Possible BOJ action short-lived

[kalian]

http://cbs.marketwatch.com/news/story.asp?guid=%7B9FFE61CD%2D6A4E%2D4728%2D9A57%2D45D150E1F7B2%7D&siteid=mktw

LONDON (CBS.MW) - The dollar surge's on the yen overnight on suspected intervention by the Bank of Japan proved short-lived on Friday.

It doesn't matter what they try...the dollar will continue to slide.

[NewGuy]

1. The dollar's slide is a mixed issue for the economy

Generally, job creation and the trade deficit are improved by the dollar's slide since more of our goods can be purchased overseas for less money. This means that in the short term, the economy improves. It is only in the longer term that a slide of the dollar can cause us economic problems.

[kalian]

2. Too funny....

and just WHAT products of ours...given that our manufacturing base
is nearly wiped out...is going to benefit from this?
Remember: 86% of our economy is "service based"...and that's quickly
disappearing as its being outsourced.

Sorry...it doesn't work this way anymore...

[NewGuy]

3. US Trade

From http://www.census.gov/indicator/www/ustrade.


Exports increased to $88.0 billion in October from $85.7 billion in September. Goods were $61.4 billion in October, up from $59.7 billion in September, and services were $26.6 billion in October, up from $26.0 billion in September.
o Imports increased to $129.7 billion in October from $127.1 billion in September. Goods were $108.8 billion in October, up from $106.3 billion in September, and services were $20.9 billion in October, up from $20.8 billion in September.
o For goods, the deficit was $47.4 billion in October, up from $46.6 billion in September. For services, the surplus was $5.7 billion in October, up from $5.2 billion in September.


The assertion that we do not export anymore is ridiculous. The deficit is decreasing as exports increase faster than imports. Please argue with the occasional fact!

[punpirate]

7. Now... look not at simple trade figures...

... but also at the current deficit accounts (which is what really counts).

Even looking at these figures, the rate of monthly deficit from September to October continued to increase. Regardless of how an increase in exports is spun, the monthly trade deficit is increasing.

There's also a need to look at these figures in historical context--we were once a net exporter, largely on the basis of manufacturing strength. We are now a net importer, directly due to manufacturing weakness. I don't think the poster was saying that we have no exports, but, rather, that we've lost our export edge because of manufacturing weakness. Probably the proof in that pudding is in the figures you cite. Exports in services, while in surplus, have not nearly made up for the deficits in manufactured goods.

One also needs to understand what the implication of what continuing, increasing trade deficits mean for the value of the dollar. Once those dollars leave the country, foreign investors have two choices--sell those dollars for other currencies, including their own, or reinvest that money in the United States. If the dollar weakens sufficiently due to other forces, that reinvestment becomes non-profitable and the investment money is withdrawn. Either choice is not good for the continued health of the dollar.

Cheers.

[54anickel]

6. Yep, check out this article

http://www.upi.com/view.cfm?StoryID=20040102-032245-7065r

[NewGuy]

8. Good article

It shows that we can more or less automatically finance about $100 Billion in deficit. At our current monthly rate we will have no more than $25 - %30 billion this year. This means probably no major slide for the dollar as it will remain an attractive choice for foreign banks.

[54anickel]

10. How did you come up with that from this article?

Did you read beyond the 4th paragraph?

"This means probably no major slide for the dollar as it will remain an attractive choice for foreign banks."

Ah, ya right.

http://www.smartmoney.com/bn/ON/index.cfm?story=ON-20040109-000404-0950

Please read the articles posted in their entirety before commenting on them, or at least quote the passages that you base your assumptions on.

Thanks

[NewGuy]

11. Sorry, didn't realize I was not clear

Here is the direct quote "In the United States, there is a certain amount of structural balance of payments deficit, probably around $100 billion per annum, that finances itself automatically." If you look at the balance of payments deficit in the last 6 months, as opposed to 2002, which the article gives, you will see we are now at less than the $100 Billion annual figure if the situation from the last few months continues.

The article actually states that this is one method of stabilizing the dollar against other currencies. The other thing it mentions is that there is frequently an effort by foreign trade partners to shore up abuyers currency since the alternative is for their currency to begin to inflate. A global trade situation should not be looked at in isolation.

[punpirate]

4. "Generally" is the operative word....

In times past, yes, that would be the case, but with a diminishing manufacturing base, there's less to offer to overseas customers. And export of services has never been the US's strong suit. Ever wonder why US general production cars aren't exported to the rest of the world? Americans don't want to pay for the service network, nor do they want to build for the world market.

Ford and Chrysler both suffered 4% losses in December. Exports didn't make up for that. And, auto manufacturing is still one of our largest industries, overall.

Consumer electronics? Already being made elsewhere.

Communications equipment? Already being made elsewhere.

Clothing? Same-same.

Lumber and building products? Not much growth there, except for niche upscale markets in Japan (steel houses are very popular there).

A recent report on exports showed there was only one area showing notable gains--medical x-ray equipment.

Nope, the situation has changed. There has been a determined effort since 1973 to convert the US to a service-based financials economy--and that means that there's less and less to export. As current contracts for imported goods expire and new ones are written, those new contracts will reflect the change in currency value. The effects of a sagging dollar now will be seen in domestic imports in the next two quarters.

And, since fully two-thirds of GDP spending is for imported goods, watch what that does to the Consumer Price Index.

[NewGuy]

5. Check my post 3.

The export import imbalance is not all that bad and is comming down. This decline in the imbalance is what you expect with a weak dollar. I have heard the argument before that we do not export anymore. I bookmarked the US Census page that has the data and referenced it in post 3.

[punpirate]

9. See my post....

Add it all up, and it's not coming down, it's still increasing; even if exports increased, deficits increased at a slightly greater rate. There was some analysis recently of this business of trying to correct the trade imbalance (see, I think, one of Ozymandius' stock market watch threads in the last two or three days--the article is in one of those), and the upshot of it was that the trade deficit wasn't going down any time soon, given the world market.

I think we'll all eventually discover, too, that the increases in exports, particularly for services, shown recently have been diddled--it's stuff going to Iraq, and it's being paid for by our tax dollars. Sometimes the numbers aren't enough to tell the whole story.

Cheers.