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Last week Japan sold 2trillon yen and bought dollars to keep the yen from gaining more value against the dollar. And they parked those dollars in money market fund rather than issue govt bonds. The world markets look at this event as loss of faith in the dollar strength with continuation of the bailout mindset of the administration, hatred for profitable business models, the continuing collasp of the US job market with no plan to stem the loss other than government jobs. As they say, we elect whom we deserve. a bounce will come, in fact many bounces but america as we've known it has changed forever. And that you can believe in.

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this thread is threatening to stray away from Costa Rica, and into USA politics...

How can one possibly live in Costa Rica with the falling value of the dollar? This is exactly what should be discussed on this thread!

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The Central Bank will have to intervene soon. This decline is very hurtful to the many multinational companies here as well as to the tourist industry already reporting losses. What's even mire sad is that it used to be a benefit to pay in US$$. Now the majority if multinationals have switched their payroll to Colones.

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How can one possibly live in Costa Rica with the falling value of the dollar? This is exactly what should be discussed on this thread!

Newman & All,

 

Topic has been moved to the Open Forum. Y'all can 'have at it' now.

 

For Rick: Feel free to start up your thread again where it was originally and we'll very courteously request that Forums members keep it on-topic to CR and not hijack it again.

 

Moderator

==

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Has anyone in authority offered any explanations as to why this is happening (dollar continuing to fall against the colon in spite of the central banks efforts to prop it up)?

 

The floor can be moved however that would require a lot of explanation/justification from the central bank. On paper they are supposed to implement some sort of action when the floor is reached ro very close however as of yesterday they have remained silent. No statement issued as to what the plan is or if they do not plan on doing anything, why not. From looking at historical data, this has happened before. back in 2008 and early 2000-2002 shortly before teh central bank moved to this new banded exchange rate. my understanding is that this structure was implemented to avoid large fluctuations again in the future. Hopefully Monday will come with some news/announcement from the central bank.

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Certainly y'all know i only got opinions, and not highly intelligent ones.

As stated, not only did Japan sell Yen to buy dollars, but locked up the dollars rather than putting them back in the market.

That managed to drive the Yen down against the dollar and seems to have strengthened the Euro a bit as well.

The week prior, China bought a bunch of Japan Yen, so to increase the yen value and thus give the Yuan competetive advantage (cheeper)

My premise is the world markets see currency devaluations as the next economic play card being that interest rates are zero most everywhere.

The US dollar (still) has the advantage of being the world currency and by saying nada seem to be implicitly agreeing with the currency wars.

Europe cut spending (entitlements) recently to get their economic house in order. The USA is talking about how to raise more money to pay for (more) entitlements

 

One can NOT divorce politics from economic policy. They are joined at the hip (and head).

Dem's and Repub have not been forthcoming the last 40years. When anyone talks about the SS fund they speak lies cause there is no fund, only IOU's.

Democrats delayed the decrease in Medicare entitlements (to pay for obamacare) until after the November elections to keep the sheepies ignorant awhile longer.

 

My non-authority analysis is the CR central bank will not do anything yet. If the US Fed decides to print more dollars (fed to meet tue-21) by buying more tressuries (thus sending more dollars into the market) the dollar will fall. My guess is they will not print $ (until after Nov elections or not at all). My guess is the dollar will go back above the 500floor. My guess is the 1st half of 2011 will be good for the US and the dollar will break thru the 516c ceiling. All bets off if the Dem keep control of congress.

 

I believe until we get past 2012 there will be alot of dollar bounces. Getting grownups back in the whitehouse would provide more certainty to the markets and world. Right now i don't see a grownup in either party in contention for the 2012 election. The real solution to jobs is to make school choice (vouchers) a priority and then wait 20years. Getting rid of minimum wage (or redefining it) would be a great enticement for getting a non-MBA education or trade.

 

As my grandma would say. I'll see ya in church.

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expat99

Senor, have you been in CR since 99? Just curious.

I have not graffed the Colone so take my input for less than nothing.

More than a couple years ago the exchange was 560 and above. But that was before the financial crash (scandal). But now, with the amount of debt accumulated by the US govt a lack of desire or sense to create new economic models (N.Gas automobiles, small nuclear turbines to produce electricty) elimination of govt. schools & postal service) and a hard look at entitlement programs which undermine incentives for personal achievment, well the only way to pay off the trillons of dollars of debt is to make the dollar cheap and use cheap dollars to paydown debt. Now, if we were to take out the nuclear bomb facilities in Iran or Islamic terrorist already in the USA succeed in killing a bunch of folk or the world experiences major food shortages the dollar will spike.

What was the exchange rate in April-Sept of 2008 when the markets froze up?

