Festool Price Increase???

[Greg Heppeard]

Has anyone else heard of a price increase for Festool on Apr 1? I just recieved an email from a major screw retailer. ;) If you don't know...Festool does not allow retailers to discount their products. They threaten to pull the products from the store if any discounts are offered. So, if they are increasing retail prices, everyone has to do it. If you're on the fence on buying, you may want to think harder about it. I have no professional affiliation with Festool or any other tool retailers.

[Don Abele]

I got that same e-mail. The same price increase is happening with Felder/Hammer. When I bought my Hammer the other day they said it has to do with the decreasing value of the US Dollar and increasing value of the Euro. By what I was told, the prices will not increase in Europe, only in markets based on the US Dollar.

Be well,

Doc

[Jesse Cloud]

Much as I hate to see the prices go up, its looks like Festool is eating most of the difference. Probably going to get worse before it gets better, lowering interest rates makes the dollar even less attractive overseas, so it probably hasn't hit bottom yet. I expect we will see same actions from other companies, like Lee Valley. The folks that have their tools made in Taiwan will probably just cut back even more on quality to make up for the weak dollar. If you are looking for quality tools, this might be the time to buy....

[Jim Becker]

Yes, April 1 is the date...and not just for Festool. Some other Euro manufacturers have announced price increases if I am not mistaken. Cost of steel, oil and the exchange rate all are contributing to this.

[Will Blick]

Considering the dollar vs. the Euro went from 1:1, now $1.55 dollars for 1 Euro, in such a short time period (bulk of it in 3 - 4 years?) .... you have to wonder if many Euro makers have been holding back on price increases, OR, buying currency options to hold their USA pricing for some time, but we all know, options don't last forever.

If this is the case, and the Dollar keeps tankin and hits near $2.00 to 1 Euro, its possible a year from now, Euro tools will be 2x what they cost just ~3 years ago. I was looking at Milling machine last week, German made, sold for $6k here in USA 4 years ago, today, identical machine is $10K, thanks to the decline of the dollar. In this case, the dealer simply buys them, and must fully absorb the currency hit and try to pass it on.

Now that tables have turned, it's our chance to sell our manufactured products to the Europeans, so they get the value and we get the profits......but.... we lost our manufacturing base :-(

[Dave Falkenstein]

Have you been to the grocery store or gas station lately? Almost EVERYTHING has gone up in price, not just tools from Germany.

[David Duke]

Yep, thats the reason I just made my first Festool purchases, (insert not so hidden gloat here)............ Domino, domino assortment package, C22 dust extractor, boom arm and handle.............I know didn't happen without pics. Its been a hectic couple of days hopefully I can open all the boxes and put everything together tomorrow.

[Dan Clark]

Unfortunately, the devaluation of our currency against the Euro and other currencies is responsible for the majority of our price increases in the last six years. Attached are two charts showing how poorly the USD has performed and how well the Euro has performed.

The manufacturers of quality European products like Festool, Felder, Hammer, Laguna and many others are going crazy right now. The US is the worlds biggest market. Our currency value is tanking. How would like to see your biggest potential customer base shrink because they can't afford your products!?!

And ever worse, there are many new products being developed in Europe that will probably never see the light of day here because we can't afford them!

Here's a rather nifty portable workbench: http://www.walko.nl/. It's getting a lot of good press and has been growing quickly in the last year. Here's a link to their demo film: http://www.walko.nl/Frame%20NL.htm.

Several months ago, there were discussions about bringing it to the US. Now? Nada!

It's sad that many parts of the world are moving ahead, while we run in place.

Regards,

Dan.

[Mike Henderson]

As I understand economics, money is a commodity just like oil or corn. If there's too much of it, the value goes down (it costs more to buy things).

The United States has been importing a lot more than it has been exporting, which means that we've been shipping money out to the rest of the world. As the rest of the world gets too much US money, they value it less, which means that the value of the US dollar falls relative to other curriencies. This makes US goods less expensive for the rest of the world and they buy more of our stuff. This "feedback" process continues until there's some equality in the money flows.

I've always wondered how we kept up the excess of importing over exporting for so long.

Mike

[Will Blick]

What's the solution Dan?

