Rebecca Wilder: Gravity will drag the greenback down

Submitted By Prieur du Plessis

This post is a guest contribution by Rebecca Wilder*, author of the of the News N Economics blog.

The US dollar ($US) is on a roller coaster. And since S&P downgraded Greece to BBB+, the dollar has been on the rise. One can attribute the recent shift in the $US to many things - improving US economic conditions, return to risk, or relative weakness in other G7 countries, whatever. But what is clear, is that the dollar’s gaining some strength, 4.7% since the beginning of December on a trade-weighted basis.

But this is not sustainable. As economic recoveries diverge (i.e., the G7 recovery is expected to be slower than that in key emerging markets), the dollar will likely fall. That’s just gravity, and a necessary condition for sorting out global trade flows.

The chart illustrates the effective value of the $US, which is a composite index of the value of the $US against US trading partners (one source for this data is the Bank of England). As recently as November, the $US slid to its lowest value since March 2008. At that time - and really anytime the $US initiates a descent - Washington gets all worked up; but why? One of the necessary conditions for the re-balancing of trade flows between major trading partners is dollar depreciation.

Just look at the contribution to GDP growth from exports in 2006 and 2007, when not coincidentally the dollar was sliding.

The chart illustrates export growth and the contribution to GDP growth, as released by the Bureau of Economic Analysis. Note: an easy way to get this data is to simply download the excel file in the right sidebar of the release page.

A weak dollar can drive economic growth - especially as trade resumes, and emerging markets see a much quicker rebound than that expected for the G7. According to the Financial Times, its already happening - Asia ex-Japan is moving Japan’s export market:

Japanese exports continued to increase in November because of robust demand from Asia, easing concerns about the strength of the country’s economic recovery.

Real exports were up by 0.6 per cent on October, according to Bank of Japan data. This was the eighth consecutive monthly rise, although the pace of increase was the slowest since exports began to recover in April.

A weaker dollar is a big part of the story for a re-balancing of trade flows. And its not just a US and China problem. According to the IMF, the 2007 US current account deficit was $731 billion, while the value of China’s surplus was just half that, $372 billion. It’s much of Asia and the Middle East that are likewise driving imbalances (of course, the US is not an innocent bystander here). The dollar will see weakness again on a trade-weighted basis; that’s gravity.

* Rebecca Wilder is an economist in the financial industry. She was previously an assistant professor and holds a doctorate in economics.

Source: Rebecca Wilder, News N Economics, December 23, 2009.

Did you like this article?

Login or register to post comments
Email this page
Reset vote
0 points

Winter day, my father,Lace

Submitted by jiangjiang on Mon, 03/15/2010 - 12:43am.

Winter day, my father,Lace Wigs mother and grandmother.Lace Front WigsAlong the way, Full Lace Wigs I saw was stuck in traffic. Custom Lace Wigs Mother said: "there are a lot of automotive exhaust, Beyonce Lace Wigs carbon dioxide inhalation body bad to the body, Indian Lace Wigs still can increase the body's lead, Remy Lace Wigs affect our growth." Human Hair Wigs If more than one out of the car and car exhaust, Human Wigs therefore, Straight Wigs we should protect the environment and driving less as far as possible,Wavy Wigs had better not drive, Curly Wigs to take a bus. Celebrity WigsThrough a park!Spring is near, every girl wants to be the bride in the special season.They are eager to put on beautiful Wedding Dresses or the Bridal gowns. During the day the Wedding gowns is the good choose, and the night,if you want radiant,you need the Evening gowns. About the bridesmaid,they have to wear Bridesmaid Dresses in order to avoid grab limelight with the bride.And the Flower Girl has the Flower Girl Dresses,too. In the wedding,the Cocktail Dresses and the Evening Dress is necessary,too!And remember, the Wedding Dress of the Bridal Dress must be the most glaring! mother of the bride dresses mother of the bride dresses prom dresses prom dresses brides dresses brides dresses plus size wedding dresses plus size wedding dresses bridesmaid dresses bridesmaid dresses Abercrombie And Fitch Abercrombie And Fitch
Wedding Dresses Wedding Dresses

The newest version of cheap

Submitted by myuggbootssale on Tue, 03/09/2010 - 10:41pm.

The newest version of cheap air max are available now.Welcome to see our special air max 90 and Air Max 360.They are your must-have air max.Nike Air Max 180 Nike Air Max 360 Nike Air Max 2003 Nike Air Max 89 Nike Air Max 90 Nike Air Max 91 Nike Air Max 95 Nike Air Max 97

To establish a new effective

Submitted by ghkhkhj on Mon, 03/08/2010 - 2:56am.