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Certainly y'all know i only got opinions, and not highly intelligent ones.

As stated, not only did Japan sell Yen to buy dollars, but locked up the dollars rather than putting them back in the market.

That managed to drive the Yen down against the dollar and seems to have strengthened the Euro a bit as well.

The week prior, China bought a bunch of Japan Yen, so to increase the yen value and thus give the Yuan competetive advantage (cheeper)

My premise is the world markets see currency devaluations as the next economic play card being that interest rates are zero most everywhere.

The US dollar (still) has the advantage of being the world currency and by saying nada seem to be implicitly agreeing with the currency wars.

Europe cut spending (entitlements) recently to get their economic house in order. The USA is talking about how to raise more money to pay for (more) entitlements

 

One can NOT divorce politics from economic policy. They are joined at the hip (and head).

Dem's and Repub have not been forthcoming the last 40years. When anyone talks about the SS fund they speak lies cause there is no fund, only IOU's.

Democrats delayed the decrease in Medicare entitlements (to pay for obamacare) until after the November elections to keep the sheepies ignorant awhile longer.

 

My non-authority analysis is the CR central bank will not do anything yet. If the US Fed decides to print more dollars (fed to meet tue-21) by buying more tressuries (thus sending more dollars into the market) the dollar will fall. My guess is they will not print $ (until after Nov elections or not at all). My guess is the dollar will go back above the 500floor. My guess is the 1st half of 2011 will be good for the US and the dollar will break thru the 516c ceiling. All bets off if the Dem keep control of congress.

 

I believe until we get past 2012 there will be alot of dollar bounces. Getting grownups back in the whitehouse would provide more certainty to the markets and world. Right now i don't see a grownup in either party in contention for the 2012 election. The real solution to jobs is to make school choice (vouchers) a priority and then wait 20years. Getting rid of minimum wage (or redefining it) would be a great enticement for getting a non-MBA education or trade.

 

As my grandma would say. I'll see ya in church.

The USS doesn't have to "decide" to print more dollars. They have to print more dollars to pay the interest on the debt. That is why when you see that "debt clock" that shows the 13 trillion dollar debt, thoe continuing additional dollars is the payment on the deebt. The presses never shut down!!

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I’m really feeling the pinch in my pocket book lately!

 

EXPAT: I agree, thanx for the statistics on how the cost of living is rapidly increasing each day in Costa Rica :o

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Unless my thinking cap is on crooked (wouldn't be the first time) it's an issue of supply and demand. There are just more dollars in CR than before, and that drives the value of dollars down. Why are there more dollars? For starters, the IMF has pumped a bunch in for loans to fill the potholes and build the bridges that all the expats grumble about. Second, if anyone cares to note, CR exports continue to rise while imports remain flat. This brings more dollars into CR without sending them out. Coupled with this is more US businesses locating in CR. The declining value of the dollar is actually linked to CR's development success. Third, there's the money that China has pumped in, which with an artificially low currency compared to the dollar drags down the value of the dollar. Not least, there is CR self-interest. The CR Central Bank is buying up $50 million in dollars a month to "stabilize" the currency, but this only offsets the IMF money, nothing more. It's perceived to be in CR's interest to have a low dollar because that fuels exports by making them cheaper. The irony in all this is that the fall-off in US tourism dollars actually helping the dollar retain value. If more tourists arrive with more dollars that will depress the value of the dollar further.

 

All of this is a huge issue to expats with dollar incomes. In reality, the dollar should be worth around 700 colones today to offset inflation over the past couple of years. Forget the 550 or 580 figure, the buying power figure is around 700. Not saying that gringos are entitled to anything, but the fact is that those of us with dollars are paying for the soccer stadium, the roads and bridges, and the overall exports with what is in effect a tax. It's something to think about.

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Kenn, i think every reason/item you listed for the weak dollar is correct. I would guess China especially looks at every opportunity to offload the 860+ billion of dollars they are currently holding. Just this week China loudly forecast the dollar will devalue more due to huge deficit spending. China looks for every opportunity to diverse away from the dollar because everyday the positive trade deficit )positive to china) only adds to its holdings. CR offers them an invisible hand to decrease their dollar holdings (funding the stadium with dollars they earned but paying in yuan) without causing a currency panic. However i don't see the dollar at 600c much less 700c. Our govt has to first stop deficit spending and until we get term limits i don't see congress doing that. The yet to be funded healthcare bill is a showstopper. I've never done any currency trading but now that I'm here I'll look for opportunities to convert dollars to colones as a hedge against further devaluation-if we get a dollar bounce I got a plan. CR may not be the best country to hedge with (not alot of mfg) but it's where I'm living for the next couple of years until i go further south.

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