i'm bullish on the future of aluminum and most of the other metals. i'm just not so sanguine that i don't believe it couldn't fall further before mounting a rally.
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JULY 23, 2001
Dollars to Doughnuts, U.S. Currency Policy Will Hold
interactive.wsj.com
By Jennifer Ablan
"The dollar is strong because that's how the market decides it," Bush told Italy's La Stampa newspaper on Wednesday. "A strong dollar has benefits as well as problems: It hurts our exports but attracts capital. The economy needs investment, which is drawn to the U.S. thanks to the dollar. Markets cause the dollar to fluctuate and we must face the consequences."
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The National Association of Manufacturers and the American Farm Bureau Federation sent a letter to Bush on Wednesday, pleading that the dollar is "having a major negative impact on agricultural and manufacturing exports, production and employment" and to "stop this economic hemorrhaging."
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"To avoid a recession, the U.S. needs more spending by households and businesses. That spending is being financed by foreign investors," adds Tom Gallagher, political economist at the ISI Group. He notes the U.S. absorbs 64% of global capital flows to fund its external deficit, up sharply from under 20% in 1992.
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Marc Chandler, chief currency strategist at HSBC, points out that a weaker dollar would "potentially trigger a collapse and limit the Fed's ability to cut interest rates." A weak dollar, he says, especially if it's coupled with less demand for foreign bonds and stocks, would mean higher U.S. interest rates, lower stock markets, slower growth and less demand for goods from abroad, undermining economic recovery.
Wayne Angell, chief economist at Bear Stearns, adds that the Bush Administration "should not succumb to the temptation to let the dollar go lower." As for the U.S. manufacturing sector, Angell avers, the group "is dependent on monetary policy, which, in my view, has been too tight." |
