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Thursday, May 7, 2009
The 1970's United States Currency Policy Meltdown
Once again, we are hit with the triumvirate of war, the restrictive gold standard, and dollars in foreign banks.This time, each problem was feeding directly off of the others. The Vietnam Conflict had drained our gold reserves heavily. By 1970, Fort Knox only held US$12 Billion.The growth of the oil business and the increase in foreign trade caused a boom in the demand for US dollars in foreign banks. Over US$ 47 Billion was sitting in overseas banks.On paper, our gold reserves were over-leveraged by almost 4 to 1. As a nation, we did not know how to react to such an overbearing assault on our currency. Then along came the invention of the Eurodollar to make our nightmare worse.Foreign banks with US dollars would make low-interest loans in US dollars to importers and exporters. Although the dollars were never repatriated, the US was still on the hook to exchange these “credit”-created dollars for the gold we kept on reserve.Then came a miracle in disguise . The Bretton Woods Agreement collapsed. In the over-leveraged gold-dollar environment, many countries began to feel frustrated with the artificial peg.In blatant defiance to the agreement in 1971, Germany declared that they would float the Deutsche mark. They were tired of the artificial peg that was keeping their economy depressed.In the first hour of trading, over US$1 billion were exchanged for Deutsche marks. For the first time, the public had voiced their opinion against being so heavily weighted with dollars.With Germany completely ignoring the Bretton Woods Agreement by floating their currency, the US government had nothing left to do but put the final nail in the coffin of the U.S.'s currency policy. The Bretton Woods Agreement was dissolved.Three short months after the Deutsche mark began to float, the US moved off of the gold standard. Gold was allowed to float freely like any other currency. Oil, although priced in US dollars, soon switched to a peg against gold. Gold and oil prices jumped ten-fold.The currency dynamics were soon changed on a global scale and it became accepted practice that countries began to float their own currency.
New Rules of Currency
In 1971, the Smithsonian Agreement replaced the Bretton Woods Agreement and authorized “forward currency contracts”, adding validity to the Eurodollar phenomenon. It didn’t work. A year later the European Joint Float was established. It, and the Smithsonian Agreement, were scrapped in 1973. Even though they were dissolved the concept of “forward currency contracts” stayed as part of the banking system.Once currencies began to “free-float”, they immediately moved away from their gentlemanly 1% fluctuations on either side to huge price ranges, going anywhere from 20-25% daily.From 1970-1973, the total foreign exchange volume went from US$25 Billion to US$100 Billion. With oil prices up, gold prices up, and an economy still reeling from the rapid currency shift, “stagflation”, rising inflation while real incomes remained the same, soon hit the United States.
Today's Currency World
In the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.This could be a fundamental shift in the next phase of currency development.
Determinants of FX Rates
The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government):
(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions which seldom hold true in the real world.
(b) Balance of payments model. This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.
Economic factors
These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include:
* Government budget deficits or surpluses
* The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends
* The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions which seldom hold true in the real world.
(b) Balance of payments model. This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.
Economic factors
These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include:
* Government budget deficits or surpluses
* The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends
* The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Web Hosting, Reseller Hosting, and Dedicated Hosting
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Fundamentals of a Good Web Host
Finding a web host is easy, but finding a good one is hard. Really, all you need to do to find one is to Google the words 'web host' and you will be overcome by thousands of hits, from hundreds of different companies who will be offering you their brand of the best web hosting solution out there. What you need to understand is that anyone can offer you this service, but only a select few can have the services and the resources to give you a good web hosting service.
What this article is going to do is to just list down some of the features that you might want to look out for when talking about web hosts that will be able to support your needs and then some. These are just some general guidelines and some of the basics that these hosts must live up to. Depending on the nature of why you need a web host, you might want to look at other more advanced features. One of the things you need to look out for is the digital disk space that will be allotted to you when you sign up with their service. The thing is, one of the main problems that people encounter when getting a good web host is that they do not get enough disk space.
Make sure that you get more than you need when you are signing up with a host, because the whole point of getting a website is to be able to expand at a later date. One of the more common sizes to look out for is above 100 megs, and some may consider in excess of 500 megs depending on the type of website and the sort of volume that you may be expecting. Another thing you need to look out for is the type of bandwidth and the sort of network technology that they are using. 56K is not going to cut it, but you get the idea. Normally a server would at least run something like a T1 or faster connection on multiple ports to support domain names.
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What this article is going to do is to just list down some of the features that you might want to look out for when talking about web hosts that will be able to support your needs and then some. These are just some general guidelines and some of the basics that these hosts must live up to. Depending on the nature of why you need a web host, you might want to look at other more advanced features. One of the things you need to look out for is the digital disk space that will be allotted to you when you sign up with their service. The thing is, one of the main problems that people encounter when getting a good web host is that they do not get enough disk space.
