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Obama has made Bush look like a miser. I'd be glad to give you links to CBO so you can see for yourself.

 

Steve

 

I don't generally jump to defend any politician, but is Obama not spending this money to cover what the Bush/Cheney/Rumsfeld machine watched happen and in many cases caused? I can't see how Obama created the need for these expenses. I'm sorry, this has little to do with Colone vs Dollar. JMHO

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I don't generally jump to defend any politician, but is Obama not spending this money to cover what the Bush/Cheney/Rumsfeld machine watched happen and in many cases caused? I can't see how Obama created the need for these expenses. I'm sorry, this has little to do with Colone vs Dollar. JMHO

 

What was spent during the Bush years was posted to the deficit during the Bush years (I posted the numbers earlier ... take a look). Any spending after 20 January 2009 is on Obama's watch. As of last week, his administration has added $1.7T to the deficit.

 

You are correct, this thread now has little to do with the Colon vs Dollar and should probably be moved to the Open Forum by an administrator.

 

Steve

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First, let me chime in with objections to the W/Obama fight. W had this cool way of keeping wars off the books, and then started the bailout that Obama continued, didn't want to continue, but most folks believed necessary. Was it a few billion too much or too little? Hell, I dunno. The bankers needed their bailout to keep the ship floating.

 

Second, I will pass on weighing in on FDR (huh?) and Nixon (I gather eliminating the gold standard). It seems to me that if you sell widgets you're OK, if you just make widgets for others (like Latin America) you're on shaky ground, and if you neither sell nor make widgets (like some of Latin America) you're screwed. Gold and the like are kind of irrelevant.

 

Third, regarding the CAD, I've been following this for a few years and must say that I find nothing ominous about it. It is a little weird, since the two economies are tied yet sometimes the currency fluctuates, yet this whole $1.30 CAD at some point doesn't make sense to me. Ten years ago the CAD was worth like 65 cents, it closed in on the dollar, then dropped back, and is now worth around 93 cents. There are fluctuations, but whatever is going on is long term.

 

Finally, regarding the colon, I am afraid that I do see something fishy going on. Lately the dollar has been dropping against it in the fall but rising again in the spring, gaining a little bit overall. I think this is now a three-year pattern. But I am not convinced that the pattern makes sense. People talk like it does, but I don't think what they say passes muster. Something else is going on, I suspect. I have heard that in CR only like three people control the money, and they they dictate it. I tend not to like conspiracy theories like this, but the fact is that it is a small country and a few big money-movers can make a difference. It is though not making sense. At the moment the colon is lower against the dollar than it was about a year ago, yet CR inflation has been slightly higher than US inflation. Again, if people are simply buying and selling widgets in the global economy this should not prevail. On the other hand, picking a year interval may not be correct, and there are a million things going on. However, let's not get silly. The question is what a toaster costs in the US v. in CR. It doesn't have to be rocket science (or gold standards). It's what a blasted toaster costs. This is a little out of line compared to a year ago.

 

I'm betting that within a couple months the dollar with rise again against the colon, but I'll be darned if I know why. Something I don't understand is going on. However, I'm persuaded that it has to do mostly with the cost of toasters, not much else--although there may be a few wealthy people tweaking this thing in CR.

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The amount of debt that Obama has incurred is greater than that of FDR. I'm very aware of the financial crisis (and the causes of it ... look into what really went on with Fannie Mae and Freddie Mac). The dollar is losing value rapidly and will continue to do so for the foreseeable future and will only slow down by reducing the speed of the debt increase (Congress just increased the debt limit to $14T). Remember the days when the yen was 360 to the dollar? It's in the low 90s now. When the Canadian dollar was $1.30 to the dollar? It's $1.05 now. To ignore, or deny the dramatic and continuing fall of the dollar is to bury your head in the sand. Sure hope you aren't counting on social security as a primary source of income.

 

Steve

 

 

 

 

 

The federal deficit today for the Month of Feb, 2010 is 225 Billion dollars for one month only and interest payments are doubled.......My God!!!

