>Question for LOBsters........Is the decline in the
>"value" of the dollar going to bolster the chances of
>the Shrubsters in next year's election?
Depends. A lower dollar would be good for U.S. manufacturing, but a lot of the trade imbalance is with China, whose currency is so far tied to the dollar. And a lot also depends on how far and hard the dollar falls (if, of course, it falls). If it's steep and/or sharp enough, that could provoke a financial crisis that might send the U.S. back into recession.
Anwar Shaikh argues very convincingly that long-term exchange rate movements are determined by differentials in productivity growth rates. If U.S. productivity is as miraculous as advertised, this chart should be turned upside down: <http://finance.yahoo.com/q/bc?s=^XEU&t=2y&l=on&z=m&q=l&c=>. In a piece the other day, Goldman Sachs pointed to this - and to the size of the trade deficit - as reasons that official productivity growth may be overstated.
Doug