[lbo-talk] The Declining Dollar?

Wojtek Sokolowski sokol at jhu.edu
Mon Nov 8 13:25:33 PST 2004


Doug:
> Well not necessarily. A high euro could crush euroland exports,
> leading to stagnation or worse. A low dollar could impel the U.S. to
> get its foreign accounts back into balance, by making imports
> expensive and exports cheap. Who knows how it'll play out?

Two thoughts. First increased export will affect states differently, but it will be mostly "blue" states that benefit from it, with the exception of TX. Seven "blue" states PA, NJ, NY, MA, IL, MI and CA account for nearly 34% of all US exports - TX is 13.7%.

See: http://www.census.gov/foreign-trade/www/index.html

The "red" states will not benefit as much because their share of exports is minuscule. So if Bush's election caused the weak $, it is mostly the blue states that will get a windfall from it, while the red states will get mainly moral satisfaction. They will be also the ones screwed up the most by more expensive exports. I can afford paying more for chardonnay and camembert, and if it starts eating into my budget, I will simply drink less wine and eat less cheese. However, the red state trailer trash shopping for China-made bargains at Wal-mart will have a harder landing.

Second, the trade imbalance is in the vicinity of 2:1 so it will take a lot of exports to compensate for more expensive imports. Moreover, how likely is it that these benefits from increased export will compensate for losses of foreign investment?

Wojtek



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