> Maybe Greenspan's right--though it's disconcerting to recall he spent
> much of the late 1990s arguing that the stock market wasn't in a
> speculative mania. It's possible that the dollar's decline against
> major foreign currencies will boost our exports and discourage
> imports, thereby diminishing the trade deficit. But our trade
> deficits with Europe, Japan and Canada have widened despite large
> shifts in the exchange rates. Though this is counterintuitive, and
> surprising even to orthodox economists, the reason may be that we
> don't make much that anyone wants. And the dollar hasn't declined at
There is one more element that you seemingly did not consider - oil.
Oil prices are denominated in US $ rather than in the actual exporter's own currency, which makes the look as if they were US exports. It is so, because actual exporters need to convert US$ they get for oil to their own currencies, and if the greenback loses its value, they take a hit. So they need to pump more to maintain the same level of revenue - which makes the gas guzzling US happy. It also makes other oil importers happy, because they need to pay less in terms of their own currencies for the greenback priced oil.
So the net effect of the weak greenback is to rob the oil exporters of the windfall they would get from increased demand or peaking out - or so it seems.
Another thought - the weak greenback reduces the chances of opening new drilling in the US, because the potential returns to those investments decrease due to unfavorable exchange rates (i.e. US oil exporters would get fewer greenbacks for oil, but would still have to pay premium price for equipment and labor).
Any comments on these conjectures?
Wojtek