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First, let me chime in with objections to the W/Obama fight. W had this cool way of keeping wars off the books, and then started the bailout that Obama continued, didn't want to continue, but most folks believed necessary. Was it a few billion too much or too little? Hell, I dunno. The bankers needed their bailout to keep the ship floating.

 

Second, I will pass on weighing in on FDR (huh?) and Nixon (I gather eliminating the gold standard). It seems to me that if you sell widgets you're OK, if you just make widgets for others (like Latin America) you're on shaky ground, and if you neither sell nor make widgets (like some of Latin America) you're screwed. Gold and the like are kind of irrelevant.

 

Third, regarding the CAD, I've been following this for a few years and must say that I find nothing ominous about it. It is a little weird, since the two economies are tied yet sometimes the currency fluctuates, yet this whole $1.30 CAD at some point doesn't make sense to me. Ten years ago the CAD was worth like 65 cents, it closed in on the dollar, then dropped back, and is now worth around 93 cents. There are fluctuations, but whatever is going on is long term.

 

Finally, regarding the colon, I am afraid that I do see something fishy going on. Lately the dollar has been dropping against it in the fall but rising again in the spring, gaining a little bit overall. I think this is now a three-year pattern. But I am not convinced that the pattern makes sense. People talk like it does, but I don't think what they say passes muster. Something else is going on, I suspect. I have heard that in CR only like three people control the money, and they they dictate it. I tend not to like conspiracy theories like this, but the fact is that it is a small country and a few big money-movers can make a difference. It is though not making sense. At the moment the colon is lower against the dollar than it was about a year ago, yet CR inflation has been slightly higher than US inflation. Again, if people are simply buying and selling widgets in the global economy this should not prevail. On the other hand, picking a year interval may not be correct, and there are a million things going on. However, let's not get silly. The question is what a toaster costs in the US v. in CR. It doesn't have to be rocket science (or gold standards). It's what a blasted toaster costs. This is a little out of line compared to a year ago.

 

I'm betting that within a couple months the dollar with rise again against the colon, but I'll be darned if I know why. Something I don't understand is going on. However, I'm persuaded that it has to do mostly with the cost of toasters, not much else--although there may be a few wealthy people tweaking this thing in CR.

The deficit of the US is directly responsable for the fall of the dollar against the colone! The US keeps printing money that has no value, so it falls against other currency. The politicians, with their massive deficit spending, are destroying lives of the working people!!

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The deficit of the US is directly responsable for the fall of the dollar against the colone! The US keeps printing money that has no value, so it falls against other currency. The politicians, with their massive deficit spending, are destroying lives of the working people!!

 

I'm not saying that I disagree, only that I am not as convinced and would appreciate your embellishing.

 

It seems to me that if the US is "printing money that has no value" inflation inside the US should be high. That is, the more money that is printed without value to support it should result in a lower value of the currency everywhere, including inside the US. Why would US inflation be low while the currency devalues against the colone if printing money is the problem?

 

Related, help me here, isn't the dollar up a little bit against the euro? If the "printing money" thing is the issue, I would think that it would be an issue everywhere.

 

Also, I would be interested in knowing the historic trends. Back when everyone's lovable presidential candidate, Ross Perot, made the deficit such a huge issue (and there was the "national debt clock" in NY's Times Square), wasn't the dollar still leapfrogging against the colone? Were Ross Perot's gripes chicken feed compared to Obama's "irresponsibility" or is something else going on?

 

Indeed, just because W put his deficit-war spending off the books, and printed money for that, were Ticos fooled? Did Ticos look at the official US budget rather than the real deficit budget and on that basis decide that the dollar was steadily worth more than the colone?

 

I honestly don't have any hidden-agenda answer here, because I genuinely don't know. Insofar as I think I know anything, I suspect that most who opine about economic matters don't know what they're talking about any more than I would. The printing money explanation could for all I know be true, but if it is true it has to include explanations for the obvious exceptions. Perhaps it is true and the exceptions can be discounted. Personally, I would really like to know.

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I'm not saying that I disagree, only that I am not as convinced and would appreciate your embellishing.

