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Ford's Surprise Profit - Currency gains?

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April 24, 2008 – Comments (0)

"Ford posted an unexpected quarterly profit on Thursday, led by strong results in Europe and South America and a narrowing loss in North America."

I wonder how much they gained because of exchange rates?  I suspect currency gains are going to be confused as business gains and growth by investors.  

On another point on debt, the US has benefitted enormously on its debt in that it is priced and payable in US dollars.  Unlike other countries that got themselves into trouble with debt, currently the problem has not been compounded by the declining value of the currency.  

So, when poor developing countries got themselves in trouble with debt that problem was compounded by the declining currency.  They owe the money in US currency, their currency declines to half the relative value and the debt has effectively doubled.

The opposite is happening with the US.  The currency is devaluing and the lenders in other countries are taking the currency loss hit so they are losing significant buying power in their own currency. 

This has got to have serious implications in how the US funds its debt moving forward.

Yves had an interesting post on the US-China co-dependent behaviour on debt

Somewhere I saw it mentioned that the only time the US has had to borrow in a foreign currency was under Carter.  I suspect the US has damaged its currency to the point that it will not be able to fund all debt with repayment in US dollars.

Currently I think there are significant numbers of investors sitting on the side watch, allow access to cheap money for now as people are more concerned about return of capital then return on capital.  But, I suspect the money will move to other investments at some point and then the debt crisis is truly appreciated. 

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