To establish a new effective method,tiffany jewelry,tiffany and Co,Welcome to read following news:I like it!links of london.

nd of Raymond Weil Tango

Submitted by connie on Mon, 02/22/2010 - 8:34pm.

nd of

Raymond Weil Tango Ladies Watch 5390-STS-00295 wholesale

merchandise they offer. A

Rolex Oyster Perpetual Submariner Date Mens Watch 16613-GYDO wholesale

store that sells the

fake swiss

best replica handbags is this one online place called six

Omega Speedmaster Chronometer James Bond 007 Limited Edition Automatic replica watch

star replicas. The store

exact replica rolex

has a lot of

Replica Ferrari Chronograph Watches

good things to offer. The customer feedback tells that the

quality-bag

company has a reliable

replica handbags

and good client support.

cheap Coach sale

They have a lot of bag designs in store which are

replica bags

amazing look alikes of

replica bags

the original brands like

replica bags

Gucci, Hermes, Massai, Chanel and Damiers. The quality

New Replica Tiffany & Co. Return to Tiffany oval tag key ring

of the bags is

New Replica Tiffany & Co Necklaces tjewelrynecklaces182

outstanding because they provide

replica jewelry

an amazing detail to craftsmanship and the designs are

best Cartier watches

done tastefully. The idea

watches replica

behind this replica store

watches replica

is to make good quality stuff that i

We can supply you discount

Submitted by kei111 on Sun, 02/21/2010 - 12:54pm.

We can supply you discount chanel handbag and cheap designer handbags with high quality,fast shipping.Recently,new arrival cheap gucci handbags are loved by womens,this designer handbags on sale make women crazy! We have large collection of louis vuitton handbags and many other famous brand handbags for sale. They are very comfortable and stylish. This is a good chance for you to buy handbags, as they are super sale off, you will save much more.Welcome visiting our website.wyx

شات رجاوي شات

Submitted by qwer on Wed, 02/10/2010 - 2:50pm.

شات رجاوي شات تعب قلبي دردشة صوتية شات سعودي سعودي كام خليجي شات خليجي دردشة خليجي شات صوتي دردشة شات شات كتابي شات سعودي دردشة كتابية توبيكات منتدى العاب شات شات كتابي شات كتابي سعودي شات خليجي منتديات دليل توبيكات العاب فلاش شات صوتي منتديات كفو قران ريمي دردشه كتابيه دردشه كتابيه منتديات ريمي زخارف دردشه قلب شات قلب دردشة قلب دردشة خليجية منتديات قلب شات تعب قلبي دردشة تعب قلبي تعب قلبي شات تعب قلبي الكتابي شات تعبني قلبي تعبني قلبي تعب قلبي دردشة تعب قلبي دردشة صوتية دردشة شات كتابي شات صوتي شات كويتي شات رجاوي شات تعب قلبي دردشة صوتية شات سعودي سعودي كام خليجي شات خليجي دردشة خليجي شات صوتي دردشة شات شات كتابي شات سعودي دردشة كتابية توبيكات منتدى العاب مركز تحميل شات الحب دردشة الحب الحب دردشة سعودية ahj شات قلبي شات عاتبوها دردشة عاتبوها زخارف شات زخارف افلام عربيه مسجات عالم حواء فساتين صور ازياء عطورات نسائيه فساتين زفاف خواطر قصص صور كاريكاتير الفيس بوك شات القصيم شات الود سكس الثقافه الجنسيه شات بنات السعوديه شات بنات الرياض شات قلبي شات حلم الدردشة شاتات شات الشرقيه دردشات شات الغلا شات تعب قلبي شات ارجوان شات احساس موالي شات جده بنات الكويت شات التحليه احباب نجد دردشة الحب شات الحب دردشة الخليج شات رور شات العين عالم الرومانسيه شات الخيال شات المميزه دردشة المميزة mbc شابك شات قلبي شات كتابي شات تعب قلبي شات السعوديه شات سعودي شات قلوب شات القلوب شات قلب شات كل البرامج منتدى كل البرامج

Here are cheap north face

Submitted by kei111 on Mon, 02/08/2010 - 10:49am.

Here are cheap north face outlets, these northface jacket clothes are designed with a waterproof, breathable, fully seam sealed exterior shell and a removable, insulated interior, cheap northface from our cheap northface jacket online sale.-zouzhilong007

NBA Basketball

Submitted by kei111 on Mon, 02/08/2010 - 10:47am.