I personally think this decline / recession is simply a correction in the world economy. While USA is still "the" major force, the combining of the Euro currency (now representing over a billion people) and the developing countries such as China, India, spending money like crazy, our position is not quite as strong vs. 10 years ago.... markets sometimes take time to make corrections like this. We can only hope the correction is not too painful.... but markets are always perfect, they determine "real" value.

[Dan Clark]

Will,

I have no solutions. I'm just clarifying the problem.

Like you, I hope the correction won't be too painful. However, I'm a little afraid that many in the US are sitting on their duffs remembering our past glories. We've gotten complacent - fat, dumb, and happy.

The world is a tougher place. We need to realize that people in other countries are as smart or smarter than we are. Other countries are pumping out top talent from their trade schools and colleges. Most importantly, they are hungry. They want the life that we have and are willing to work hard for it.

Collectively, we have to work harder and smarter to compete.

Regards,

Dan.

[Jeffrey Makiel]

Have you been to the grocery store or gas station lately? Almost EVERYTHING has gone up in price, not just tools from Germany.

Dave...I think you're spot on. Also add health insurance & services, property taxes, and utilities to the list. All are seeing double digit increases. All are domestic services for the most part.

The dollar is weakening abroad and at home. Festool is only one of many. I expect many 'mom & pop' manufacturers of niche woodworking products will be hurt the most. After all, I'm guessing that most of the sales in woodworking products in the USA these days are for hobbyists and therefore based on disposable income which is likely shrinking while production costs are skyrocketing.

-Jeff :)

[Will Blick]

Jeff, good points, fully agreed....

> Like you, I hope the correction won't be too painful. However, I'm a little afraid that many in the US are sitting on their duffs remembering our past glories. We've gotten complacent - fat, dumb, and happy.


Well said Dan..... although a high % of Americans live paycheck to paycheck....lets hope that scenario doesn't represent the good ol days.


> The world is a tougher place. We need to realize that people in other countries are as smart or smarter than we are. Other countries are pumping out top talent from their trade schools and colleges. Most importantly, they are hungry. They want the life that we have and are willing to work hard for it.

BINGO! Again, well said, this is a big component of the problem.... Americans are spoiled vs. developing nations, complacency happens without people even knowing it.

The older I get, the more fascinated I become about the economy in general, specially now that its global.....it really is a new paradigm that our experts have not fully comprehended. I think our current recession is evidence of such..... I had a strong suspicion once the final Real Estate bubble burst, we will see the real shake out of the world economy AND the new found power of the Euro. First we had the stock market of the mid to late 90's, then R.E., both artificial bubbles that kept our head in the sand for ~ 12 years.


I find it fascinating how fragile our economy is, even during good times. Consumer spending represents over 80% of our economy, which is quite amazing that our trips to the supermarket, dinners, ww tools, is what fuels the economy. When you consider the slim net margins the avg. corporation makes due to stiff competition here and abroad, it only takes slight reductions in gross sales and many companies can crumble.....partly because of super high fixed costs and the fact Wall Street keeps funding these companies vs. the companies taking drastic measures before its too late. The attitude has always been, things will return to the good ol days.

When gas levels at $5 - $6 a gallon (the UK has been paying $6 per gallon for 8 years now) this will represent a huge hit to many Americans as our fuel bills will start to exceed our car payments. Not to mention, more dollars continually leaving the country. We will soon be bidding against China and India for fuel :-(

Then R.E. value after finding bottom might appreciate at 1 - 2% a year, ridding all that excess equity, which we used to buy power tools, cars, 2nd homes, etc. It's like a snowball rolling down a hill, you just can't believe how fast it becomes huge.

The Feds finally haa a clear understanding on how sensitive the economy is, and I marvel at all the fixes they are throwing out relatively early in the cycle. Of course, if this current recession represents the overdue worldwide correction mentioned above, then all the band-aids the Feds offer, at best will only postpone the correction.

Americans forget, even after WWII, when things were supposedly boomin, the stock market indexes did not grow one bit from 1952 - 1972, 20 years of stagnant market... this can easily repeat itself.

I think you are right, America needs a new model for success now that the economy is global and the internet is making the world a small place.

Sorry for the soapbox....

[Pat Germain]

I retrospect, we could all afford to buy whatever tools we wanted had we invested in Euros and gold only a few years ago.