 

It seems to me that if the US is "printing money that has no value" inflation inside the US should be high. That is, the more money that is printed without value to support it should result in a lower value of the currency everywhere, including inside the US. Why would US inflation be low while the currency devalues against the colone if printing money is the problem?

 

Related, help me here, isn't the dollar up a little bit against the euro? If the "printing money" thing is the issue, I would think that it would be an issue everywhere.

 

Also, I would be interested in knowing the historic trends. Back when everyone's lovable presidential candidate, Ross Perot, made the deficit such a huge issue (and there was the "national debt clock" in NY's Times Square), wasn't the dollar still leapfrogging against the colone? Were Ross Perot's gripes chicken feed compared to Obama's "irresponsibility" or is something else going on?

 

Indeed, just because W put his deficit-war spending off the books, and printed money for that, were Ticos fooled? Did Ticos look at the official US budget rather than the real deficit budget and on that basis decide that the dollar was steadily worth more than the colone?

 

I honestly don't have any hidden-agenda answer here, because I genuinely don't know. Insofar as I think I know anything, I suspect that most who opine about economic matters don't know what they're talking about any more than I would. The printing money explanation could for all I know be true, but if it is true it has to include explanations for the obvious exceptions. Perhaps it is true and the exceptions can be discounted. Personally, I would really like to know.

The US deficit today is around 12.5 trillion dollars! Medicare and Social Security are broke. The present unfunded liablilities for outr government for the future to support Medicare, Medicaid, Social Security and other political boondoggles are estimated at around 130 trillion dollars! The Congress continues to pass laws requiring even more "borrowing" from other foreign countries and private investors (individuals, banks, insurance companies, mutual funds etc.). Inflation is just around the corner - stagflation! This is absolutely unsustainable - If you don't believe it, read up on the French revolution, and the inflation in Germany in the 20's and 30's which was brought abought by printing worthless moneey. This irresponsibility is ruining peoples lives, and it is only going to get worse. Solution for the US? Have a two year moratorium on all taxes so that private enterprise can recover, and the US can start manufacturing things of value - heavy machinery, machine tools, steel, aluminium, etc. and we can restore the free enterprise system that made us the greatest nation in the world! Respectfully

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If anyone knew that, then they could easily make a lot of money. It is anyones guess really.

 

 

And to say it is Obama's fault is absolutely silly. The chain of events in the financial markets where put in place A LONG TIME before Obama even entered politics. If you want to point fingers... the Nixon admin is your man. Please make sure you understand financial systems before you make such a silly comment.

I will say it's Obama and the folks running things, and no I don't think it's silly at all. Don't spend what you don't have, sorry thats just how I live clearly it's not how they do things in old Daley/Obamavill. If only Ron had won, but such is life.

Edited by sabo941

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The US deficit today is around 12.5 trillion dollars! Medicare and Social Security are broke. The present unfunded liablilities for outr government for the future to support Medicare, Medicaid, Social Security and other political boondoggles are estimated at around 130 trillion dollars! The Congress continues to pass laws requiring even more "borrowing" from other foreign countries and private investors (individuals, banks, insurance companies, mutual funds etc.). Inflation is just around the corner - stagflation! This is absolutely unsustainable - If you don't believe it, read up on the French revolution, and the inflation in Germany in the 20's and 30's which was brought abought by printing worthless moneey. This irresponsibility is ruining peoples lives, and it is only going to get worse. Solution for the US? Have a two year moratorium on all taxes so that private enterprise can recover, and the US can start manufacturing things of value - heavy machinery, machine tools, steel, aluminium, etc. and we can restore the free enterprise system that made us the greatest nation in the world! Respectfully

Yesterday, I did a quick calculation of the de-valuation of the dollar over the previous 3 / 4 months. Not long ago the exchange rate was 585 colones per dollar. Friday, the exchange rate was around 536 colones per dollar. That means that for anyone living here on $1000 a month, they are losing about $90 per month in purchasing power!! This is inflation - Remember the story about the guy in 1920's Germany that went to the store to buy a loaf of bread, and brought his German currency to the store in a wheel barrow. He left the wheel barrow unattended at the store, and when he came back, the money was stacked on the ground, and the wheel barrow was gone?

