The pain of a weak US dollar/ Asia Times

[TexasLawyer]

Nov 16, 2006

The pain of a weak US dollar
By Axel Merk

The United States' massive trade deficit exerts pressure on the US dollar as currency is shoveled abroad in return for goods and services. As the US economy is slowing down and possibly sliding into recession, the rate at which the trade deficit grows may also be slowing; in September, this deficit was "only" US $64.3 billion - still near record territory but not as bad as economists had predicted.

Does this mean the worst for the dollar is over? After all, it now costs over 50% more to pay for a 100 euro hotel room than six years ago, assuming the hotel has not raised its price. Can it get worse? Since you probably cannot afford to go to Europe on vacation anymore, it may not matter to you.

But even if you do not travel abroad, it does matter to you as your purchasing power erodes; among others, the cost of imports and commodities, including the price you pay at the gasoline pump, is likely to go up.

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The next time you hear about the trade or current-account deficit growing at a less brisk pace, evaluate why this deficit has gone down. Is it because of a shift in policies to induce consumers to save and invest? Or is it because the economy is slowing down?

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http://www.atimes.com/atimes/Global_Economy/HK16Dj02.html