As already pointed out, a weak dollar has pros and cons. Obviously, it's great for the few manufacturer who are still the US. Maybe somebody overseas will actually buy Ford, GM and Chrysler vehicles because they're cheap.

If the dollar stays low and oil stays high, which seems likely, maybe some of that overseas manufacturing will actually start to come back. No sense in making things overseas if you can't afford to float them across the Pacific.

As for Festool, I think more people are starting to realize the high prices, although painful, are actually worthwhile. As quality continues to suffer with other brands, Festool products seem to be getting better and better. I think most would agree that's a good thing.

[Eric Haycraft]

I once saw a quote that said that our economy is a deck of cards in gale force winds.

In terms of the exchange rate, it won't stop dropping until we are a net export nation again. Unfortunately that won't happen until our dollar drops another 30+ percent compared to other currencies. In general, that means that everything will be at least 50% more expensive and our wages will on average be equivalent to today. That will be a very tough pill to swallow for the majority of Americans especially those living paycheck to paycheck. The reality of the situation is that everyone has and will continue to receive pay cuts via inflation until we are an export nation again. Last week it was announced that we are no longer the largest economy in the world..due to the exchange rate. What is about to happen here is payback for borrowing so much money to import goods for the last 30 years.

[Will Blick]

Boy, you creekers sure are smart :-)

It would be nice as our dollar tanks, our auto makers would be a beneficiary, exporting more cars to Euro. But this has not been the case yet, and might not be... (at least not on a big scale) Not every country is as import friendly as good ol USA.

Eric, if you are right, and the dollar drops to 2:1 to the Euro, we will see some serious economic impact. Other currencies have beaten up the dollar also, including the Yen over the past 8 years, same radical move as the Euro. Bottom line, our currency has very little buying power outside this country.

I think the Great depression was an example of how fragile an economy really can be.... a drop in the equity markets, a slow down in industry, and whamo. It took many years, to get back on an upward swing. Your deck of cards analogy is a good one.

I think I will go order some Festool and Felder tools now, before its too late :-)

[Pat Germain]

I don't think the deck of cards analogy is accurate. Likely, it comes from people who benefit from scaring other people. Our economy is nothing like it was in 1929. People also know a lot more about economics now then they did in 1929.

I don't agree that we must be an "export nation" before the economy turns around. The US economy was booming in the 1990's and we weren't an export nation then.

[Eric Haycraft]

I did a lot of tool buying this past year because of the exchange rate. Bottom line, buy it while you can and while it is still cheap. We are seeing many companies trying to absorb the price increases, but that won't last forever. Sooner or later the prices are going to break free and we will see large price increases across the board and not just oil/grain related items. Inflation tends to have a delayed reaction on consumer prices, but it eventually catches up.

Regarding the manufacturing economy and exports. While we have decimated our mfg in this country over the past few years, that should bounce back, but it would take years and that delay would prolong a recovery. Also, Europe is threatening to impose tariffs on us because our environmental laws are so lax and it causes a disadvantage to their manufacturers. All of this only hurts our chances of a quick recovery.

It took until the 90's for the stock market to recover to 1929 levels when adjusted for inflation. Unfortunately, they were never supposed to get back to 20 levels since they were horribly overvalued in 1929. Unlike the 20's, today we have a derivatives market which is leveraged over 4 times the value of the underlying securities (which are overvalued too) - a truly chilling fact.

[Eric Haycraft]

I don't think the deck of cards analogy is accurate. Likely, it comes from people who benefit from scaring other people. Our economy is nothing like it was in 1929. People also know a lot more about economics now then they did in 1929.

I don't agree that we must be an "export nation" before the economy turns around. The US economy was booming in the 1990's and we weren't an export nation then.

In the 90's we were a debter nation, that was what fueled our economic expansion. If you don't believe me, you can look it up. Overall debt was increasing even though government debt was dropping. Same thing with 01-07..increasing debt causes economic expansion. Unfortunately, that condition is only temporary - you can only grow through debt for so long before people stop lending to you. That is what we are running into now.

Sadly, I have yet to see a comparison of the present to 1929 where our current fundamentals are any better then 29. Factor in the derivatives market and suddenly it starts to look like a larger house of cards and a hurricane about to hit the shores.

There aren't too many people that benefit from gloom and doom economic talk - least of which are economists.