Make sure that you get more than you need when you are signing up with a host, because the whole point of getting a website is to be able to expand at a later date. One of the more common sizes to look out for is above 100 megs, and some may consider in excess of 500 megs depending on the type of website and the sort of volume that you may be expecting. Another thing you need to look out for is the type of bandwidth and the sort of network technology that they are using. 56K is not going to cut it, but you get the idea. Normally a server would at least run something like a T1 or faster connection on multiple ports to support domain names.
Host Gator provides Shared, Reseller and Dedicated web hosting solutions. Our services are designed for both beginners and professionals. All of our shared plans include a 99.9% uptime guarantee, 24/7 support and a 45-day money back guarantee.
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Multiple Domain Hosting - The New Solution to Cut Costs
Multiple domain hosting is the new wave of cost cutting measures by web hosts and web masters these days. This is because of the new rising concerns of many web masters that have a problem cutting costs when dealing with a web host that runs more than a single web site. It is actually quite common to many shared web hosting solutions out there, among other problems experienced by what is considered to be yesterday's solution to hosting many websites.
One of the main alternatives that these webmasters are looking to is multiple domain hosting, and what it is actually using a single account to host multiple websites with their own domain names. This is quite different from the old system where many accounts were being managed by a single web master. When looking at this, the solution of multiple domain hosting is actually quite simple and there are many ways for you to do this. One of the more simpler ways for you to achieve this is to actually redirect all the directories and sub directories of the account into a single domain root. In this method, all you are doing is creating a subdirectory of the root domain, and all new domains will be then set up to actually point to that particular subdirectory.
The uses are the same, all that is being done is some minor name changing. The process is then automated on the end of the user, which means that even if they type in the old domain name, they will be automatically route to the newly created sub domain. While slightly technical in explanation, the process is really quite easy to do and anyone can achieve it. Many web masters are touting this method, especially for those who have more than one networked web site that have similar administrative needs. This means that you will have separate control panels and options for managing these websites, which would be quite tedious.
If you have a website with many domains within the root address, then you might want to consider multiple web hosting as well. There are other methods besides this and one of them is true multi domain hosting, which means that you will get a single domain and subdirectories, but you will receive separate ways to control each of the domains through GUI's and panels. The benefit of this is that there will be plenty of flexibility in customising each and every domain, but of course this is a much more intensive and labour hardy method. The other method that is floating around is called multi domain housing reseller account, a mouthful of a name that allows for you to create customised websites and domains, under a single control panel. It is a really cheap way for you to start up your own web hosting company. So these are some of the alternatives to just plain old domain hosting, and one of them may be the answer to all your problems.
Now hosting over 1,800,000 domains!
Host Gator provides Shared, Reseller and Dedicated web hosting solutions. Our services are designed for both beginners and professionals. All of our shared plans include a 99.9% uptime guarantee, 24/7 support and a 45-day money back guarantee.
http://secure.hostgator.com/cgi-bin/affiliates/clickthru.cgi?id=atinder
One of the main alternatives that these webmasters are looking to is multiple domain hosting, and what it is actually using a single account to host multiple websites with their own domain names. This is quite different from the old system where many accounts were being managed by a single web master. When looking at this, the solution of multiple domain hosting is actually quite simple and there are many ways for you to do this. One of the more simpler ways for you to achieve this is to actually redirect all the directories and sub directories of the account into a single domain root. In this method, all you are doing is creating a subdirectory of the root domain, and all new domains will be then set up to actually point to that particular subdirectory.
The uses are the same, all that is being done is some minor name changing. The process is then automated on the end of the user, which means that even if they type in the old domain name, they will be automatically route to the newly created sub domain. While slightly technical in explanation, the process is really quite easy to do and anyone can achieve it. Many web masters are touting this method, especially for those who have more than one networked web site that have similar administrative needs. This means that you will have separate control panels and options for managing these websites, which would be quite tedious.
If you have a website with many domains within the root address, then you might want to consider multiple web hosting as well. There are other methods besides this and one of them is true multi domain hosting, which means that you will get a single domain and subdirectories, but you will receive separate ways to control each of the domains through GUI's and panels. The benefit of this is that there will be plenty of flexibility in customising each and every domain, but of course this is a much more intensive and labour hardy method. The other method that is floating around is called multi domain housing reseller account, a mouthful of a name that allows for you to create customised websites and domains, under a single control panel. It is a really cheap way for you to start up your own web hosting company. So these are some of the alternatives to just plain old domain hosting, and one of them may be the answer to all your problems.
Now hosting over 1,800,000 domains!
Host Gator provides Shared, Reseller and Dedicated web hosting solutions. Our services are designed for both beginners and professionals. All of our shared plans include a 99.9% uptime guarantee, 24/7 support and a 45-day money back guarantee.
http://secure.hostgator.com/cgi-bin/affiliates/clickthru.cgi?id=atinder
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