Weak Dollar Helps, but Not Cure for American Industry
July 22nd, 2008
The dollar has significantly weakened against currencies that trade freely in the past year. The biggest factors were significant reductions in U.S. interest rates compared to foreign countries and the economic situation here compared to other countries.
When Bernanke and the Fed realized the real estate bubble was bursting and cut rates to try to stem the tide, other countries, particularly the European Community, left their rates high. As our rates dropped and other countries rates stayed high, it makes the U.S. dollar less appealing, as people/companies/countries can earn more interest in British Pounds, European Euro’s etc.
We as a people should also keep in mind that lower interest rates are in effect a tax on anyone with more assets than debt. For example, a retiree with $100,000 saved was earning $5000 per year on those savings at 5%, but is only earning $3000 per year at 3% — a painful sudden cut for many. The relative silence on this issue from groups like the AARP, etc. surprises and disappoints me.
The weak dollar has spawned some good news, like a factory featured in The Wall Street Journal in Wisconsin re-opened recently. I am never going to complain when we get ANY good news, but if a 10% shift in the dollar can spark such and opening, what will happen with the dollar eventually shifts back the other way?
Also, several of our biggest trading partners, particularly China, do not let their currency trade freely against the dollar. In effect, the weaker dollar against the Euro has also weakened China’s currency against the Euro too, as their currency is tied to ours. This is a huge trade advantage the Chinese have that our government does nothing to try to make the playing field equal.
Thus, the gains in manufacturing here from the weak currency will only be temporary unless we make further real changes.
Free trade needs to be modified to take into account artificial advantages of other countries – like a fixed currency or their lack of environmental pollution controls.
In my many years living abroad, I never saw “free” trade going both ways. It is always wide open shipments to the USA, while many barriers shield our so called partners.
What can we do? Here is a start:
1) Encourage investment in manufacturing, research, and renewable energy in the USA through very low taxes.
2) Force the government to deal with these trade issues.
3) Hold retailers accountable for dangerous products they import.
4) For goodness sake, we as a people need to care about where the stuff we buy comes from. It is either made by our neighbor or in China…
Please join me in making America strong again.
Todd Lipscomb
Founder
MadeinUSAForever.com
Hundreds of American made products available at www.MadeinUSAForever.com. For example, tools at http://madeinusaforever.com/totforgu.html.
Tuesday, July 22nd, 2008 at 4:09 pmand is filed under Uncategorized.
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