[Johnny Kleso]

Liegh Jigs just raised their prices after Christmas and I just was in time to get my D4R

US $ worth is dropping :(
Can you say recession ?

[Matt Bickford]

Eric,

For one thing, a recession is defined as two consecutive quarters of decreasing GDP. Our GDP was a small increase last quarter, as the one before and the one before that. The economy in 1929 was a depression. You want us to look up numbers...why don't you research how many quarters it takes to qualify as a depression (i'll warn you that it's more than a couple).

As far as turning back into an "export" country. The ratios of imports to exports doesn't factor in the trade of intellectual product, which has seen all of the growth as manufacturing declines. These numbers that compare physical imports are outdated and will eventually be replaced.

I don't know if you're the one that said that you wish our manufacturing hadn't dropped because we'd be able to take advantage by exporting to markets like Europe. Whoever said that has it backwards, it's the same situation with the same exchange rates. We lose again.

What's causing this is not the lack of manufacturing exports, it's the increase of debt. People borrowed too much money for bad investments in houses and credit cards. Lending companies borrowed too much money for bad investments in lending. All this because interest rates were extraordinarily low.

If you think the US needs to have more manufacturing, just look at the current successes. Ford, GM, Chrysler...oh wait they're paying higher wages to sell an inferior product for more. I don't thnk we need more of that...

[C Scott McDonald]

How much is the price increase? I have been on the fence for awhile that might be the deciding factor.

[Vijay Kumar]

The price increase vary from 0 to 15 % depending on the item.

Here is a link http://www.mcfeelys.com/info/festool-alert.htm
that details the individual price increases.


How much is the price increase? I have been on the fence for awhile that might be the deciding factor.

[Pat Germain]

Don't shoot me, but I really don't think we can complain about tool prices these days. Many of the power tools I used to look at in the early 90s are now priced the same or even less. I bought my PC-690 router back then. I'm pretty sure I paid almost $200 for it and that was on sale at Lowe's. Right now you can buy it on Amazon.com for $95.43. And I think most people would agree that's a great little router. I'm still using mine.

The same goes for my Porter Cable framing saw. Right now it's on Amazon for $129 and that's about what I paid for mine back in the early 90's.

When I was shopping for my first table saw, I wanted a Delta contractor saw, but my budget couldn't quite meet the $600. I ended buying a Craftsman contractor saw, which was just over $400. (In retrospect, I should have held out for the Delta, but that's another story.) Anyway, once again, the Delta contractor saw is priced at $599 on Amazon.

Obviously, there are many downsides to offshoring manufacturing. Yet, we always want cheap and offshoring has kept things cheap. If we want the quality which comes from Festool, Minimax or other European manufacturers, we're going to have to pony up. I don't know about you guys, but I've never heard of anyone feeling ripped off after purchasing European woodworking tools.

[Eric Haycraft]

29 was the year before the depression and late in 29 was when the downward spiral began but the depression didn't really start until the 30s. I am comparing the US now to that or the late 20s before the downslide. When the market 'crashed' the soup lines didn't immediately form - it took years for us to hit bottom. The multiple year downward spiral was ironically littered with news headlines that 'economists delcare the worst is over, future is bright' only to see more and more declines follow for years to come.
Also, economic 'expansion' of 1 or so percent when there is inflation over 1 percent is not expansion, it is contraction. Yes, it takes 2 quarters for a formal recession to be declared, but that declaration is retroactive back to the start of the decline. That's why economists say things like 'we might be in a recession' rather than saying that we are in one - because we haven't met the 2 quarters yet.
Understand that for the sake of brevity, I am not explaining all of the intricacies of the situation. The problem is deeper than the housing market, foreign debt, and our trade deficit and it would take way too long to explain all of the issues. Some companies are doing better these days due to the exchange rate. Many of them software companies based here with global client bases. When I speak of exports, I speak of products and services, not just things that are shipped in containers over the sea.
Regarding the auto industry, the big three are dead. You may have noticed that foreign auto makers are building cars here now. BMW just announced that it is expanding its production capabilities over here. Even if the big 3 don't increase exports, others will come simply because paying someone 30 an hour here will soon be like paying a european 15 an hour for the same quality of work.

[Anthony Scira]

Buy as many American made products as you can.

