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Originally Posted by Bobblehead
With respect to the Post article, Americans selling American stock will not affect the value of the US dollar. That is influenced by foreign buyers; for a British firm to purchase Microsoft stock on the NYSE they need to purchase American dollars to do so, and that increases the demand for the US dollar. Bill Gates selling his stock may result in Microsoft shares decreasing in value (because of an increased supply) which may actually entice foreign investors to buy US dollars so they can then purchase those shares at that price (if they believe it is a good deal). It all depends upon why Bill Gates sold - if it is because he thought the value of the stock was about to go down then you may be correct and this is a bad thing. If he sold because he wanted the money for some other purpose (like buying something else he believes is undervalued) then it may be a good thing.
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I think the implication was that they were removing those dollars from US listings because the listings are going to take a beating when the dollar drops. (On a side note, despite the illusion of all time highs for the Dow these days it is actually still down if you account for the MASSIVE drop already experienced by the USD over the past ~6 years. US consumers are free to invest in outside listings, so yes it still counts as a loss)
The big question is, as you say, what they are doing with those liberated dollars.
I remember when everyone was on Bill Gates case for 'illogically' moving billions into Silver back when it was like $3.50/oz. That only earned him like a 300% return within a year or two.....
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It is long know ploy for a country to try and lower the value of it's currency (which maked the goods produced in that country "cheaper" to the rest of the world, and should increase exports). If done on purpose, this is known as a "Beggar-thy-neighbor" policy. Policies like these tend to require 2+ years before their true or full effects are known (but like the speed of business, this timeframe is shrinking).
Macro-economics is still quite a new study, and there have been many differing theories proposed in the last 50 years, but like many of the social sciences, no single unifying theory has emerged yet.
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That is true for small secondary economies (like Canada even) but it is not in any way a viable long term policy for a super power like America. Especially a super power addicted to energy imports from around the world just to stay afloat and a perchant for needless and expensive wars every few years. Imagine the Iraq/Afganistan price tag with a USD 20% less valuable?! It would be potentially hundreds of billions higher. Likewise with the price of oil, current $60 USD/br oil is actually $40/br with the massive ~30% loss in USD falue factored in. It could go up to $80+/br based on a USD loss alone...
There are hundreds of advantages to being the premier world currency, and all of them are lost with a weak dollar policy.
Claeren.