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Strategies & Market Trends : US Economic Trend Analysis
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To: John Vosilla who wrote (45)5/7/2007 9:32:49 PM
From: gpowellRead Replies (1) of 97
 
I'm not worried about the US dollar, its value vis-a-vis other currencies is a residual, meaning better to think about domestic concerns such as employment, productivity, and capital expenditure.

As far as import prices and exchange rates - it's surprising to many - but prices take a long time to adjust to exchange rates. Upwards of 4/5 years for the full effect - meaning by the time they have fully adjusted exchange rates have changed again. This price phenomenon shouldn’t be all that surprising though as most firms choose to price to market. Consequently, don’t look for import prices to suddenly rise just because the dollar has fallen. And when they don’t, don’t get bagged into thinking this indicates manipulation with the usual attendant blow out period.

I should add that the only thing the US is "over consuming" is the world's savings. Domestic savings have mostly going into non-equity "investments" (a lot in real estate obviously) - not consumption goods - indicating individuals are mostly planning for future consumption. The danger here, and it isn’t a very large concern, is that asset markets just aren't very liquid; meaning if everyone heads for the exit at once, consumers may find that they will have to alter their plans. The “deflationist” crowd is counting on that, with an attendant meltdown in credit markets.
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