Economy stalling
Jun 8th 2013, 6:41 am
#31
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Re: Economy stalling
The textbook says that BUT .... In the UK for example the outgoing Governor of the Bank of England has been determined to get a weaker pound in the hope that it will stimulate exports and growth. Quantitative Easing (i.e. printing more money and putting it into the system via selling Government Bonds and providing funds for banks to lend), 'talking the pound down', reducing interest rates to extremely low levels and so on have been used.
The pound has certainly fallen but exports haven't risen substantially (what is there to export other than financial services which dominate exports? And who would have great confidence in dealing with the likes of RBS, Lloyds etc who had no small part to play in the GFC?)
Compared to the UK, Australian exports are made up of a higher proportion of 'visibles' (goods) and a lower proportion of 'invisibles' (services) and of course raw materials are very important. A weaker dollar would make things from Australia cheaper for the likes of Chinese manufacturers but if their growth rates are slowing down there is a limit to their capacilty to buy more, cheaper raw materials.
The AUD is being mainly affected by growing confidence in the greenback and the US economy's prospects. With it's comparatively strong growth rates in recent years and less exposure to the GFC, as well as comparatively higher interest rates, the AUD was seen (like gold) as a 'safer haven'. However, as confidence in the greenback is growing the AUD (and gold) have seen less demand and lower prices (i.e. exchange rate).
Some of the cross rates have not behaved similarly. For example, the AUD has fallen more against the pound than it has against other currencies like $US.
The pound has certainly fallen but exports haven't risen substantially (what is there to export other than financial services which dominate exports? And who would have great confidence in dealing with the likes of RBS, Lloyds etc who had no small part to play in the GFC?)
Compared to the UK, Australian exports are made up of a higher proportion of 'visibles' (goods) and a lower proportion of 'invisibles' (services) and of course raw materials are very important. A weaker dollar would make things from Australia cheaper for the likes of Chinese manufacturers but if their growth rates are slowing down there is a limit to their capacilty to buy more, cheaper raw materials.
The AUD is being mainly affected by growing confidence in the greenback and the US economy's prospects. With it's comparatively strong growth rates in recent years and less exposure to the GFC, as well as comparatively higher interest rates, the AUD was seen (like gold) as a 'safer haven'. However, as confidence in the greenback is growing the AUD (and gold) have seen less demand and lower prices (i.e. exchange rate).
Some of the cross rates have not behaved similarly. For example, the AUD has fallen more against the pound than it has against other currencies like $US.
Jun 8th 2013, 8:01 am
#32
Lost in BE Cyberspace
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Re: Economy stalling
[QUOTE=chris955;10746659]Ah I see you are one of those that thinks the UK doesnt actually produce anything? It is an odd theory.[/QUOTE
Not an odd 'theory' at all.
I didn't say the UK doesn't produce 'anything', I'm saying it relies heavily on the export of services to help plug the Balance of Payments.
The UK in 2012 had a £106 bn deficit on visible (goods) trade. A surplus on trade of services is needed to help plug this gap but it was only £70 bn in 2012 so that's a trade gap of £36bn, twice what it was the year before.
http://www.guardian.co.uk/business/e...dismal-reading
Not an odd 'theory' at all.
I didn't say the UK doesn't produce 'anything', I'm saying it relies heavily on the export of services to help plug the Balance of Payments.
The UK in 2012 had a £106 bn deficit on visible (goods) trade. A surplus on trade of services is needed to help plug this gap but it was only £70 bn in 2012 so that's a trade gap of £36bn, twice what it was the year before.
http://www.guardian.co.uk/business/e...dismal-reading
Last edited by OzTennis; Jun 8th 2013 at 8:28 am.
Jun 8th 2013, 8:55 am
#33
Joined: Jun 2006
Posts: 4,555
Re: Economy stalling
WA is a yo yo. Next they will want to scrounge gST after a few years of being net contributors.
Jun 11th 2013, 1:19 pm
#34
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Re: Economy stalling
Not necessarily. Whilst the Fed was pursuing a huge program of 'quantitative easing' and growth was not evident in the US economy it made the AUD stronger against the greenback and rise to record levels; when the Fed announced last month that it was 'easing the easing' and growth was starting in the US economy, AUD (and gold) fell.
You mentioned the US, and there has been good news coming out of there, but look at how the USD has been performing against the EUR just recently. The Euro is actually reaching record highs in recent times against the USD.
