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To: Wyätt Gwyön who wrote (119379)	5/28/2002 12:47:31 PM
From: carranza2	Read Replies (2) \| Respond to of 152472

., we run a trade deficit This is something that has always been puzzling to me as we've run trade deficits for a long time, yet the dollar has been strong for a similarly long time. One would think that we would have seen a weak dollar long before, but we haven't. Why? I suspect the answer lies in the manner in which the TD is calculated. A very significant part of our trade is conducted by international subsidiaries of our companies who do business overseas. Are the subsidiaries' sales trade counted as US-based or are they considered the sales of a foreign entity? Example: A Nike subsidiary manufactures tennis shoes in China, and sells them in France. Such a transaction might not show up in US trade figures at all because the tennis shoes are not made in the US. The profits (or most of them), however, are repatriated to the US despite the fact that no one in the US has "produced" a single thing. Good for the US economy and the dollar? Sure. But how is such a transaction quantified in the trade deficit figures? I don't know yet. However, I suspect that the issue is a lot more complex than a simple comparison of what we produce versus what we consume. Similarly, what about corporations like Mazda? It is owned to a significant extent by Ford. Should all sales of Mazda to the US be counted in the deficit figures? Shouldn't there be some mechanism to account for Ford's ownership interest? All of this leads me to suspect (not conclude) that trade deficit figures are not all they're cracked up to mean. I think the evidence thus far probably supports the notion that they play a lesser role in detemining the strength or weakness of the US currency than we suspect. Take that statement with a huge grain of salt as I'm no economist. As far as foreign investment is concerned, I'll grant you that it is not as safe as it has been in the past. But the same problems that plague the US exist overseas. Are you interested in investing in the Japanese yen while Japanese banks teeter-totter on the edge of bankruptcy? Not me. I suppose the Euro is the closest thing to a choice, but it has its own problems. The alternatives, even when one takes the vagaries of the US equities market into account, are thin gruel. Don't know if foreigners will be able to demand higher interest rates here, though the short term wisdom says that rates are likely to rise. This may attract foreign investment, and strengthen the dollar or keep it at its present level. I've never been comfortable with the low prices which have persisted in the commodities markets for so long. This I don't even pretend to understand.