Reaction to Interest Rate Cuts By the Fed

[Inmexicocity]

I’m interested in others opinions about whether the think there is the basis for a class action lawsuit against major US banks and SIVs that created the current financial crises which has resulted in significant loses for Americans living abroad. The charge: Financial Terrorism and the de-stabilization of the US and Global financial markets. The damages: By forcing the Feds repeated cuts in interest rates, US citizens living on fixed incomes and US citizens abroad who are effected by exchange rates have suffered significant loses of income and a reduction in their standard of living.
Any opinions?

[Bevdeforges]

It's an interesting idea, but I suspect that the people losing their homes in the US thanks to shoddy mortgage marketing practices would have more of a case than US expats. The problem for the expats is the drop in the value of the dollar - and that's a well-known hazard of expatriation.

If the mortgage holders can't manage a class action suit, I think making the "direct" connection between sub-prime mortgages and the freefall in the value of the dollar would be a stretch at best. Besides, there are plenty of folks in the government who are thrilled to have the dollar at such a low point - it makes US exports much cheaper on the world market.

[Steve Hazzard]

Originally Posted by Inmexicocity

I’m interested in others opinions about whether the think there is the basis for a class action lawsuit against major US banks and SIVs that created the current financial crises which has resulted in significant loses for Americans living abroad. The charge: Financial Terrorism and the de-stabilization of the US and Global financial markets. The damages: By forcing the Feds repeated cuts in interest rates, US citizens living on fixed incomes and US citizens abroad who are effected by exchange rates have suffered significant loses of income and a reduction in their standard of living.
Any opinions?

I don't believe that there would be any standing for a class-action lawsuit in the matter of expats' financial conditions vis-a-via financial situations in the US. The devaluation of the USDollar is the result of market forces and the Federal budget deficit in the US. As paper money has no silver or gold backing, like before the US went off the gold standard in 1934, paper money, in itself, is worthless; only the faith and credit of the US government gives paper money any monetary standing domestically or internationally.

This devaluation of the USDollar is becoming a significant factor in the pricing of crude oil and petroleum products. The is a significant movement in moving th pricing of crude oil and petroleum products to the Euro or a basket of world currencies including the USDollar and the Euro. I can see this happening within the next 10 years.

Expats are aware, or should have been aware, that living in a foreign country and depending on the USDollar for income, is subject to the political and currency fluctuations of the financial markets. That's why moving "on the cheap" domestically, and particularly internationally, in not a bright idea! With 12 years experience as a long-haul household goods hauler, I've seen a significant majority of "cold moves" and/or "on the cheap" moves end with undesired results!

[synthia]

It is not the governments job to maintain the value of our currency so expats don't have financial problems. There are some good economic reasons for keeping the value of a currency low, since it tends to increase exports. That's why China has been resisting floating its undervalued currency for so long and had to be pressured into the minimal changes it now allows.

It's difficult, too, to determine what part of the dollar's losses are caused by US actions, and what part is caused by China's newly powerful economic position and the strength of other economies, so even if you sued, how much could you sue for?

Countries do not have total control over the value of their currencies unless they choose to peg them. That is a very expensive, as the government frequently has to spend a lot of money to prop up the currency. That's why so many countries have let their currencies float freely in recent years. The Malaysian government used to peg the ringgit within a very tight range, but fairly recently decided they had to let if float.

I agree with Steve, it's a risk you take when you move. Some people make out with currency fluctuations. Expats in Argentina a few years ago suddenly found that they had four times as much money when the Argentinian currency collapsed.

It's hard, though, to imagine how big the impact can be. Inflation is very low in the US, yet at an average of 3%, the dollar will lose half of its purchasing power in (72/3) 24 years. It's worse for people on social security, since a different inflation rate (the core rate) is used to for adjustments. The core rate doesn't include gasoline prices.

[Inmexicocity]

It seems the answers all focus on the bigger perhaps unintended picture. I'm still in the process of putting some meat on to the concept of "Financial Terrorism". But the essence of my question is: Did BofA, Citibank, WaMu, Bear Stearns et.al., engage an activity that de-stsabilized US financial markets? Did that result in actions on the part of the Fed that lowered interest rates which directly effects exchange rates? Did we the expat community suffer damages due to the actions of the banks and SIVs? And of course the answer. This is where I get lost....is there no recourse for expats?

[Bevdeforges]

Originally Posted by Inmexicocity

This is where I get lost....is there no recourse for expats?

I think the short answer here is probably "no." Back before the euro, US expats here in France used to have to ride out the ups and downs of the dollar against the franc. And, when I lived in the UK, nearly 20 years ago, the dollar was approaching $2 to the pound, just like now.

Sure, there are reasons for the currency movements. But you can't always sue someone when "stuff" happens. Sometimes you just have to take your lumps and get on with life.

[Steve Hazzard]

This is where I get lost....is there no recourse for expats?

What entity would the "recourse" be directed at and what would be your expectation of compensation to make you "whole again"? My analogy would be like trying to break the rack on a pool table using a marble for a cue ball! I don't see the basis for your standing in such a class-action suit.