[Will Blick]

Eric, you raise some excellent points..... we must also consider though, in the 1920's - 30's, we were not in a global economy like we are now.... we also did contend with developing nations becoming hungry and US makers sending everything off shore to be made, leaving USA manufacturers with virtually no front line workers. So many factors are so different, we can't make EXACT parallels.... but overall, I agree with your consensus, i.e. these conditions are hard to define, and they don't happen over night, sometimes they are long drawn out battles, even though the media and Wall Street tries to turn every upswing in the markets as "things are all better now". Of course they have every incentive to speak like this.... few if any really benefit from economic decline, so not sure what the above poster was referring to, when he suggest scaring people.


> I don't know if you're the one that said that you wish our manufacturing hadn't dropped because we'd be able to take advantage by exporting to markets like Europe. Whoever said that has it backwards, it's the same situation with the same exchange rates. We lose again.

I think you have this backwards.... those USA makers who can sell to Euro right now, have a huge advantage vs. Euro makers selling similar products. The exchange rate is not hurting us again as you suggest. It only is hurting is when Americans want to buy Euro products such as Festool, which was the basis of this thread.


I also agree Eric, that overall, tool prices have been damn good.... but we can credit that to move to Asian manufacturing..... however, now, we will start seeing the first signs of the weakening dollar hurting Euro tools here in the USA. As mentioned, makers can't hold off the inevitable, and it makes no sense to sell products at a loss to hold market share. Although I do think many makers are probably playing the currency markets to level out swings in currency, hence why prices have held on most tools....but this is temporary also.....


Eric, do you think its possible the USA may one day join the Euro currency, as well as the Brits? (I never hear talk of the USA joining the party) As painful as this may be during the transition, don't you think this might become a necessary evil, to accommodate the new world economy and level the currency fluctuations? The Euro user-base already outnumbers the US dollar user-base by almost 4:1. As the Euro grows in popularity, the dollar will continue to loose its clout over time as the Euro will be the most stable currency in the world.... even though in its infancy, many probably think it already is....

[Doug Mason]

Somewhat distantly related to the discussion--is the fact that as we have lost our manufacturing base (w/an eventual corresponding reduction of the middle class), what is our capability to wage a global war (other than nuclear)? Should the US ever be in that position, I have no doubt we could rehabilitate our manufacturing base, but I suspect it could take years.

In my opinion, most of our future economic woes will be borne out becuase of this trade imbalance that we carry.

[Pat Germain]

Much of military manufacturing is still in the US; Navy ships, tanks, helicopters, trucks, jeeps and artillery pieces for example. Many small arms, both civilian and military, are also cranked out from US factories.

Although, even those areas are going more global. Much is being made of the Air Force's decision to go with an EADS (Airbus) platform for a new airborne tanker. In truth, had Boeing won that contract, much of their manufacturing would also had been overseas.

I still say there's way too much doom and gloom here. And yes, there are many people who benefit from preaching such negativity. Politicians, primarily.

[Dan Lautner]

"the stock market indexes did not grow one bit from 1952 - 1972, 20 years of stagnant market."

What index are you talking about? The dow had huge gains in that time frame.

[Glen Gunderson]

"the stock market indexes did not grow one bit from 1952 - 1972, 20 years of stagnant market."

What index are you talking about? The dow had huge gains in that time frame.

You're correct. However, his same point could be made between 1964-1984. The Dow Jones hovered around 1000 for 20 years. $1000 ($3350 in 1984 currency) invested in 1964 was only about $1250 in 1984, so that would be a net loss of over $2000 after inflation.

In fact, after inflation, the Dow Jones only recovered to it's 1929 levels in the early 1990s. Heck, it took until the 1980s a get back to the pre-WWII levels of the Dow Jones. So that was almost 50 years with almost no growth in the index when compared to inflation.

[Will Blick]

Dan, it's possible I got the years wrong, but it was stagnant for a big chunk of time around there... IIRC it was the Dow.... 1962 - 80?

http://tinyurl.com/3e2cd3

[Dewey Torres]

Pat... You are quite the economist. Who would have known:confused: Now what are you building next? (Plantation shutters, another cutting board, something requiring a band saw perhaps?)... awe just kidding:D See you at work!
By the way.. did you notice which branch is gaining the criticism's for overseas $$$. "Chair Force".
Dewey


Much of military manufacturing is still in the US; Navy ships, tanks, helicopters, trucks, jeeps and artillery pieces for example. Many small arms, both civilian and military, are also cranked out from US factories.

