The continued fall in the US dollar will have the following effects:
1. an increase in the demand for US exports and a fall in US imports, encouraging the current boom(let?) to persist.
2. a fall in the demand for rest-of-the-world exports and a rise in ROW imports, except for in China and other countries which are keeping their currencies from rising relative to the US$. This encourages recession or slower demand growth in these countries.
to a large extent, on a global level, #1 and #2 cancel out, since it's simply a matter of switching demand from the ROW to the US.
3. a rising price of US products, due to import prices rising in dollar terms (including those of most raw materials) and US exports facing less competition. Just as the "high dollar" encouraged low US inflation, its demise encourages a surge in inflation. In this case, it is likely that the Fed will drop its low-interest policy, though possibly this will happen only after the 2004 election. This encourages a second dip of the Dubya recession, especially given excessive consumer debt and the housing bubble.
4. this corresponds to lower prices in the ROW, which might encourage the threat of world deflation to rear its ugly head again.
------------------------ Jim Devine jdevine at lmu.edu & http://bellarmine.lmu.edu/~jdevine
> -----Original Message-----
> From: uvj at vsnl.com [mailto:uvj at vsnl.com]
> Sent: Tuesday, December 23, 2003 8:15 AM
> To: lbo-talk at lbo-talk.org
> Subject: Re: [lbo-talk] Recent Growth & Bush's Economic Policy
>
>
> Doug Henwood wrote:
>
> > With deficits as large as these it's no surprise the economy's been
> > stimulated, but it's taken quite a long time and the growth
> rates are
> > hardly overwhelming, testimony to the inefficiency of the stimulus,
> > because of its upper-bracket skew. Tax cuts for millionaires and
> > Halliburton contracts (the biggest component of military spending in
> > the second quarter, which saw the biggest spurt in Pentagon spending
> > since the beginning of the Korean War, was "support services," i.e.,
> > transport, setting up bases, fixing turkey dinners) just don't pack
> > the punch that higher unemployment benefits or infrastructure
> > spending would.
>
> It would appear then that growth or slowdown in the US
> economy is largely driven by factors internal to the US
> economy. That far from the US imperialism requiring the rest
> of the world for extended reproduction of capital in the US
> (as assumed by the traditional theory of imperialism), it is
> the capitalism in rest of world (or at least very large part
> of it) that requires the capital accumulation in the US for
> its own growth. Would that be accurate description of the
> relationship between the two? And if this is case, the US
> economy far from being a obstacle to the growth elsewhere,
> may in fact be a condition for it. Or am I missing something?
>
> Ulhas
>
>
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>