Jun 11th 2013, 2:07 pm
#35
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Re: Economy stalling
Yeah, but in general the AUD is a barometer of global sentiment. So when the world is happy and economies are booming then the AUD strengthens. And when the global outlook doesn't look good then the AUD will dive even if Australia itself is doing great.
You mentioned the US, and there has been good news coming out of there, but look at how the USD has been performing against the EUR just recently. The Euro is actually reaching record highs in recent times against the USD.
You mentioned the US, and there has been good news coming out of there, but look at how the USD has been performing against the EUR just recently. The Euro is actually reaching record highs in recent times against the USD.
The Euro was in meltdown because of the various crises in Greece, Italy, Spain, Portugal, Republic of Ireland and Cyprus (where next? was the fear) - it has recovered mainly because 'the markets' believe the crisis has been weathered and confidence in the Euro has gradually grown and it's thought Germany won't have to bail out a large slice of the EU. This is the main reason for Euro's rise vs $US (vs most currencies).
Jun 11th 2013, 4:27 pm
#36
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Re: Economy stalling
Look what happened when market sentiment went south in mid-2008. Aussie Dollar went from high 90's to like 65c without as much as blinking. Lay over the same chart of the NASDAQ100 and it's a perfect match - both going into free-fall at the time.
Fast-forward to recent times and American stock indexes are at a historic high, so not exactly shaky times in terms of investor mood if new records are being set.
I would expect both to follow suit in case of any trouble. If US markets go into disarray then the AUD will be punished badly.
Fast-forward to recent times and American stock indexes are at a historic high, so not exactly shaky times in terms of investor mood if new records are being set.
I would expect both to follow suit in case of any trouble. If US markets go into disarray then the AUD will be punished badly.
Jun 11th 2013, 11:46 pm
#37
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Joined: Mar 2013
Posts: 255
Re: Economy stalling
I know, it depends on which currency we are looking at first; USD-AUD or AUD-USD
This chart "may" explain why we keep getting reports almost every year of the economy stalling. Each year it dips, and then rises... what is next in 2013, after the recurring dip ?
Jun 11th 2013, 11:59 pm
#38
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Re: Economy stalling
I thought the Aussie Dollar went the other way in 2008
I know, it depends on which currency we are looking at first; USD-AUD or AUD-USD
http://www.abcdiamond.com/images/AUD...004-2013-h.jpg
This chart "may" explain why we keep getting reports almost every year of the economy stalling. Each year it dips, and then rises... what is next in 2013, after the recurring dip ?
I know, it depends on which currency we are looking at first; USD-AUD or AUD-USD
http://www.abcdiamond.com/images/AUD...004-2013-h.jpg
This chart "may" explain why we keep getting reports almost every year of the economy stalling. Each year it dips, and then rises... what is next in 2013, after the recurring dip ?
Jun 12th 2013, 12:28 am
#39
Joined: Jun 2006
Posts: 4,555
Re: Economy stalling
The one thing they will all agree on is the cycle never stops. When someone says this is a new paradigm you know pain is ahead. When the sheep reckon the pain will never stop it is time to review getting risky again.
Jun 13th 2013, 12:41 am
#40
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Jun 13th 2013, 1:05 am
#41
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Jun 13th 2013, 1:38 am
#42
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Re: Economy stalling
I offloaded all I had at around 2.09 as I was worried about the GBP. Slightly bad timing as at the time the AUD moved out to about 2.35, but soon afterwards the GBP did collapse and the AUD just kept getting stronger and stronger. 
No AUD any more in my case, too risky. Just going to wait patiently until there's another big fall and maybe then head back at "discounted" rates.
No AUD any more in my case, too risky. Just going to wait patiently until there's another big fall and maybe then head back at "discounted" rates.
Jun 13th 2013, 8:05 am
#43
Lost in BE Cyberspace
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Re: Economy stalling
We averaged $2.62 on 40 trades of £'s to $'s over the period 1998 to 2005 and one trade was at $3.02 (on 27/9/01). When I read about how weak the dollar supposedly is I think hmm. Yes, it is trending southwards presently but put it in some historical perspective.
Jun 13th 2013, 8:26 am
#44
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Re: Economy stalling
When we moved over 7 years ago 1AUD was 40p. It's now 60p, 50% less and looked at against recent history, still pretty strong
Jun 13th 2013, 9:04 am
#45
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Re: Economy stalling
Certainly for much of the period early 90's to recent years it was always a case of $2/50p being a psychological barrier that was never breached - for much of the time it was closer to and above $2.50/40p. This puts the current rate in perspective.
