Economics question

>Is Trump right when he says the american economy is bad and he will make it "tremendous" again?
Absolutely.

>What does it mean when the American Dollar is worth only 0.77 british pounds, and 0.89 Euros? Is that a signal that the Western European economies are "stronger" or "better" in some way?
It doesn't mean anything by itself - the values are pretty arbitrary, in the end, and only matter for how many euros you get for a dollar. What DOES matter is how the values change over time - if US economy grows faster than the eurozone, you expect the USD to grow more valuable in relation to the euro, and the other way around. So a strong dollar(that is, a dollar that grows more expensive relative to other major currencies) is a signal that US economy is doing well, relatively speaking. It's also a matter of trust - people invest in currencies just like they invest in stocks, so if people are buying dollars, the value of dollar goes up and more importantly, they expect to gain something from that interaction, so it means they trust the dollar to keep going up. Finally, it means they trust the central bank - if the US central bank suddenly starts printing more dollars because they, say, want to pay off US dept, then the value of the dollar is going to go down: the economy stays the same size, but the amount of money in circulation grows, so the value of money must go down.

>>74366
http://www.shutterstock.com/video/clip-4586021-stock-footage-moscow-jun-timelapse-wide-view-modern-bridge-over-water-and-modern-architecture-buildings.html

>>74366
>>74367

There are two terms you should learn immediately when studying economics...the concept of real and the concept of nominal.

Political rhetoric can only nominally impact the economy. If I say I'm going to make America great by focusing on America first and sticking it to foreign countries and investors take that at face value and start pumping money into American stocks, that's a nominative gain. Lots of American business get capital cash inflows.

What matters are real effects on the economy. If by making America great I actually mean that I will increase trade restrictions and tariffs on imports, making it harder to get inexpensive goods and services, I will actually reduce real GDP growth because I'm making it more expensive to buy things with the money I earn over the long term.

>>74418

That is not at all what the difference between nominal and real are.

Nominal refers to what prices are currently priced at while Real refers to adjusting prices to account for price changes due to monetary inflation or deflation.

Neither of your examples highlights the difference between the two. The first one just illustrates that financial market prices can change due to political rhetoric. That gain can be measured in both nominal and real terms -- given that this is occurring in the short-term, the nominal and real values should be roughly equal.

The second example only reflects what happens when you choose to implement poor economic policy: a reduction in GDP growth. If you wanted to compare Real GDP Growth with Nominal GDP Growth, you would need to adjust based on inflation from a given starting year.

>>74366
Strong Dollar = Cheaper Imports
Weak Dollar = Cheaper Exports

That's it.

An economy is doing neither good or bad based off solely how it's currency trades with other currencies. It can be used to help identify other problems within the economy (i.e., currency crisis), but the way American politicians use it is a false way to judge an economy's health. Better metrics would be job growth, investment, income growth, employment levels, productivity, amount of leverage in the financial system, etc.

>>74424
>>74366 (OP)

>Better metrics would be job growth
No.
> investment
In what? By who?
>Income growth
Maybe
>employment levels
Doesn't represent growth, stays the same, basically. Maybe for short term analysis.
>productivity
Not measurable on a large scale, and not relevant to all industries
>amount of leverage in the financial system
What?

I think you hit the nail on the head with investment, but specifically, in retirement funds. When a normal American has money to put to the side, where does he put it? A 401k. He only puts it there when he's confident the returns will be worth the investment.

>>74427
>>Better metrics would be job growth
>No.

More people employed is better than less, especially if unemployment is involuntary. Jobless recoveries are hardly recoveries at all.

>> investment
>In what? By who?

Fixed, variable, and human capital. You know, when a business decides to build a factory or expand its operations to increase production.

>>Income growth
>Maybe

Maybe? When has a lack of income growth ever been good?

>What?

Thanks for outing yourself as an idiot. It's the debt ratio of the financial system. You will generally see large increases in financial leverage prior to big recessions, examples being the great depression, savings & loans crisis, and the recent financial crisis (debt ratio was highest it has ever been).

>I think you hit the nail on the head with investment, but specifically, in retirement funds. When a normal American has money to put to the side, where does he put it? A 401k. He only puts it there when he's confident the returns will be worth the investment.

You are conflating investment in an economic sense with investment in a monetary/financial sense.