Although, even those areas are going more global. Much is being made of the Air Force's decision to go with an EADS (Airbus) platform for a new airborne tanker. In truth, had Boeing won that contract, much of their manufacturing would also had been overseas.

I still say there's way too much doom and gloom here. And yes, there are many people who benefit from preaching such negativity. Politicians, primarily.

[Eric Haycraft]

Eric, do you think its possible the USA may one day join the Euro currency, as well as the Brits? (I never hear talk of the USA joining the party) As painful as this may be during the transition, don't you think this might become a necessary evil, to accommodate the new world economy and level the currency fluctuations? The Euro user-base already outnumbers the US dollar user-base by almost 4:1. As the Euro grows in popularity, the dollar will continue to loose its clout over time as the Euro will be the most stable currency in the world.... even though in its infancy, many probably think it already is....

I have been trying to read up on everything fed and currency related that I can find lately and I firmly believe that world currency is a goal of many of the powers that be, but it isn't something that I can prove. The euro was a big move in that direction. Unfortunately, a world currency would likely end up doing more harm than good to the little people like us. I don't really want to get into why this would be bad but in general the people that control the money control the world..would those people be in it for the good of the masses or a few? With few exceptions in history, the few are the ones that benefit when currency is centralized.

Remember that the great depression wasn't really caused by the over exuberance in the stock market...that would have only caused a recession. The depth and length of the depression was caused by the Federal Reserve's tightening of the money supply while the markets were falling. Back then, the Fed had great control over the economy, that has greatly changed over the past few years. While we are in a very similar market position to 1929 (lots of 'froth' in the stock market), the outcome can't really be predicted because the intricacies of our markets today are very different then the 20s. The Fed also seems much less evil these days. Back then, the amount of money in the system was easily controlled by 1 body, with securitization in the markets today and derivatives, central control is gone and the Fed can only nudge in one direction or another. The question of are we in for a recession or something that makes the depression look like a cake walk is unfortunately unanswerable because the issue is so complex. The markets will certainly crash, that's a given, but what that means for the masses is unknowable. We have a liquidity log jam going on right now and the Fed seems to be powerless to break it free which is a big concern to people like me watching from the sidelines.

A week or so ago, the US dropped to #2 in terms of our economy's size due to the falling dollar. Part of what was keeping the dollar artificially high (which helped us by giving us easy credit to cheaply buy all of the things that we have enjoyed these past 30 plus years) was that the USD was the reserve currency of many countries and the base currency that many commodities were trading in. This has been changing as the euro rose up. (It is interesting to google about which countries threatened to drop the dollar and what ended up happening to them).

[Will Blick]

> the USD was the reserve currency of many countries and the base currency that many commodities were trading in. This has been changing as the euro rose up.

This is really interesting Eric..... I never knew this... sheeesh, more potential decline for the dollar.

I agree with your assessment of uncertainty... as a lot of the outcome of the current crisis hinges on investors mindsets....just the simple act of investors pulling out of the markets to sit on the sidelines can start a catastrophic fall in the markets.... it's the snowball rolling down the hill concept. There is no formulas that dictate human behaviors....specially as there is other outside influences such as wars, terrorist acts, scarcity of supply of resources such as oil..... all this can greatly influence investor thinking. Again, it really is a deck of cards.

I am no economist, but I can't see how a single currency would hurt the world economy over the long haul. It seems one currency would provide the sledge hammer required to create the true definition of "value".

[Mike Monroe]

Price increase? What price increase... no impact here as I don't plan on buying any Festool tools; now or in the future. As much time as I don't spend in the shop, top of the line tools are jut not economically feasible for me.

-Mike

[Eric Haycraft]

I agree with your assessment of uncertainty... as a lot of the outcome of the current crisis hinges on investors mindsets....just the simple act of investors pulling out of the markets to sit on the sidelines can start a catastrophic fall in the markets.... it's the snowball rolling down the hill concept.
The scary part is that many investments these days are highly leveraged. For example, hedge funds may raise 1 million from investors and turn around and take out loans for 10 or 20 million to buy up other securities. This works ok until the investors want their 1 million back. If the securities that they purchased on loan haven't made any money, they have to dump everything that was purchased with loans to pay back the original investors. Other situations arise when the bonds that they purchased have their ratings lowered...when that happens, the banks that loaned the 10 or 20 million turn around and say that the hedge fund needs to have more than 1 million on hand due to the increased risk or that they need to sell those bonds. If the bonds are that bad, no one wants to buy them and they are caught in a catch 22. This is a simplified version of what happened to Bear Stearns.


