"We would have some very interesting adjustment questions if we were to have big dollar devaluation. The fact is, we don't have adequate manufacturing capacity to really eliminate or even fundamentally reduce by more than 50 percent our large current account deficit. The current account deficit is equal to 45 percent of the value of U.S. manufacturing output. We have had a long parade of declining spending on American-manufactured capital goods. In 1998 manufacturing investment in this country was $150 billion. In 2003 it had fallen to $115 billion. In 2002 and 2003 American firms spent more on foreign-manufactured capital stock than domestic-manufactured capital stock. Foreign investment in 2003 was $130 billion compared to $115 billion here at home. So we don't have a huge amount of excess capacity and, if we were to cut the current account deficit by only 25 percent, our capacity utilization rate would increase from 79 to 86 percent. If we cut the deficit in half, the utilization rate would go to 93 percent." David Hale:
<http://www.levy.org/default.asp?view=publications_view&pubID=10654b0b370>