Posted on 11/16/2010 9:33:18 AM PST by Hoodat
A weakening currency traditionally helps a country raise its exports and create more jobs for its workers. But the declining value of the dollar may not help the United States increase economic growth as much as it might have in the past.
Though a weakened dollar would help exports to some degree, business executives and economists said that because of the ways American multinational companies operated, it was uncertain whether it would cause much of an increase in hiring.
The issue is crucial for President Obama, who made economic growth and job creation the main themes of his recent 10-day trip to Asia. He has also held out the prospect that a surge in exports would reduce the nation’s stubborn unemployment rate, currently 9.6 percent.
(Excerpt) Read more at nytimes.com ...
And Declare December 7 "Take Your Money Away Day" !
Please watch in full screen mode for translation -- LOL, LOL !
Dang you're good!
My estimate of Freerepublic's average IQ just tripled.
Thx for your pings and links.
That makes sense . . . but . . .
The devalued dollar will cut the cost of US labor, US goods that are used to create the goods. Other countries input goods will go up in price . . . but . . . the net effect will be a more competitive product because of reduced US labor and US input prices relative to the foreign currency.
Make sense?
First lets look at the facts. Exchange rates and trade balances don't affect each other. Any logical system that proves reality wrong is useless. There are plenty of reasons why reality is what it is, but anyone can hear the reasons and proceed to come up with additional reasons why reality is wrong. That's where we really get lost.
You posted your link before. You have a statistical measure that you view as the “world around us” but no reasoning behind it, no understanding of “why.” I’m asking for the why, in part because I don’t know the timing of effects in trade. Existing contracts will delay a lot of the effect. Retooling, creating new businesses and product lines etc. take time, so I have to wonder about the timing of the measurement. Etc.
Basically, statistics are tough to deal with and can mislead, so I need the “why” and the “when” as well as one measurement of “what” to understand this.
If you suspect that there may be timing distortions from contracts, retooling, "creating new businesses and product lines etc.", then that's good. By all means, share the numbers with everyone. If no records other factors can be found to explain why there's no correlation between exchange rates and trade balances, then two options exist. One is to accept existing records and the other is to reject what can be seen and hold a belief on faith.
It's not a good idea to try and explain the 'why' before everyone's seeing the same 'what'. It's too easy for true believers to make up rationalizations 'proving' something taken on faith.
On a local level, when the Canadian dollar is at par or above the greenback.
there is a big influx of Canadian shoppers into Buffalo snapping up deals.
Parking lots are said to be full of Ontario license plates.
I’m not after you or trying to prove anything expat. You don’t have any additional info which is fine. I thought you might. I spent a year looking at international trade in the 80’s for an econ paper and the economics was limited, politicized, repetitive, and poorly developed. My hypothesis is that it is impossible that exchange rate doesn’t effect the balance of trade in goods (manufactured, commodity or agricultural) since cost of goods must effect purchase of goods. My second hypothesis is that the lack of correlation that you showed looking at it year to year is that it’s a long term phenomenon not a short term one, so the unit of measurement of one year is the problem. China has artificially pegged their currency to the dollar at a low rate for a long long time and they’ve slowly built themselves into a manufacturing powerhouse; it didn’t happen in a year.
Which is why the US trade deficit always falls when the dollar weakens....except for all those times the US trade deficit rises when the dollar weakens.
Make sense?
No, it doesn’t make sense. Look at my last post.
It's your claim. Why doesn't it make sense?
Because it violates the law of supply and demand.
the law of supply and demand.
Probably what's being missed here is the Balance of Payments we touched on earlier.
If Buffalo vendors add up big dollar sales receipts selling to Canadian shoppers, then the banks that bought all those $Canadian had to sell them to Americans who bought stuff from Canada.
More stuff bought in the US = more stuff bought in Canada. It always equals out.
If Americans swap US$ for $Canadian and buy Canadian summer homes then Canada gets a Capital Account surplus and a Current Account deficit. Canada gets a trade deficit and Americans get a trade surplus. If those Canadian shoppers spending hundreds of dollars on Buffalo retail goods also bought tens of thousands of dollars of T-bills, then America ends up with an increasing trade deficit.
Anyone follow this?
I don't see any violations here, do you?
Here either.
Please let me know where (on both charts) you see the violation and then we can discuss your claims further. Thanks.
They were arrogant and lazy because they refused to face the fact that they simply did not already understand all there was to know and they needed to observe first and explain second.
--and at the same time the cost of Capital Account purchases is affected the same amount. If Capital Account purchases exceed those for goods and services the trade deficit will increase.
With a reserve currrency countries hold the currency and the bonds rather than purchase goods, or are able to purchase goods internationally with the dollar, so it’s not that straight line A = B. Also, manufactured, commodity and agricultural goods are what most are concerned with since they provide jobs and military power, not overall balance of trade where the flows out equal flows in . . . but out is us buying their “stuff” and the flow in is them buying our bonds.
Welcome to the real world. Glad you realized your error.
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