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October 19, 2009
Dollar Down Exports Up
Here is a headline I never expected to see in my lifetime. U.S. Steel Exports Surpass Imports. So far it is only for the month of August. Still. A steel industry trade group said the United States exported more steel than it imported in August for the first time in more than 50 years. But another group said that assessment was based on a selective reading of government data.OK. So it looks like they are cooking the books in search of a headline. They got one from me. So I guess it is working - for them. Some people think corporate America worries about the shrinkage of the US dollar. Chief executives from the biggest U.S. corporations worry that the slumping dollar could sap U.S. credibility around the globe, spur inflation and ultimately undermine the economy.And all that is true. But let us take a look at the numbers. US imports have exceeded exports for a very long time. This is balanced by loans and other investments, thus more or less balancing the books. It does argue that at least on a materials basis the dollar is overpriced. But I got to tell you that a 14 month low is not exactly panic city. My worry is not about the amount but the continued direction. One thing that does happen in a market system when costs are rising is that the people in the markets work very hard to reduce costs. No one wants to be the first to raise prices. It is bad for business. It is the usual: the greed of the honest businessman leads to a better deal for the consumer. Of course not all businessmen are honest. Raj Rajaratnam, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.A guy like that has to know who his friends are. Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world's wealthiest billionaires, with a $1.3 billion net worth.And it seems that he was interested in some rather unsavory characters. ...even before his arrest, Rajaratnam was under scrutiny for helping bankroll Sri Lankan militants notorious for suicide bombings.Now why would a guy friendly to suicide bombers also be friendly to Democrats? Let me think. It will come to me soon I'm sure. Did some one say economics? All I can say is that the Democrats are moving in the wrong direction. A slide in the dollar may be a good thing for some and a bad thing for others (gasoline prices say - and didn't Sarah Palin have a word or two recently about developing more domestic supplies? Yes she did.) But a cratering of the dollar would be a disaster. Time for a new direction? You betcha! Cross Posted at Power and Control posted by Simon on 10.19.09 at 08:24 AM
Comments
These idiots in the white house and congress can't even get a devaluation to promote exports right. That is if this is their intention. If this was the intended idea, then the logical thing would be to remove as many impediments as possible to business in the form of tax, regulatory and statutory relief for business in general exporters in particular. No sign of that happening. Another would be to really open up energy exploration at home and there is no sign of that either. The devaluation is the result of stupid policies and progressive agendas. The recovery starts when the marxists in congress and the white house lose their jobs. cubanbob · October 19, 2009 08:50 AM The weakening dollar is a huge boon to domestic producers (esp. farmers, who have recently had some of their best years ever). The only question is how much inflation it will cause consumers... but the current environment seems to be deflationary. Here's a point I've been making for a while: the U.S. dollar has been kept artifically strong by currency intervention done by our trading partners to prop up their less efficient companies. We accepted this because it was good for our consumers and drove capital investment, and it didn't hurt our GDP much because our system is the most Darwinian in the world. Now a level currency playing field will mean we wipe the floor with our competitors in many industries. TallDave · October 19, 2009 10:42 AM Since World War II, the world has used the Dollar as the world's financial reserve currency. This implies that foreign countries have been buying the dollar not because there is a demand for U.S. goods and services, but because they're hoarding dollars in order to stabilize their own currencies. No-one has really thought about the consequence of this: we just accept it as "normal" that U.S. dollars would be in greater demand than the balance of imports and exports alone would suggest. No-one thinks, for example, that perhaps one of the reasons why manufacturing was destroyed in the 1970's and 1980's was because an expensive dollar combined with a Europe and Japan which finally started hitting all cylinders after two decades of reconstruction caused manufacturing to become relatively overpriced. Instead, we look to self-recrimination: our workers are too greedy, their retirement plans are too gold-plated. The dollar's decline has pre-dated this current Administration. It's decline predates the previous Administration, and it even predates the creation of the Euro in 1999. The creation of the Euro has actually helped to accelerate the decline of the dollar as a second potentially viable world currency has emerged that can be used as a reserve currency in a "basket of currencies." Even if the Dollar remains relatively strong, a diversified portfolio suggests you need to mix it up rather than put all your eggs in one basket. And this decline will have positive effects as well as negative effects: manufacturing in the United States becomes relatively cheaper. Jobs that were once exported from the United States will flow back to this country. In a relatively free economy foreign goods which become too expensive to import will be replaced eventually by locally manufactured goods.
But the decline has been a long time in coming--and is a consequence of a world monetary system reshaping itself away from a world that became dependent upon the United States after World War II. William Woody · October 19, 2009 12:34 PM tract:denominators clash,bluff reindeer.ruthless . Anonymous · October 26, 2009 01:50 PM Post a comment
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These idiots in the white house and congress can't even get a devaluation to promote exports right. That is if this is their intention. If this was the intended idea, then the logical thing would be to remove as many impediments as possible to business in the form of tax, regulatory and statutory relief for business in general exporters in particular. No sign of that happening. Another would be to really open up energy exploration at home and there is no sign of that either.
The devaluation is the result of stupid policies and progressive agendas. The recovery starts when the marxists in congress and the white house lose their jobs.