This COULD be a problem, but its a lot more complicated than just the dollar dropping a bit in exchange value against the Euro.
For one thing, the planet has over 50 major currencies, and while the dollar has indeed dropped a good bit (about 12%) against the Euro over the past 6 months, it has remained the same against most of those currencies, dropped against some of the stronger (Australia, Canada, New Zealand) and held its own against others (pound, peso) while going UP against many others (yen, recently, not overall) that have fared worse than we.
The US media focuses far too much on the Euro. Some days they will trumpet "the dollar is DOWN" when it loses ONLY against the Euro.
For most Americans, a weak dollar IS a good thing - evidenced by the decision by Ford to move manufacturing HERE rather than ship those jobs overseas. BTW, we should not lose sight of the fact that this factory could have been built in Mexico, China, India or some other sweatshop economy - Ford IS behaving as a standup corporate citizen during tough times for us locals. This was not always true, and may change, but I call them as I see them.
Another thing is the fact that we are in the bottom of a deep recession hole - and that means the dollar is sick, because WE are sick. Expecting anything else right now would be foolish, and mean we are also in some funky state of denial.
The Europeans will NOT like the closing down of factories on their soil, and the sight of those jobs moving to the US will make them crazy. They have been pursuing a "strong euro" policy for years now, and I think their leaders panicked every bit as much as ours did when the feces hit the spinning air foil. While our guys stupidly poured a trillion dollars into zombie banks, their guys nationalized their financial system, pouring a similar sum of Euros into the surprised but pleased laps of major investors around the world that USED to own their banks.
Here the idea was that the money would be used to avert disaster and fuel recovery, but instead the zombies (go figure, they ARE zombies) just sit on it and loan it to the dollar carry trade for tiny interest gains.
THERE the effect worked a little better, it was not QUITE as stupid a move as ours, but the effect on the Euro was to make it far TOO strong, and undercut the poorer nations in the EU, who are mostly bankrupt now with starving economies, while the more wealthy economies see their manufacturing and export-based economies wilting under the over-priced Euro.
We NEED more manufacturing here, and for that to happen we need 2 things:
1. A fairly priced dollar. I would consider the current attack by speculators on the dollar as short term, and when it turns, many of the dollar shorts will get zapped, big time, and fast. Look for the dollar to stay in the (dollar index) 70's for a long while, though it will move higher after moving lower. In this range, exports will steadily grow, and imports shrink.
2. A business-friendly regulatory atmosphere. Unfortunately, THIS will not happen, at least not before 2012. At best we can hope for the defeat of such budget-busters as Obamacare and Cap and Tax. At BEST. At worst, this second support item will fall away and undercut any other factors, locking us into this nasty recession for years.
Don't get sentimental about a strong dollar - its just a way to keep score, and the game changes every day.
Quote:
Originally Posted by JEB  This only shows that the dollar is growing weaker in comparison to the Euro.
At least that's how I view it. There has to be a money reason to do this.
Not that I think this is a bad thing, I just think that the reason for it shows that we are in a bad spot. |
Ford Moves Factory to US to Build/Export SUV to Europe 