I am no economist, but I can't see how a single currency would hurt the world economy over the long haul. It seems one currency would provide the sledge hammer required to create the true definition of "value".
It *could* work. For it to work, two things would need to happen and both are quite unlikely. First, fractional reserve banking would need to be abolished. Second, the currency in circulation would need to be directly tied to population. Those two elements together would eliminate inflation.

Fractional reserve banking is another topic altogether and it gives me the willies every time that I think about it. It is the basis for our banking system. Basically it states that a bank can lend out multiple times the amount of money that it has deposited. So, if I deposit 10,000 in a bank, they can make someone else a loan for 100,000 based solely upon my deposit. Now, let's say that the person that took out that loan deposits 10,000 in that same bank, the bank can again loan out another 100,000 to another person. In this simple example, the bank created 200,000 dollars from 1 10,000 deposit. (It is a much more complicated than my overly simplified calc because it doesn't allow unlimited exponential creation of money, but it does create many times the amount of money deposited) Google 'fractional reserve banking'.. it is an eye opener. In effect this style of banking causes inflation (usually only a few percent) which is an invisible tax on everyone that uses the currency. It also requires an increasing level of debt or the currency will collapse. As a result, a world currency using fractional reserve banking would result in a worldwide tax through inflation and increasing worldwide debt. I personally would prefer not to go down that path.

[Peter Quadarella]

Darnit, you made me buy the Domino! :)

My 2 cents re: the economic debate = The sky is not falling.

Also, we're not going to a single currency for the simple reason that the voters wouldn't like it (for patriotic reasons) and therefore politicians that suggest it will lose their footing. I believe this is the underlying reason the GBP still exists.

Our country still has an amazing amount of buying power, and more natural resources and in house manufacturing than most 1st world countries. If you haven't forgotten WW2, you will also note than in time of crises we can mobilize our workforce like nobody's business. So don't worry so much; enjoy your woodworking. :)

[Will Blick]

Peter, not worrying, just fascinating chatter while not in the shop.....

yeah, you did the best thing, buy your domino now, before $1500 price tag! :-)

Eric, great point about bank leverage loaning....this truly does create artificial economic growth....same true with leveraged funds (which I learned about the hard way).... the more an investment is extended beyond pure cash, the shakier the house of cards becomes.... lighter winds can blow it down...

IMO, this is the first time in our economy which we have experienced such over extension on everything.... right from the top, Bear Stearns, down to the individual house flippers trying to turn a profit on a home with no money down.... it seems we start reaching the end of growth in many sectors, and this extended form of credit was the only way to push markets further....which worked great, till the market finally turns and the notes are due. Many current R.E. flippers can relate to this pain today....

[Dan Lautner]

"A week or so ago, the US dropped to #2 in terms of our economy's size due to the falling dollar"


Our economy is four times the size of any other country. What are you referring to?

Dan

[Steven Hardy]

Myself ,realising that it is a global economy,prefer to buy ONLY from countries that have a healthy trade with us. There are a number of countries that DO buy our products (thank you Canada!) I prefer to avoid
Japan and China products. Its the same story year after year....
http://www.census.gov/foreign-trade/statistics/highlights/top/top0711.html

[Bill Lantry]

Gentlemen,

All this speculation is nice, but not relevant to what's really going on. This is all about fiscal policy. If you're really interested, try this:

http://www.nytimes.com/2008/03/23/business/23how.html?em&ex=1206590400&en=1917af0e41e51f62&ei=5087%0A

Thanks,

Bill

[Randy Denby]

Bill, I read that article. Thanks!

Also read one of the articles linked at the side of the page
http://www.nytimes.com/2008/03/22/business/yourmoney/22money.html?em&ex=1206590400&en=a8a303b1e04b74b1&ei=5087%0A

This was a good read and was something I needed. Been real insecure lately, but this re-enforced what my grandfather always told me.Buy when people are selling and sell when they're buying...and live within your means. Thanks again!
Randy