As for Mr. Nixon, h was the last preseent to submit a balanced budget to congress in 1969!! Respectfully

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Not to worry, the new $100 bill will be printed on a roll. When you can no longer exchange them for anything of value, you can just put them in the bathroom. There should already be a fixture for this.

 

Dana

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Kenn,

 

It's reasonable to ask for such explanations but it seems the answers as to WHY the colone should be a almost world-wide exception are not able to be stated here.

 

It's OK to ask the bear to dance, but not fair to expect him to do it well.

 

However, it might be interesting to determine in which currency the new trade with China is carried and thru whom. B)

 

I'm not trying to be hard to get along with, but I'm not following your dancing bear analogy. Also, just breezing through the posts, you seem to have a handle on things so I would be curious.

 

In addition, can anyone who read the Tico Times article on the exchange rate in the 3/12 issue explain it to me? Cards on the table, I honestly believe that the reporter didn't understand and wrote the opposite of what is true. Mind, I don't want to disparage him, since in my opinion people always get caught up in these economic metaphors and mix things up. He's just a working stiff trying to do his job. But I think as written he had things backwards. More dollars chasing fewer colones lowers the value of the dollar, at least if the rules of supply and demand operate, right?

 

On a political point, while Mr. Nixon is in my opinion often unfairly chastised, in fact Jimmy Carter also submitted balanced budgets and even paid down the national debt. I don't know whether or not Clinton did--the Clinton experts will have to weigh in--but I know Carter did.

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"in fact Jimmy Carter also submitted balanced budgets and even paid down the national debt. I don't know whether or not Clinton did--the Clinton experts will have to weigh in--but I know Carter did." kenn

 

In fact President Bill Clinton left office with a balanced budget and a surplus that was projected towards paying off the deficit/debt from the Regan/Bush years. Would have only take a few more years to have paid that off too.

 

When W took office, he decided that it would be better supply-side policy to give that surplus to the wealthy and corporations, with a few crumbs thrown to the middle class, via huge tax cuts. Along with everything else that happened afterwords, well, we know what happened to the US deficit/debt, don't we.

 

Dana J

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Hi Kenn,

 

The dancing bear label was intended to apply to forum posters who, having a dim grasp of complex issues, reduce the issue to some generalized theory (usually taken from popular pundits) and often come with a political agenda attached. When asked to define the points of logic that lead to their conclusion, we find that they are unable to provide any and only repeat their initial statement, often in all caps, only adding derogatory comments as to the readers failure to accept such self-evident "facts". So, such posters (bears)can raise a issue ("dance") but not well enough to add anything useful when challenged.

 

To your point: I think that "too many dollars chasing too few colones" WILL result in fewer colones (as you say) per dollar at the exchange window and that is what I see happening. The need for dollars (assuming the carry trade is conducted in dollars) to finance imports from the US has certainly diminished for Costa Rica over the last 12 months. So the article does offer some explanation for that part. The writer does indicate that the people he interviewed believe the long-term inflation of the colone vs. dollar will resume.

 

That may well happen but we have a new actor on stage now; China. As DIRECT CR trade with China has increased, the dollar is subject to being supplanted by whatever medium of exchange the Chinese want. I do not believe China have positioned themselves to accept yet another dollar based trade while they are swimming in them and wish to diversify. Regardless of in which currency this new trade will take place, the need for new incoming dollars will diminish and the need for Colones increase. If the dollars earned from tourism holds or resumes increasing, the supply of dollars relative to the need for them will increase. So it's not only the issue of US printing money - which is undeniable - it's external as well.

 

What none of this does if to address the TIMING of the dollar/colone exchange rate swings... they do not seem to follow any visible "supply and demand" curves. The current swing may be responding to the import drop but this does NOT account fro previous swings and no article has address those. I ruminate that the CR exchange is a small and relatively closed system, controlled by a few and has little in the way of internal or external oversight. That scenario has often resulted in a temptation too great for human nature to resist and abuses have resulted. Anybody want to bet?

