Quote:
Originally Posted by editec  Of course when more Americans are gainfully employed the dollar gets stronger.
Free trade?
Isn't free,
duh!
I wonder if someone would be kind enough to point that out to the econ boys at University of Chicago?
They seem to have missed that fact because they are busy congratualting themselves about how swell free trade is working out for about 5% of us. |
Actually the employment rate plays only a small part in the value of the dollar.
The dollar has been losing value, weakening its status as the world’s major currency and setting off jitters in the international financial system. The falling dollar is not just a technical matter for financial market experts: trillions of dollars in value have shifted in the course of about eighteen months, reducing the reserves of the world’s central banks and knocking down the value of all US assets on the international marketplace. Analysts worry that a serious dollar selloff could create panic in the markets and lead to a global financial meltdown. Even if the worst-case is averted, a declining dollar may weaken the power of the United States, reorganize global markets and shift strategic power in the international system
After rising sharply against the Euro during 1999 and most of 2000, the dollar started to tumble in late 2001 and it continued its decline through mid-2003, losing more than a quarter of its value against the euro (see "The Dollar's Ebb and Flow"). After a brief rally in the summer, the dollar started another steep retreat that is likely to continue.
Many financial analysts expected the dollar to weaken because of the growing US trade deficit on its “current account,” which includes goods and services, income payments such as interest and dividends and unilateral transfers such as foreign aid and worker remittances (see chart). But few thought the dollar would fall so far and so fast.
The biggest single factor in the dollar’s fall has been the soaring deficit in US trade. The United States imports far more than it exports in goods and services. US consumers have a strong appetite for Japanese automobiles, Chinese clothing, German machinery and Finnish mobile phones. Oil imports, by far the largest item, grow steadily. US companies are not able to export products and services of the same value. While Microsoft, Coca Cola, Boeing and Hollywood may wrack up large earnings and gain high visibility for US exports, they simply cannot match the foreign products and services purchased by US companies and consumers. In 2002, imports of goods and services totaled $1,652 billion, while exports amounted to only $1,203 billion. The difference is made up by net foreign lending and investments.
Fall of the Dollar - Social and Economic Policy - Global Policy Forum