the Marshall plan stipulated that the money be used largely to buy US goods
Well that's correct, but if we took out that foreign aid gave them in order to purchase our products, they would have been in a trade surplus with our markets.
Without that foreign aid, they wouldn't have been able to afford US products anyway. But those nations still possessing an ability to export (bananas.. etc?) likely enjoyed a trade surplus with the US. The numbers just aren't being reflected because we're not pulling out the foreign aid.
it could cause a drastic decline in the Dollar and thus repatriation of funds to their foreign owners
To where? We're talking 100's of Billions of dollars worth of assets Zeev. What other economy is able to handle such an influx of funds, OR BE ABLE TO JUSTIFY SUCH INFLOWS?
Japan? Nahhh... they pay lousy interest rates, are in a liquidity trap, have a national debt equal to 130% of GDP, declining taxpayer base, and will probably have to resort to devaluation to spur their consumers to loosen up their wallets. And as the US slows to a walk (crawl?), they will slide into full-blown recession.
Europe? Well, they could put it there.
But Europe lacks unity of direction, or cultures, and they still have an unpredictable Russia on their borders. Furthermore, their economic problems also display high unemployment, excessively high taxes/wages, and in the event of a slowing of US economic growth, Europe will ALSO slow and be forced to lower rates to spur growth.
So since economic weakness in the US will spur even weaker economic conditions in other nations, pulling wealth out of one weaker economy and into an even weaker one makes little sense to me.
I just think we're overblowing this "capital flight" scenario... The dollar is retracing back to the monthly trend line. If we break through 105 on the downside, then I might start getting nervous. But anything down to there is a needed consolidation:
futures.tradingcharts.com
And this one from Carl Swenlin over on decisionpoint:
decisionpoint.com
Regards,
Ron |