 

I'm not sure I'm following, but I decided to put my thinking cap on and here are some of my tentative conclusions.

 

First, I think mixing up US policy with the colon/dollar exchange rate is mostly misplaced. Granted, US policy is never irrelevant, but this strikes me as hot heads with axes to grind about the US. I think the colon/dollar exchange rate has to do with what's happening in CR.

 

In particular, it seems to me that the relevant thing is mainly the supply of dollars vs. colons. It's supply and demand. The more dollars there are are for the same supply of colones, the lower the value of dollars. Thus, the fall in the value of the dollar is a consequence of there being more dollars than colones, so to speak.

 

The question is thus how there came to be too many dollars, and printing them in the US is largely irrelevant. The issue is how there got to be too many dollars in CR (and just printing them in the US, if true, doesn't necessarily get them to CR, except indirectly through US inflation, which isn't happening). Also worse than irrelevant is blaming the decline in tourism. Actually, an increase in tourism from the US would lower the value of the dollar in CR more. The decrease in tourism is actually a blessing for the dollar.

 

The crux has to be that CR is simply spending fewer dollars, that is, buying fewer imports from the US or elsewhere denominated in dollars. This is giving CR a surplus of dollars and driving down their value. At the same time, CR could be exporting more to the US. Somehow, CR is accumulating more dollars than usual.

 

My guess, though I don't know, is that trade between CR and China may be the culprit, at least if China doesn't want to be paid in dollars (or its surplus of dollars is driving down their value there). Every time CR buys from China rather the US, it leaves CR with excess dollars and drives down their value. Is trade with China up? I would look at this.

 

It's possible that, being a relatively small economy, CR is influenced by currency traders. Yet, I have not been able to think through their incentive. They would have to move large sums around, and I'm not sure the profits and risks would be worth it to them.

 

However, I'm convinced that somehow CR has more dollars than usual, and that's the crux. Why it does (with tourism down) is the puzzle.

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No expert in economics here, but a few observations:

1. Having seen indicators that tourism is actually going up, with more full airplanes landing in CR, and the season of Semana Santa spending is upon us with many folks spending a wad of local currency these next weeks, it will be interesting to see what impact this will have on the colon dollar exchange rate.

2. Another question is what will become the impact of China trade with Costa Rica and which currency is being exchanged for that increase in trade. Not just talking about building a stadium here, but the availability of Chinese ceramic tile is a real example, since in the past you could only find Guatemalan, Mexican, Italian, and Costa Rican tile here. Now you can buy ceramic tile made in China, and by the way it is cheaper.

Just saying...

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No expert in economics here, but a few observations:

1. Having seen indicators that tourism is actually going up, with more full airplanes landing in CR, and the season of Semana Santa spending is upon us with many folks spending a wad of local currency these next weeks, it will be interesting to see what impact this will have on the colon dollar exchange rate.

2. Another question is what will become the impact of China trade with Costa Rica and which currency is being exchanged for that increase in trade. Not just talking about building a stadium here, but the availability of Chinese ceramic tile is a real example, since in the past you could only find Guatemalan, Mexican, Italian, and Costa Rican tile here. Now you can buy ceramic tile made in China, and by the way it is cheaper.

Just saying...

 

We will see, but I doubt that Semana Santa brings in more gringo tourists. This is a Latin thing. After spring break the gringos are gone.

 

The ceramic tile is more interesting. Clearly if Ticos are buy less from the US and more from elsewhere, there would be more dollars in the economy and this would depress the value of the dollar.

 

I also saw in last week's Tico Times that exports from CR have been up this winter, 39% of those exports going to the US. This brings dollars in, which if not spent on imports lowers the value of the dollar in the local economy.

 

However, it seems to me that my factors are too small to explain more than a 10% drop in the value of the dollar over six months. It seems like there ought to be a more specific and even dramatic explanation.

 

But I dunno.

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