of currencies: Look at how many people compare the dollar to gold or silver, for example.

The only reason that anyone cares about inflation is because of it's impact on purchasing power - the ability to convert our pieces of paper into useful stuff like copper, gold, televisions, cars, oil, and so on. So comparing the dollar against other currencies is definitely one useful metric, but it doesn't necessarily tell the whole story; the dollar could be much stronger than every other currency on earth, but if that only occurs because all currencies are inflating rapidly but the US dollar is inflating just slightly less rapidly than the rest, then you'll end up with a situation in which "the dollar" looks good on currency based metrics but doesn't have any purchasing power.

__________________
A policy of freedom for the individual is the only truly progressive policy. -F.A. Hayek

xTYBALTx

There is much controversy.

http://en.wikipedia.org/wiki/Economi...ession_dispute

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A policy of freedom for the individual is the only truly progressive policy. -F.A. Hayek

leejo

From what I've seen people talk about "the dollar" rising or falling against other currencies and they talk about "inflation" with regard to purchasing power. In other words, you won't hear anyone on the news say "today the dollar got stronger" unless they're talking about its relationship with other currencies. You WILL hear them say "Gold fell" or "Oil rose". Semantics maybe, but it's an important distinction when putting $100 on the line.

I don't think I'd be willing to bet that oil is 15% cheaper at the end of the range than the beginning, but I'll bet that gold is...

Tempus

I'm not convinced of the currency/inflation relationship. Brazil has the strongest appreciating currency in the world over the past couple of years (as well as an interest rate approaching 15%), and yet it still has higher inflation than the US or Europe.

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El_Gringo_Grande

Yea, economics is voodo magic. I think much of what happens is because we have convinced ourselves that this is what should happen.

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I’m not racists, I have republican friends. Radio show host.
- "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
- "A foolish consistency is the hobgoblin of little minds" - Emerson
- "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
- If software were as unreliable as economic theory, there wouldn't be a plane made of anything other than paper that could get off the ground. Jim Fawcette

leejo

Maybe it is voodoo magic. Or, you could study it and learn everything you can about it and hopefully not be helpless when the seas get stormy.

Funny how often the people who devote themselves to learning as much as they can about economics are basically in the camp of wanting the government to leave us alone and the people who think it's voodoo magic want the government to bail "us" out of our problems. Funny like a kick in the nuts every April 15th and payday.

El_Gringo_Grande

That is because those that learn all they can about economics just end up worshiping the voodoo magic.

And I find it more a soothing caress that calms my fears and lifts my spirits.

__________________
I’m not racists, I have republican friends. Radio show host.
- "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
- "A foolish consistency is the hobgoblin of little minds" - Emerson
- "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
- If software were as unreliable as economic theory, there wouldn't be a plane made of anything other than paper that could get off the ground. Jim Fawcette

leejo

Yes well I worship the voodoo magic in first class with a cocktail in my hand while the non-believers file past with their copies of Who Moved My Cheese.

I did. I moved your cheese. Cheers!

edit: I actually fly first class a lot not because of any special insight I have but because I fly a ton so they upgrade me all the time. However, the cocktail in hand and Who Moved My Cheese is a true story. One day I was enjoying a vodka and tonic in first class when some dude struggled on board with that book (which I've always hated) and that was my thought.