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
****************************************************** Shaikh's thesis makes sense to me in that real productivity is connected to socially necessary labour time (aka, snlt) in the production of commodities.
I wonder how much the increase in the value of the Euro vis a vis the US dollar is tied to relative snlt in European commodities, compared with say, the more conservative lending policies of the many of the major European banks?
You're right, if the books on wealth production are being cooked, trouble will follow. Many sane people would, of course, question the real usefulness of much of the wealth actually being produced.
In any event, if the economy (aka capitalism) manages to stage a recovery via the cheaper commodities it can peddle, the chance is the will Shrub grow. It looks like part of their plan to me.
Best, Mike B)
===== ***************************************************************** "A man's maturity consists in finding once again the seriousness he had as a child at play."
Heraclitus, Greek philosopher (500 B.C.)
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