Comment by csomar | Hacker News Reader

Comment by csomar | Hacker News Reader

Okey Dokey, so I'm assuming Amazon has to reach singularity in order to sustain that value?

Something is not quite right. We are reaching significant highs and the US dollar is getting stronger. Several economies are collapsing mainly due to their currency crashing against the USD (Turkey, Argentina, Egypt, Tunisia, Iran, etc...).

I'll probably fail to find the comment but I was very bullish on tech stocks a year or more earlier. I'm still VERY bullish on them. Albeit I have to say that the risks now for a substantial correction is starting to go up.

Here are two possibilities:

1. Things go back to normal. Tech Stocks go up a bit more and then we correct. Possibly getting into a bear market. This time is not different.

2. This time it is different. Tech stocks carry on the bull market. Everything is a bull market even the US dollar. This crashes pretty much the rest of the world stocks and economies. The US economy and dollars crashes several economies and makes a come back as the most powerful economy on the planet.

I've been hearing about the USD causing issues with economies such as Turkey recently from several sources.

As far as I can tell it's because a lot of loans in Turkey were backed by USD. Now that the USD is a lot stronger it's causing loan defaults in Turkey.

Can someone chime in who has a better understanding of the current situation? It sounds really interesting and complex.

Not an expert of the current situation. But the Asian Financial Crisis in 1998 was caused by something similar.

In that case, people were borrowing in USD due to much lower interest rates in USD and stable/fixed exchange rates. These loans were used to finance property and infrastructure for exports. However, these loans were also financing lots of purchases for imports, so the current account deficit in these countries got worse and worse, until inflation happened and debt payments shot up, causing firms to default and creating an economic collapse.

As a result, Indonesia, Thailand, and South Korea had to get help from the IMF. http://www.wright.edu/~tdung/asiancrisis-hill.htm

It's not quite as simple as it just being the USD's strength. In Turkey's case, they are highly leveraged and have probably spent above their means for the last decade whilst growth was also healthy. Now growth is so so, the USD is getting stronger making the debt ratio worse, there is relatively high inflation and consequently the loan markets are becoming tight for Turkey as people are becoming wary about repayments..

Edit: Erdogan's (Turkey's prime minister) strongman attitude, a perceived power grab as well as attack on independent journalism might be contributing too.

Turkey has an overheated economy. It's growth has outpaced its productive capabilities. Lot of people are painting this to be primarily Erdogans fault. That is far from true. Turkeys growth is due to the combination of foreign denominated investments and loans in both domestic and foreign currencies. The Turkish Central Bank has been surpassing interest rates despite high inflation rates to keep the credit flowing. Altogether, the economy is over-levereged and it was going through a corrective cycle from January. Normal, and healthy.

That being said, multiple geo-political situations have now pushed this correction into what is likely a recession. First, there is the situation in Syria. Aside from the domestic strains and frictions, this situation puts Turkey at odds with Russia and Iran. Second, after a failed coup attempt a paranoid and defensive Erdogan has consolidated power -- this can only increase uncertainty and risk. Finally -- the straw that broke the camels back -- the recent economic policies of US towards Turkey. Tariffs, threats, and likely more (according to the administration). This led to a sell-off of the lira against the dollar and euro. This has systemic effects as it increase the cost to finance any foreign denominated debt. What that means is that all Turkish businesses need to increase costs in order to maintain present profitability levels. Without foreign intervention -- or very good diplomacy by Turkey and EU -- this is likely beginning of a recession.

I strongly disagree with your portrayal of Turkey’s problems as not being in large part stemming from Erdoğan and his rule.

He has hollowed out the government and banking institutions of capable and educated, in favour of political functionaries, conspiracy peddlers, and other unqualified individuals.

https://foreignpolicy.com/2018/08/22/how-turkey-dumbed-itsel...

That's right. The situation is quite complex with foreign debts that are hard to pay back. The situation gets worse with tariffs against Turkey hurting their ability to trade, which creates caution among investors. This in turn causes less demand for their currency, which makes things worse.

Econofact has some background and history that I found quite interesting and well explained:

https://econofact.org/the-financial-and-economic-crisis-in-t...

How does the USD getting stronger lead to economies in other countries collapsing? This is a real question, I really don't understand how or why this would happen.

It costs them more to import goods, because the goods are priced in USD. They may not actually be priced in USD, but as of now, the USD is still the world currency reserve, so most international trade is at least indirectly based on it's perceived value.

With Turkey there were sanctions put on banks and the Turkish currency devalued immediately after.

