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  • From: Don Bowen <don.bowen AT earthlink.net>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] 4 years later ...
  • Date: Wed, 01 Dec 2004 13:24:13 -0800

At 12/1/2004, you wrote:
I've read the administration wouldn't mind the dollar falling further to help ease trade deficits, but it's a double-edge sword.

It would help our trade deficient with Europe but not China. Chins has pegged its currency to the US dollar so any drop in the dollar also helps them. Another point is that much of our export business has been moved offshore to still cheaper places.

If the dollar falls much further, how long will foreign investors continue to hold dollars that earn less on their investment? I've read we're going to have a problem no matter what, and what remains to be seen is whether it's an abrupt jump over a cliff, or whether it's a gentler and steady tumble down a long hill. Brought to mind a twisted version of Jack and Jill going up the hill carrying the pail of water. Japan and China have much control over our fate.

Saudi Arabia has already announced that they will not change to the Euro or a market basket of currencies but will stay with the dollar. What this tells me is that they are looking to increase revenue in the face of the shrinking dollar but are politically tied to the US. The world is very dependent on oil, to the extent that classical economics is held hostage to oil. As long as oil remains expensive to us but is dropping in real terms to our competitors, we are at a disadvantage.

Am I being too negative?

I do not know. All I do know is that I want confidence to stay up long enough for the house to sell.



Don Bowen
Awl Knotted Up Woodworking
Valley Center, CA http://www.braingarage.com






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