The Dollar and Exports

By October 3, 2007Economy, Taking It for Granted, Trade

From The Financial Times, “Fed sanguine if dollar descent stays orderly.”

The weak dollar – which last week sank to its lowest level since the era of floating exchange rates began a quarter of a century ago – carries with it both benefits and potential risks for the US economy.

Most commentators emphasise the benign consequences for the US, while noting that it could have adverse effects on its trading partners, in particular in Europe.

This is essentially a current account perspective. A falling dollar – plus slower growth in the US than the rest of the world – boosts net exports and should help offset the effects of the US housing recession on overall growth.

David Heuther [sic], chief economist at the National Association of Manufacturers, says: “Exports remain strong and are holding the economy above water.”

This may overstate the case but virtually all economists are expecting a positive contribution to growth from exports. Equity investors also appear bullish, buying into large cap export stocks.

It’s Huether, u before e. And to respond to the Financial Times’ response, where would the economy be without exports?

More evidence on behalf of the Peru, Colombia, Panama and South Korea free trade agreements, in any case…

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