brief conversation with a VP in my firm, with Econ background
really smart guy, very personable, great guy
he came from Canada, now a citizen of USA
I stuck my head in his office, and did the "I told you so"
we had talked in late March about the dollar vulnerability
he acknowledged the call, saying "troubled times"
we talked about a number of things
like the distortions of CPI, productivity, unemployment
he said most economics work is bought and tainted
then I wanted to test a theory
I asked him if he thought all this dollar stuff would change much
he said "a lower dollar will help our economy"
I asked "you mean with our exporters?"
he said "yes, since they have been hurting for years"
I said "that might be the only positive out there"
he said "I dont know about that, many positives"
I asked "like what?"
he said "it fixes the distortions of a strong dollar"
I said "yes, but what about the storm and imports?"
he didnt understand my prompt
I said "when standing on a ladder at 25 ft painting, you dont get as much work done, compared to working without a ladder at ground level... you can step down slowly, or you can get pushed and fall... either way you end up on the ground, but a push results in broken bones"
he said "I get it, the JOURNEY down is rough"
I said "yes"
I gave a different analogy
"it is now 90 degrees and high pressure, when we want that 75 degree moderate pressure zone... but in order to get it, we must endure high winds, rainstorms, and downed power lines"
he nodded again "bad journey to get it"
then I said "I find it interesting that the economics pundits out there are totally missing the higher prices that will occur all across our land from imports"
he said "imports will be cheaper now though"
I corrected him tactfully, saying "other way around"
he understood after being reminded that during the entire 1990 decade, a rising dollar kept inflation at bay by reducing the cost of foreign goods
he said "oops, this is murky stuff, hard to figure out"
I left him with a comment that the first stage has foreigners selling US stocks
the second stage has foreigners selling US TrezBonds
which results in higher interest costs, regardless of whether the economy recovers and strengthens
he said "good point, gonna be rough I guess"
if a trained B.S. in Economics doesnt understand the backdoor inflation concept from imports, then we are seeing a BIG BIG BIG TRAP being laid for the unsuspecting
/ Jim |
