Lower Interest Rates, Weak US Dollar Favour American Exporters
The stock market rose yesterday. The dollar fell. As incredible as it would have sounded two years ago, oil now seems ready to go to US$100...and gold seems ready to cross the US$800 mark.
Ai yi yi...the dollar is below US$1.44 to the euro. But who cares? The experts tell us that the lower dollar is making it easier for US exporters. American companies will prosper, they say.
The Fed is expected to favour US exporters when it meets today and tomorrow. Many analysts are betting that rates will be cut another quarter of a point. Bernanke is much more worried about troubles in the housing market, they say, than about the falling dollar. They’re surely right. No one seems particularly concerned about a falling buck.
But look at what is happening. The dollar is falling. It may fall gently. It may rally. Or it may fall hard. But one thing is almost certain; it will be worth less in the future than it is today.
A dollar is a pound... is a euro...is a peso. Our taxi ride from the train station in Köln to our hotel in Bad Godesburg was 70 euros. In Buenos Aires, it would have been 70 pesos. In the United States, 70 dollars would be about right.
In Paris yesterday we had lunch with a colleague. It would have cost us about 40 pounds in London...40 dollars in the United States...or 40 pesos in Argentina. We paid 40 euros. But the real cost varies with the currencies. Americans are aghast at how much it costs to live in Europe...and pleasantly surprised when they get their luncheon cheque in Buenos Aires. Argentina is a cheap country.
“Well, it may be cheap for you foreigners,” Gabriela had told us, “but it’s not cheap for us.” Salaries are lower too. We’re outsourcing some of our publishing work to Buenos Aires because we can hire people for less money down there. And so as to economise your time, dear reader, we will jump directly to our forecast: soon, foreigners will outsource work TO the United States!
Aha...we’re ahead of the crowd on this one, aren’t we?
Bill Bonner
The Daily Reckoning Australia
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by plowman on 31 October 2007:
whats Australia buying from the US....TV, Entertainment, movies?
easy livin down under?
Comment by Karl on 1 November 2007:
It looks to me that the US wants to turn into a developing country again. It is devaluing their dollar which has the effect that they become like Mexico, India or Singapore.
But then again from a growth perspective, who wouldn't want their country to be a developing country.. well.. apart from the flies and poor living conditions, there is a massive sustained boost to the economy over time, productivity goes up and it enters another "golden age" so to speak.
Countries like Singapore have very good, modern and cheap infrastructure, while the US is crumbling apart.
So perhaps foreign companies outsourcing their labour to the US is a good thing - if it becomes cheaper to produce an item in the US than, say, China?
Maybe there is method to this apparent madness in the US?
Comment by Derek on 19 December 2007:
The method to the madness is for the government to have the US citizens submit to socialism/ communism. New world Order.