australian dollar falling rapidly (1 Viewer)

[bfox]

Our shocking external stability (record CAD and net foreign debt) has a bit to do with the fall, among hundreds of other factors, as Aus is heavily exposed to global influences. Drop in $A reflects speculators getting nervous about investing in countries with poor external stability, so $A drops more than other currencies in times of global turmoil. Works the same in reverse, which is why $A appreciated so much when global economy strong.

 

[Garygaz]

TRUE REASON

Australia's bond market totals at around $50 billion dollars, and one institution in the US alone can issue bonds worth this much. As you all know, the financial markets are in crisis and investors and firms are attempting to find the most safe/secure place for their money. So, what they are doing is buying into large economies with large bond markets, as bonds are seen as the safest place for any currency at this stage. ALTHOUGH it is interesting to note that with inflation spiralling in the US and interest rates now a full 1% lower than inflation, investors are actually losing money in these bonds, though 1% per annum is seen as far less risky than investing in the markets at the moment.

 

[2162]

TRUE REASON

Australia's bond market totals at around $50 billion dollars, and one institution in the US alone can issue bonds worth this much. As you all know, the financial markets are in crisis and investors and firms are attempting to find the most safe/secure place for their money. So, what they are doing is buying into large economies with large bond markets, as bonds are seen as the safest place for any currency at this stage. ALTHOUGH it is interesting to note that with inflation spiralling in the US and interest rates now a full 1% lower than inflation, investors are actually losing money in these bonds, though 1% per annum is seen as far less risky than investing in the markets at the moment.

But with inflation lowering due to decreased demand where supply has not stopped, there will be deflation and contractionary monetary policy that is why some people are perceiving these american bonds as good things. Get 2.65% interest now or nothing later. It's all relative.

 

[Captain Hero]

TRUE REASON

Australia's bond market totals at around $50 billion dollars, and one institution in the US alone can issue bonds worth this much. As you all know, the financial markets are in crisis and investors and firms are attempting to find the most safe/secure place for their money. So, what they are doing is buying into large economies with large bond markets, as bonds are seen as the safest place for any currency at this stage. ALTHOUGH it is interesting to note that with inflation spiralling in the US and interest rates now a full 1% lower than inflation, investors are actually losing money in these bonds, though 1% per annum is seen as far less risky than investing in the markets at the moment.

That's one hell of aspect of it.

All the other answers in this thread are fucking hilarious. To the degree of people trying to shove their 'knowledge' into a square hole or something.

 

[2162]

That's one hell of aspect of it.

All the other answers in this thread are fucking hilarious. To the degree of people trying to shove their 'knowledge' into a square hole or something.

I dont know if you have the world of warcraft forum on another tab but every single answer proposed in this thread is correct. Try reading again if you need any more clarification.

 

[Garygaz]

Yea cheers, though its a bit more than just plain year 12 economics to realise it, not that I'm claiming it, I just had a 1 on 1 eco seminar with a very smart man, and he was telling me heaps of stuff about the world markets at the moment. He was pretty pessimistic, only things he liked were BHP and RIO for long term investments. Said that China in the next 10 years will be building around 7 cities the size of NY to accommodate the urbanisation of 160m people.

@ 2162

You're right, though I think you'll find that it'll happen slower than you think. America, like Aus, is a dual-speed economy. We have finance (Vic and NSW) and resources (QLD, WA, SA) just like they have two separate economies. Their other half will keep running momentarily and with interest so low there are still some people who can borrow and repay debt.

 

[Captain Hero]

I dont know if you have the world of warcraft forum on another tab but every single answer proposed in this thread is correct. Try reading again if you need any more clarification.

Thanks HSC economics student. Hahahahahahahhahaahhahaaha.

 

[2162]

Yea cheers, though its a bit more than just plain year 12 economics to realise it, not that I'm claiming it, I just had a 1 on 1 eco seminar with a very smart man, and he was telling me heaps of stuff about the world markets at the moment. He was pretty pessimistic, only things he liked were BHP and RIO for long term investments. Said that China in the next 10 years will be building around 7 cities the size of NY to accommodate the urbanisation of 160m people.

