Dollar 'plummets' - doesn't just fall #media #economics #language

This is about language, especially the language used by the traditional media, but we'll open up with some simple economics: the Australian dollar is traded on an open marketplace and moves up and down in response to demand. (Long ago it was fixed by successive governments, mostly notably the conservative ones, but a Labor federal government reformed our currency system and floated the dollar.)

By floating or trading the currency the value of the dollar adjusts itself to the realities of, for example, importers wishing to exchange Aussie dollars for other currencies. These importers need to do this in order to buy goods and bring them into the country. Now as the dollar falls in value against any particular currency that means more Aussie dollars are needed to buy that foreign currency. This raises the local cost for the importer which will be reflected either in lessened profit for the importer or (more likely) an increased price to the consumer. The upshot of that is a fall in demand for price-sensitive imported products and more cash available to buy locally-produced products, or to invest locally. Is this good or bad? Or neutral?

To read the local Aussie press you'd think it bad, by default: Australian dollar plummets on weak US data. Note that it didn't fall - by about a cent, mind - rather it plummeted. Doesn't sound good, does it? I can imagine many readers assuming the worst.

However the flipside to a falling dollar is that exporters will be selling Aussie goods at local Aussie prices to importers in other countries, and they will receive payment in a foreign currency. As the Aussie dollar falls in value against those currencies (and it may not, as each is traded individually), they get more Aussie dollars in return for a stronger overseas currency. For example an exporter may have signed a contract in $US and will expect to get a certain number of Aussie dollars when those gratefully received US dollars arrive. However a falling Aussie dollar means they will get more Aussie dollars than they originally expected. It's a bonus, it adds value and profit to the exporter's bottom line and encourages further investment. So now, is that good, bad or neutral?

Media-speak is a wonderful thing, but it does distort the news by adding colour and flavour where none is needed. Rather than report an event, they re-write it to suit what they want to portray. Whilst some traditional media play a straight bat most of the time, all succumb to temptation over time and manipulate stories to their advantage. We know this, and put up with it. After all, we know the game-plan of each media outlet is to sell their product - or do we?

Chinese stimulus package trades bikes for cars #auto #bicycles

Economic stimulus packages are all the rage right now - imagine what could have been achieved with a similar global effort on global warming, instead of the lukewarm drip-fed effort we have seen so far? Anyway, the financial collapse threatens economies, and thus jobs, which would be of immediate harm to most incumbent governments... so what hurts most gets most attention.

In China's case the stimulus package includes support for car makers, effectively tying the consolidation of the industry to an economic imperative - to drive local growth by swapping bicycles and the like for locally-made cars. Now this is great for the car makers, consolidation will save costs and make for increased efficiencies, driving down per-unit cost and ultimately, once the fall-out has settled, adding jobs - but only if growth can be sustained and exceed where we are now. To do that means exporting more - many more - of those cars. Given that right now is not the right time to be exporting cars, they had better have a compelling sales pitch - and that means low-cost, as in really cheap. Hopefully they will be reliable, serviceable and efficient. Otherwise I'll stick with my bicycle.