Well, these economies (I live in one, travel to another one) have already shaky economies and weak currencies. Let's say you mainly export in EUR but you import most of your living expenses in USD. USD gets stronger and EUR goes down.

Now you might think it is just a few "percentages" but remember these economies are already on shaky grounds so this might trigger the crisis. Certainly, the USD here is not to blame (I don't really believe in all the jewish money central bank crap). But if the USD goes stronger along with the US economy it might destabilize several other countries that have yet to reach the trigger point.

In Turkey many businesses were taking out loans denominated in USD or Euros instead of local Turkish Lira.

"The lira sell-off has also meant Turkey's banks are seeing more loans go bad as borrowers struggle to pay off euro- and dollar-denominated debt. For years, Turkish companies borrowed in hard currency, drawn by lower interest rates, but the lira crisis has made it more expensive to repay that."[1]

[1] https://www.cnbc.com/2018/08/03/reuters-america-turkeys-bank...

Weak economies often have some inflation and thus high interest rates. During the time of almost zero interest rates in the US, people borrowed Dollars and not their local currency to get money cheaper.

The problem arises now that the value of the Dollar is rising. People have to exchange their local currency back into Dollars to pay back their credit loans. They have to pay more than they expected which can be a problem.

Is the value of the Dollar rising, or the value of the local currency falling? I'd say the latter.

Yeah, inflation is not negative, so it doesn't seem reasonable to say that the value of a dollar is rising.

To out-pedanticize (?) your pedantry, by convention currencies are valued against other currencies - this is why the tickers at the bottom of Bloomberg show USD-EUR, USD-CNY, et cetera.

In the context of this thread, you're expected to interpret "the value of the Dollar is rising" as "it costs more Turkish Liras to buy a dollar today than it did yesterday."

I feel like this is missing his point, and he was actually asking if the change in currency value was mainly due to America getting stronger, or due to the other countries getting weaker. So far this comment thread has been fairly US-centric, and I believe he was suggesting it's more that these other countries are just failing, rather than the US doing particularly well.

Currency values don't necessarily correspond to the strength or weakness of a country. Sometimes countries that are strong in terms of GDP, military power, or other metrics intentionally drive down their currency value in order to improve their balance of trade.

Most of the other comments have explained it, but I'll also point out that in many developing countries or ones that have recent crashes in their economy, their unofficial-official currency is the US Dollar or, less commonly, the Euro.

USD and EUR are often stand-ins for the country's currency for various reasons. This leads to devaluing of the currency and eventually laws on money exchanging and import of other currency (see also: China).

It's partly that a strong USD means that people are buying dollars or moving money to the US. More money to the US means less money to others.

It's partly borrowing. Lots of developing nations' loans are denominated in dollars. Meaning that they have to pay back the money in dollars since lenders worry that developing nations/peoples would just devalue their money to pay back their loans if the loans were in pesos, liras, etc. As the USD gets stronger, the loans become more expensive.

https://www.ft.com/content/b0436678-4fa8-11e8-9471-a083af05a...

Mexico had a scare just 2 years ago which Trump's election and the USD gaining a lot on the mexican peso. There were even talk of mexico collapsing if the USD continued to gain strength because of mexico dollar debt issuances.

I wonder if the same thing which happened to John D. Rockefeller's oil monopoly will happen to tech.

Amazon and Google are becoming more like a technology holding/investment company (like Berkshire).

I don't think the guys on Washington really understand the severity. Tech is still new and machine learning is doing wonders but not merging universes (as of yet).

What is the severity?

I think something very different needs to happen. Commodity monopolies are different than platform monopolies. Additionally, I can't think of an example where any retail monopoly has been broken up.

I am still unsure if breaking these companies up in a vertical way would actually result in any benefit to the public.

The old AT&T I think would count as retail.

IIRC, AT&T asked to be broken up so that it could get into the computer business.

According to http://usdebtclock.org/ the $ 21 trillion US national debt is now 114% of US GDP and about a third of that debt is held by foreign countries. Unfunded liabilities (medicare, social security, veterans benefits etc) is almost a million dollars per tax payer ($940K).

Either we are partying and leaving it to our children to clean up the mess or arithmetic does not matter to the US economy.

I cannot make sense of it and I had exactly the same feeling in 2001 and 2008.

"If you owe the bank a hundred thousand dollars, the bank owns you. If you owe the bank a hundred million dollars, you own the bank."

Huh, I guess that's what Donald Trump, Kushner and Deutsche Bank all seem to agree on.

Or stocks just level off and bring mediocre returns for several years.

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