@ 2162

You're right, though I think you'll find that it'll happen slower than you think. America, like Aus, is a dual-speed economy. We have finance (Vic and NSW) and resources (QLD, WA, SA) just like they have two separate economies. Their other half will keep running momentarily and with interest so low there are still some people who can borrow and repay debt.

The problem in the american economy right now is that there is no one to lend money to banks and even every day people. Banks are relucatant to lend money to other banks for more than a day, even if they hold a AAA rating. The bail-out was meant to try to assure everyone that there is enough liquidity and credit going around. But this is not the case and we are seeing that the americans cannot borrow themselves out of this one... yet. Further adding to this is that yield on lending to anyone at all is so low that the risk would outweight it 3:1. with banks defaulting, and soon businesses, which bank would volunteer to emerge itself with more debt? Further perpetuating the fact that there will be decreased spending and demand and therefore lower prices and ultimately, lower interest rate.A good example would be general motors who is having huge trouble financing its whole car division due to decreased demand for cars and a negative outlook. Investors and financiers just find it hard to believe that there will be any good times for car-makers and this will ultimately be a self fufilling prophecy. All this perpetuates that the risk of deflation, may be coming unless the bail-out package affects the american economy relatively soon.

 

[Captain Hero]

Quick few hints for everyone in this thread:

What causes the 'business cycle'? [hey some dude won a nobel prize for that or some shit]
what is fractional reserve?
what causes inflation?

go thread go!

 

[Animals]

What causes inflation?

1) An increase in aggregate demand. As there are limited resources, an increase in demand means that producers bid up the pricers of ever-more scarce resources, therefore contributing to inflation. Known as demand-pull inflation.

2) An increase in the cost of production which therefore leaves producers that much out of pocket. These costs have got to be recovered, and again, they do this my bidding up the prices of their goods and services. Known as cost-push inflation.

3) An increase in the price of resources overseas. Again, same concept. It costs more for producers to produce a certain good or service and so they must make up this difference by increasing their prices. Known as imported inflation.

4) Speculators. If speculators become jittery and decide to bail out on our market, our market is suddenly flooded by excess funds which means that the value of our currency decreases, therefore contributing to inflation because producers have got to charge more.

That's as far as HSC economics has taken me thus far.

 

[Captain Hero]

Wait so how do things costing more devalue a unit of currency? Hint: Not all things cost more.

How do you systematically devalue a currency, overall?

 

[Animals]

Wait so how do things costing more devalue a unit of currency? Hint: Not all things cost more.

How do you systematically devalue a currency, overall?

I don't know man. I've been taught a watered down version of Economics.

Oh no wait! I do know! It decreases our terms of trade. Am I on the right track?

Yep, and to build on this: A decrease in our terms of trade decreases our international competitiveness, and yeah, dollar decreases for obvious reasons.

 

[whoisurdaddy]

Quick few hints for everyone in this thread:

What causes the 'business cycle'? [hey some dude won a nobel prize for that or some shit]
what is fractional reserve?
what causes inflation?

go thread go!

in essence... an increase in the money supply that is not reflected in increases in supply.

 

[Garygaz]

Wait so how do things costing more devalue a unit of currency? Hint: Not all things cost more.

How do you systematically devalue a currency, overall?

High core inflation. There is normal inflation, which measures the movement of prices within an economy and core inflation which takes out the ecstatic price movements, e.g oil.

Or if you want to devalue a currency you can pull a George Soros who broke the Bank of England. He pretty much shorted the currency so heavily ($10 billion U.S worth of pounds) that he forced the bank to raise its interest rates by 10% for one day to stop the massive devaluing/selling. Lulz, evil man.

 

[bfox]

That's one hell of aspect of it.

All the other answers in this thread are fucking hilarious. To the degree of people trying to shove their 'knowledge' into a square hole or something.

That is the idea of this thread, seeing as we have a little exam in a couple of weeks, and part of the course is global economy. So whatever anyone can 'shove in' might be handy in a few weeks.

 

[stazi]

That is the idea of this thread, seeing as we have a little exam in a couple of weeks, and part of the course is global economy. So whatever anyone can 'shove in' might be handy in a few weeks.

i'd like to shove something in you

 

[CardCheat]

i'd like to shove something in you

a carrot or something?