nnuut
Moderator | TSP Legend
Good article!
Ahead of the Curve
The Real Reason to Worry About the Dollar
By Donald Luskin
SHOULD WE BE worried about the U.S. dollar falling to all-time lows vs. foreign currencies? Does it matter to investors?
Yes it matters, and yes you should be worried — but not for the reasons that you may think.
First, let's get all the wrong reasons out of the way.
One reason you hear all the time is that the U.S. is growing slower than the rest of the world, so global investors want to move out of dollars and into the currencies of countries that are growing faster. Fine — China and some other emerging markets are growing faster. But compared to the mature regions that really compete with the U.S. for significant investment flows — Europe and Japan — U.S. growth, based on the latest GDP figures, is higher.
Another reason you hear all the time is the US trade deficit — that fact that we are spending more on imports than we receive for our exports. So how come the dollar's fall has accelerated over the last three months while our trade deficit has actually gotten smaller? I've never understood why a trade deficit is supposed to make the dollar less valuable. It just means some dollars have moved from here in the U.S. to the rest of the world. That's terrific — we get their manufactured goods, they get our little pieces of paper. I'll do that trade all day. And what happens when they redeem those pieces of paper for our goods and services? That's no problem — we'll have an economic boom providing all those goods and services. [much more] http://www.smartmoney.com/aheadofthecurve/index.cfm?story=20071109
Ahead of the Curve
The Real Reason to Worry About the Dollar
By Donald Luskin
SHOULD WE BE worried about the U.S. dollar falling to all-time lows vs. foreign currencies? Does it matter to investors?
Yes it matters, and yes you should be worried — but not for the reasons that you may think.
First, let's get all the wrong reasons out of the way.
One reason you hear all the time is that the U.S. is growing slower than the rest of the world, so global investors want to move out of dollars and into the currencies of countries that are growing faster. Fine — China and some other emerging markets are growing faster. But compared to the mature regions that really compete with the U.S. for significant investment flows — Europe and Japan — U.S. growth, based on the latest GDP figures, is higher.
Another reason you hear all the time is the US trade deficit — that fact that we are spending more on imports than we receive for our exports. So how come the dollar's fall has accelerated over the last three months while our trade deficit has actually gotten smaller? I've never understood why a trade deficit is supposed to make the dollar less valuable. It just means some dollars have moved from here in the U.S. to the rest of the world. That's terrific — we get their manufactured goods, they get our little pieces of paper. I'll do that trade all day. And what happens when they redeem those pieces of paper for our goods and services? That's no problem — we'll have an economic boom providing all those goods and services. [much more] http://www.smartmoney.com/aheadofthecurve/index.cfm?story=20071109
Who said that, I SAID THAT!!
