Stop the presses again. You misread what I said. LOL!
I never claimed a "predictive" relationship. I am pointing out the actual HISTORY of the last four years! A history which you guys had denied for years previous. I had always felt that the dollar's previous upward float was inspite of the fundamentals...and eventually the the trade imbalance deepening would eventually override the factors driving it up. I.e., a "tipping point." I have asked you previously if that "tipping point" had been reached. And you blew it off. And now it can be seen that the dollar has been declining as the trade deficit deepened. In tandem. The last 4 years. Totally debunking you and all your fellows you just pinged, as you flared your distress signal...hahahahahahaha!!!!!
And it is your free trade side, not me, that has been calling for the yuan to float. Yes, that will definitely be felt. As China's dollar-peg has been the U.S.'s CPI-moderating lifeline.
As for your quibble, Was the 2000-2003 deficit less than the 1973 deficit? take it up with the U.S. Commerce Dept.
As your chart shows, the dollar goes steadily up from 1997 until 2002. If your correlation was there, the deficit would have been steadily decreasing. In tandem.
In tandem. The last 4 years. Totally debunking you and all your fellows you just pinged, as you flared your distress signal...hahahahahahaha!!!!!
What's the saying? Correlation is not causation. How about lack of correlation is really not causation?
As the author of the article stated "The larger lesson is that the dollar has no obvious relationship with the trade deficit. The exchange rate rose and fell from 1990 to 2005 on a trade-weighted basis, while the trade balance simply fell and fell further."
More from the article:
There is no doomsday today. None of the suggested links between the federal budget, trade deficit, and dollar exchange rate withstand scrutiny. The basic measures of economic vitality are GDP growth and employment, and America’s continuing strength, according to these measures, is due largely to its superior institutions and freer markets.
More:Alan Greenspan famously quipped, “There may be more forecasting of exchange rates, with less success, than almost any other economic variable.”[5] Indeed, economists agree that no variable has proven effective at predicting exchange rates in the real world, despite what various theories suggest. As Federal Reserve economist Greg Hopper wrote in 1997, “What is not so well known outside academia is that exchange rates don’t seem to be affected by economic fundamentals in the short run.”[6]
More:Turning back to America’s trade figures, the real problem is that there is no real problem. The American current account deficit looks like a canyon as it surpasses 6 percent of GDP only until placed in the context of total exports and total imports. (See Chart 2) The real lesson of Chart 2 is that America is going global, not that it is sinking into debt. The trade deficit will likely persist as long as the U.S. technology-driven growth surge outpaces that of other advanced nations.
More:In sum, the public bias against imports is wrongheaded. Trade is the foundation of economics, and an “excess” of imports from Tokyo to a small American town is not fundamentally different from an excess of imports from Detroit. Free people engage in mutually beneficial trade, and it is wrong to “fix” that freedom.
Finally:As for the third link, the notion that the exchange value of the dollar is related to the current account does not seem to exist in empirical data. The logical breakdown between deficits and dollar prices is that trade alone does not drive the global flow of monies. Investment is the other half of the equation, and one should think of it as the dominant half. In a recent speech, Federal Reserve Governor Ben Bernanke made this same case, characterizing the U.S. trade balance as “the tail of the dog.”[9