Re: EELVs: Time to Pull the Plug


Rand Simberg wrote:
> On 21 Dec 2005 09:25:46 -0800, in a place far, far away, "Ed Kyle"
> <edkyle99@xxxxxxxxxxx> made the phosphor on my monitor glow in such a
> way as to indicate that:
>
> >> >> It's an illusory trend--given the state of the EU GDP growth (average
> >> >> growth 2.9%) against the US (average GDP growth 4.8%), within a few
> >> >> years the Euro will have to slide unless massive reforms are undertaken
> >> >> or the US economy has a disaster.
> >> >
> >> >The U.S. ran a record $12.1 billion trade deficit with the
> >> >EU in October ($390 million per day). I don't see how the
> >> >dollar can strengthen when the trade imbalance is widening.
> >>
> >> Can you show any historic relationship between the trade balance with
> >> the EU and the relative strength of the dollar versus the Euro?
> >
> >"http://news.bbc.co.uk/2/hi/business/3999825.stm";
>
> Sorry, I meant any indication of a causal relationship of a trade
> deficit causing the dollar to strenghthen or weaken.
>
> My reading of this is that you (and perhaps the traders mentioned) are
> confusing cause and effect (that is, a changing currency value affects
> trade deficits, but not necessarily the other way around).

If the current account deficit continues to balloon, the dollar
will eventually be devalued to restore equilibrium, either by
the currency markets or by government policy.

"http://www.imf.org/external/pubs/ft/fandd/2000/03/mann.htm";

- Ed Kyle

.

Relevant Pages

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