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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (10650)	3/22/2004 5:32:03 PM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 110194

Jim, I maintained that a lower dollar would spur exports, not necessarily improve the trade deficit. Companies like 3M and Caterpillar are now attributing something like half their latest earnings growth to foreign sales, especially sales in euros, which translate to even higher sales in dollars. That was what I was arguing, and it has happened with a vengeance. Since the U.S. imports about one-third of its oil, and since its oil imports continue to grow quite fast, it is unlikely that a lower valued dollar could raise export sales enough to compensate for the huge dollar cost of imported oil. The OPEC nations know this, and they know especially that the U.S. administration is in no mood to curb gasoline or oil usage. So they have engineered even higher oil prices by restricting production. This raises the price of oil and is the main contributor to our growing trade deficit. Since the OPEC production quotas are set essentially by the Saudis and their Arab allies, who don't particularly like what the U.S. is doing in Iraq and Israel, one should consider the increasing price of oil a "war tax" that largely cancels out any stimulative effects from earlier tax cuts. Note also that the recent decline in exports is caused mainly by lower exports of beef and chicken, owing to fears of mad cow disease and avian type flu. You cannot draw conclusions from looking only at the overall numbers. You have to see what they're composed of. Art