SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: ild who wrote (59837)4/28/2006 11:26:05 PM
From: CalculatedRisk  Read Replies (4) of 110194
 
In general I agree with Feldstein, but ...

1) Feldstein is wrong about the trade deficit with China. Feldstein writes: "[China] is responsible for only a fraction of our trade deficit". While technically true (99/100 would be a fraction! ROFLOL), Feldstein is clearly implying that China accounts for a small fraction of the trade deficit. In 2005, China accounted for about 26% of the trade deficit - that is not small.

This is important because a weaker dollar doesn't help with the trade deficit with China - or any other country that fixes their currency to the dollar. And a weaker dollar really only helps mostly with exports to low labor cost countries, not with imports (Feldstein notes this).

2) Oil is becoming a huge portion of the deficit. Feldstein seems to forget that dropping oil prices really helped with the trade deficit in the late '80s (he mentions the impact on inflation, but not on the trade deficit). The average import price for crude in '85 was $26.20; oil dropped to $13.90 in '86, $16.80 in '87, $13.69 in '88.

How is the price of oil going to fall without an increase in supply or less demand? And if the answer is less demand that implies an economic slowdown somewhere in the World (probably in the US).

3) Several economists have suggested another Plaza Accord (September 22, 1985). Who in the current administration understands enough about economics to implement a Plaza Accord? I can't think of anyone.

And will the price of oil drop with a weaker dollar this time?

I think his suggestions are reasonable, but what group does the US work with? Feldstein notes: "G-5 finance ministers may not be the appropriate group now" and "It might be best to start with a meeting with major Asian trade surplus countries" but that takes a) putting a group together (hard - in '85 the G-5 already existed), and 2) diplomacy. The US does not engage in diplomacy and will not for another 999 days (not that anyone is counting).
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News