Friday, September 21, 2007

Buying More in the Dollar Zone

Sure, the dollar is getting weaker… but there are upsides to that. 

More cuts may have to be made at Airbus if the euro continues to remain strong against the dollar, an executive at the European planemaker has warned.
Chief operating officer Fabrice Bregier told French radio station BFM a further 1bn euros may need to be added to a savings plan based on a $1.35 euro.

On Friday the euro hit a fresh record high against the dollar of $1.4120.

Airbus may also have to buy more goods in the dollar zone - where it currently buys about half its supplies, he added.

Buying more goods in the dollar zone would help lower costs as it would mean cheaper prices.

“If the euro remains durably at $1.45, that would mean we had to find one billion euros in additional savings under Power 8 [restructuring plan],” he told the French station.

“Our reply to a strong euro is, first to be more competitive, second to buy more in the dollar zone,” he added.

(7) Comments
Posted by Owen at 1024 hrs
Foreign Affairs + Off-Duty

  1. Even more amazing is the fact that for a brief time within the past week, the Canadian dollar was worth more than the US dollar - YIKES, Eh?

    Posted by .(JavaScript must be enabled to view this email address) on September 21, 2007 at 1440 hrs


  2. No kidding.  I remember calling Canadian coins “slugs” for the relative worthlessness. 

    So does this mean that Canadians will soon come here for their prescription medicine?

    Posted by David on September 21, 2007 at 1528 hrs


  3. What’ll be really interesting to watch is the degree to which Canadians (and countries in the Euro Zone, for that matter) start getting up in arms about all those premiums they pay on U.S. products.  At the present exchange rate, there are suddenly a lot of things marked way the hell up for no good reason.

    Canadians often see numbers 20-30% higher on identical goods.  For ages, U.S. companies have been selling items in the Euro Zone at near-numeric parity, which means people in Europe are being asked to swallow a nearly 25-30% cost hike on products (the significantly larger VAT is already factored in by companies).  It’s so effed up, I know someone in Europe who went on vacation to New York basically to buy a new computer at the Apple Store, because the cost savings on the computer paid for his plane ticket (a low-end MacBook Pro costs $600 more to buy in the Euro Zone than in the U.S.).

    There are going to be a lot of U.S. companies being pressured to cut prices on products in overseas markets to better align those prices with what U.S. consumers pay.  So yeah, there could be a honeymoon, but the market will likely squelch it eventually.  What starts as a win-win could turn into a lose-lose in a hurry when countries begin refusing to pay the now ridiculously high prices for items we export.

    Posted by Recess Supervisor on September 21, 2007 at 1703 hrs


  4. What is going to be really interesting is how eager the rest of the world is going to be to buy our paper.

    These guys actually think all they have to do is print it. Treasury bonds were not meant to be a speculative maket.

    Treasury Secretary Henry Paulson, shown here in a 2006 file photo, told Congress on Wednesday, Sept. 19, 2007 that the U.S. government will hit the current debt ceiling $8.965 trillion on Oct. 1. Paulson urged quick action to protect the “full faith and credit” of the United States.

    That is the first time I have ever heard of anyone establishing “full faith and credit” by borrowing more money, with dubious collateral. You can read the rest of the BS here:

    http://www.cbsnews.com/stories/2007/09/19/national/main3274350.shtml

    Any amateur or professional economists have any comments?

    Posted by .(JavaScript must be enabled to view this email address) on September 21, 2007 at 1957 hrs


  5. The problem is the borrowing.  That and the capitulation of the federal reserve in using the money supply to try and control things that are not really monetary in nature.  The ultimate solution, and the one that will eventually occur after everey other idiotic scheme is tried, is a massive decrease in federal spending.  As you suggest, it isn’t a self imposed debt limit that will limit our ability to spend, it’s the willingness of buyers to purchase that debt, and the interest they will require.

    Posted by .(JavaScript must be enabled to view this email address) on September 21, 2007 at 2203 hrs


  6. And why are we borrowing? Think hard kdis.

    Posted by .(JavaScript must be enabled to view this email address) on September 21, 2007 at 2218 hrs


  7. The single biggest reason we are borrowing is to service existing debt.

    Posted by .(JavaScript must be enabled to view this email address) on September 21, 2007 at 2315 hrs


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