NBA Basketball Shoes

Nbasupplier.com are authentic NBA Basketball Shoes supplier, who have a long history in NBA basketball shoes trade. Their customers are from all over the world. The best quality and best service promise to you. You can find the newest and the classic style in this online store. Shop for NBA Signature Basketball Shoes from atasale.com. You can find pages with details of the NBA players that wear these brands and wich model of shoe they wear.
This New Allen Iverson Shoes : Reebok Answer XII Invictus shoes will be printed in the history. Allen Iverson is a great scorer that will have a place in the House of Fame. His sneaker has a fabulous history. If you are Crazy about Kobe Bryant Shoes, there are Nike Zoom Kobe Shoes Mens and Womens Collection for you. Or Lebron James is your idol aslo can collect all his Signature Shoes there.
The eastern part of the all star line-ups list: Dwight Howard, LeBron James Shoes, Kevin Garnett, Dwyane Wade, Allen Iverson; West all star line-ups list: Kobe Bryant, Yao Ming, Tim Duncan Shoes, Chris-Paul, Amare Stoudemire. And as we know, there are so many fans, men even women, are bound up in NBA. Atasale.com, he can support you the NBA Shoes about those NBA MVP. /You xiaoyan

Under the circumstance of

Submitted by nini on Fri, 02/05/2010 - 1:20am.

Under the circumstance of 642-901financial crisis people’s job are pretty insecure and they long for the obtaining of CCNA ratification to stay in their position.sy0-201It is until people are determined 642-825to start preparations for 640-802 exams that they find a lot of difficulties.It is too 640-816 hard to learn by heart all the knowledge that is irrelevant to daily life, though I have tried to remember them once 642-642 after another. What’s worse, quite a lot of the reference materials are far 642-436 away from main points of the test. Thus, I was doing nothing but wasting time when I was doing the excercises.N10-004The Pass4sure product offers the superb quality 640-802 exercises 642-892 with lowest price. Containing all knowledge points in the exam the Pass4sure enables you to neglect 642-873 all other references in the market to pass the examination.Pass4sure provides 24*7 642-873 service, any problems can be solved at the first minute. When having any questions, you 640-802 can press the CONTACT US button on the page to use the Live Chat service to contact vcp-310 with customer service.Pass4sure includes various types of information required for the 350-029 exam, it is ensured that users can pass the CCNA exam in the first time. If you VCP-410 do not pass or not pass the exam in the first time, Pass4sure promises a full refund unconditionally 640-553 in case of 352-001 customers.Pass4sure provides free trial demo for eliminating the suspicion that the customers have about the quality of Pass4sure 642-812 Many people that participate in the CompTIA exam with unpractical 640-822 expectations often end inHP0-S18 failure. Many people owned the following expectations before participating 350-030Even without jn0-400 still I can take CCNA Nowadays there is a great upsurge in pursuing the CCNA certificate. Many examinees pass the exam 642-566 and get the certificate smoothly with the help of Pass4sure.However, many people are wondering: can I pass 642-426 without Pass4sure? It is known to all that JN0-342 does avail the examinees a lot, which offers similar questions to the real ones in the exam and covers the knowledge jn0-350 points 100 percent, helping the examinees save a plenty of time and energy. 1z0-146 With the help of Pass4sure it is no wonder to get the certificate.650-393 On the other 650-621 if you ec0-350 may not catch the chance of Pass4sure, the way to success will be much more difficult 646-230 and 646-588 much extra time and 646-563 will be spent on642-661 the exam. 640-863 Nevertheless, it's not impossible to get the CCNA by passing the Cisco 640-802 Examination with appropriate review and hard work.642-105 As there is too much test database on the internet, 642-164 the exam-takers are over dependent on it, which is still far from being satisfactory.If the exam-takers 642-373 are over dependent on test database, their learning motive and learning efficiency will fade. 642-415 Therefore, knowledge which can be originally absorbed will be reduced. Besides, 642-453 some test database of low quality will not help but cause a waste of time and energy.Materials from 640-721 are really the best and most reliable for people to prepare for 350-001 the exam in the market.But even so, it is only an auxiliary tool, students should not over depend on 220-601 it and be more reasonable when using it.Each candidates should keep in mind that the purpose is not for the paper, 156-215the more important is whether you learned knowledge and skills 156-215, whether your capacity improved or not. JN0-331 Let\'s say it confidently that if there is no Pass4sure, I can also get the certificate!