Homestead mailing list

[Don Bowen <don.bowen AT earthlink.net>]

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