>>74427
>>74432
>Not measurable on a large scale, and not relevant to all industries

How could I forget the most stupid statement of all. Go check the BLS if you don't believe productivity can't be measured on a large scale. Productivity is how well you do your job with the inputs you are given, and productivity is highly relevant in all industries. It is THE distinguishing factor from the highly developed and advanced economies of the west and the more inefficient and poorer economies of the rest of the world.

Let's say the UK economy is based on selling rare Pepes, and Americans want to buy rare Pepes.

If the UK makes fantastic rare Pepes, the very dankest Pepes, and sells them in England for £1, then that is what the Pepes are worth, basically. But if Americans want to buy the British rare Pepes, they might pay more for them, since they are the best Pepes in the whole world. As a result, they might start offering $3 per Pepe, even though $3 is more than £1.

If this happens on a large scale, then effectively, £1 is worth $3. Because this is more than £1 is worth currently, you would say that the pound is stronger against the dollar, and now, any English person with £1 can buy $3's worth of stuff from America.

However, this would mean that from a British perspective, inferior American Pepes are now cheaper. If you buy a $1 Pepe, it will only cost you £0.33. That's a bargain! So English people will start buying American Pepes instead of English Pepes, and those pounds are now in the American economy. As a result, there is more wealth in the American economy, and less wealth in the British economy. This, in theory, should ultimately mean that even though the US dollar is weak, the US economy will actually improve over time. And if the economy is better, Americans can buy new Pepe printers and create superior dank Pepes. Then, they can export those hot new Pepes, and the dollar will rise.

So really, the value of currency goes up and down all the time, and you don't really need to worry about it because if a currency goes down a lot, that will ultimately lead to it going up again, unless the actual economy falls apart too. Similarly, a stronger currency might mean it's cheaper to buy things from foreign countries, but it will be bad for your own country's exports, which will in turn harm the economy and make your currency's value go down again.

So you should probably just ignore it unless you actually buy foreign currencies as an investment.

From what I've gathered the American economy is actually in piss poor shape. The consumer driven economy can't grow because most consumers have little or no income left after basic needs are paid for and credit is almost tapped out again. If consumers can't consume the economy stalls or just limps along like we have now. Also if the economy was healthy then governmet coffers would be filling up quicker, but from all that I've read and heard it's the exact opposite

As for Tump, neither he or Clinton have the answer to the wests economic problems because the answer would be essentially biting the hand that feeds them

>>74366
>What does it mean when the American Dollar is worth only 0.77 british pounds, and 0.89 Euros?
By itself it means absolutely nothing. What's important to know about this is that these relative values fluctuate and do so faster than things like de/inflation that affect the general prices of goods/services. So if one day one currency is worth a given amount in another currency, but the next it goes up in value, then you have more purchasing power with that first currency in that second currency -- which can be a very HUGE thing in international trade. Fluctuations in currency values can be like Wal-Mart putting an item on sale. Like if the Chinese yuan loses value relative to the US dollar, then that's a good time for people trading with US dollars to buy shit.

It also has a massive effect on things like interest, paying off debts, and the like. By timing things right with the money market, you can effectively get a massive break on paying off a debt. Say you take a loan/get a line of credit from a foreign corporation and agree on a price in their currency and you have a net 30 agreement with them (meaning you've got to pay within 30 days of creation of an invoice). Let's say that your currency's relative value halves in the first week after you get an invoice. The price of that invoice has just doubled for you. Likewise, if the value of your currency doubles the next week, and then doubles again, you've now halved the effective price of that invoice...all while paying the exact same amount.

This can get really complicated when you realize that not all currencies change relative values in a logical manner that keeps all other values proportional to each other. This allows for one to just trade currencies against each other and make money just by changing currencies.

Assume you've got the US Dollar at .5 to the GBP. Now imagine you've got the AUD at 1 to 1 USD and 1 AUD to .75 GBP. If you take all of your USD, convert them into AUD, you...

>>74487
(continued) can now convert all of those AUD to GBP, then back to USD, and you'll have gotten 25% more USD than you started with. There's a shitton of stuff that makes this actually difficult to accomplish, but it's definitely possible.

This thread reminds me why I should never take advice from 4chan. The majority of you do not understand economics.

If one wants to understand the economy. one should probably start by watching this here video. 10/10 esoteric knowledge

https://youtu.be/5hfEBupAeo4

>>74544
Plot twist: No one really understands economics