Dollar Worries: Why it Matters to Business

BoingBoing has a great post with a roundabout explanation on why the dollar is causing headaches for consumers because some businesses are trying to weasel their way out of the reality of inflation — Why HP’s region coding excuse is bogus:

If a company is doing business in two major regions of the world and the currency is sinking in one region (the U.S.) and rising in another (Europe) then the company has to worry about the fact that it might be buying things in the more expensive currency while being paid in the sinking currency. In simple terms, HP has to worry about being paid $1US today, then try and buy $1EU of stuff next week, when that US dollar is only worth 80 cents in Europe – they just lost 20% on that transaction.

However, there’s a simple defense for global companies in this situation – price in a larger profit margin on goods sold in the sinking currency, as a buffer against the value being lost in that currency. HP’s printer cartridges should be more expensive (comparatively) in the U.S., to make up for the fact the the $40US (!!) you pay for a cartridge might be only worth $38 in global purchasing by next week. That’s not what’s happening here though.

(Some people might complain at this point that HP raising prices in the US would not be a good thing, because it’s promoting US inflation. Duh!! Why do you think all the economists are so upset about the sinking US dollar and America’s huge debt?!)

A great read and puts the regional pricing schemes of companies like HP in a new perspective.

Stephen VanDyke

I've published HoT along with about 300+ friends since 2002. We're all Americans who are snarky and love our country. I'm a libertarian that registered Republican because I like to win elections. That's pretty much it.

  1. hey stephen. Love the posts on the tanking US dollar, even though it’s starting to scare me quite a bit! I know you kindof scoffed off my suggestion for switching over to a silver backed currency (the liberty dollar as an example, but e-gold as another), but what would you propose we do on the multiple tiers of the US? What to do on the federal level? State? Personal?

    just curious. and keep up the good work my good man!

  2. There isn’t enough gold or silver in the world to back the trillions of fiat dollars floating around right now. I don’t think the dollar itself if the problem, it’s the policies which continue to drive it down. This “fuck them before they fuck you” attitude that pervades America is the root of the problem and it won’t get better until the world finally flips the tables on us and refuses to shoulder the debts we know we won’t pay (government, business and personal).

    Right now, that’s slowly dawning on the rest of the world as they hedge their bets against the US, but eventually the whole thing will come crashing down, and when it does the nastiest side of our government will finally rear it’s head. Personally, I think we’re overdue for a revolution (even if Kerry had been elected, these policies would still be in effect), but I realize it will have to get much worse before people start getting really vocal about it.

  3. so my next question is…
    Why do you think there is not enough gold or silver? Just because there is only 6 billion worth of silver above ground? What does that tell you. Sure, there isn’t enough silver to back up the paper notes AT THAT PRICE. This should tell you that the dollar is overvalued and silver is truly undervalued on a per ounce basis. Once people put 2 and 2 together, silver AND gold should adjust quite nicely relative to the dollar.

    There is enough gold and silver, it’s just a matter of what the conversion is. And the more paper bills dumped into circulation for a set quantity of silver and gold… the less each dollar bill is worth. This adjustment is not only likely, it is mandatory in the sense of supply and demand. People are just finally waking up and realizing it.

  4. I do not think that replacing the standard currency is the point, nor the solution. It does not matter what our country bases trade upon, if the policies remain the same, we remain targets. If the populace cower like sheep content in their reality programming and “news” we will continue to stagnate and decay as a people.

    I admire your reasoning, and since it sounds intelligent I have full confidence we will continue on with the current tender. Good ideas are far and few between in this administration and likewise throughout our various levels of government…

    my 2 cents anyway…

  5. James,
    A couple of things we are screwing up… wars we shouldn’t be fighting and massive social programs we can’t afford. Now how does having currency backed with a precious metal (somethign with intrinsic value) stop these 2 things.

    War: Here is a great article that I can’t do justice even paraphrasing, but i’ll try.
    When the US can’t just have the FED magically make money out of thin air to spend, they can’t rightly go to war without the people donating or agreeing to extra taxes for the sake of the war. What we have now? Well, we want to invade iraq, the FED say we’ll loan you 87 Billion (which we just make), and there ya go. Have fun, say hi to saddam for us.

    How does it end massive social welfare programs. simple, when a currency is guaranteed to be back by a certain amount of SOMETHING, it can’t be inflated unless the thing backing it can be created, dug up, etc. Since alchemy doesn’t work, there is no way to inflate silver and gold. Since the welfare state depends on being able to inflate and dump money into the market place to pay them (think of inflation as a hidden tax… they don’t take your money, they just make the money you have worth less in terms of buying power).

    A currency that’s actually backed with gold and silver stops the statists right in their freagin traps, because they can’t just use monopoly money to accomplish their every whim. But, that’s the beauty of legal tender… if you don’t accept it as payment, the debt is gone. What a kick in the balls

  6. Good to be said. It’s going to take a large body of people to come together to make this change. I doubt our government “officials” would institute something like this. Sounds like a solid idea. Not my area of expertise. ;-)