[Nettime-bold] Re: Deflation, anyone?

[Brian Holmes <brian.holmes@wanadoo.fr>]

Here's a short piece from the BBC World news business section, on the 
falling dollar, which they relate directly to the rising trade gap, 
but above all to the plummeting NYSE.

A few years ago some wise guy found a great title for his investor 
bible: THE DOW AT 35,000. Get your copy fom Amazon - before either or 
both are pulped.


******

Friday, 19 July, 2002

Dollar falls on record trade gap

The US dollar continued to weaken on foreign currency markets as US 
trade deficit soared to a record $37.6bn in May. Imports soared to 
$118bn as Americans snapped up foreign-made cars, TVs and clothes. 
The deficit rose by 4.1% higher in May, with imports growing at twice 
the pace of exports, the Commerce Department said. Exports rose by 
just 0.7% to $80.6bn, as the weakness in the world economy restrained 
export growth.  The trade gap with China widened to $8.1bn, showing 
China was still benefiting from its membership of the World Trade 
Organisation.

Dollar under pressure
The announcement further undermined the dollar, which has weakened in 
recent weeks as shares have plunged amid fears of corporate scandals. 
The euro rose to a level of $1.0155 shortly after the data was 
released.  The weaker dollar in turn raised expectations of another 
gloomy day for shareholders.  "The dollar is the focus of attention 
of a lot of investors right now," said Gary Thayer, chief economist 
at AG Edwards in St Louis.  "If the dollar had held up well, that 
would have been a good development for stocks."  The dollar also 
weakened against the yen, which was trading at a level of 115.64 to 
the dollar shortly after the news.  The strong yen puts in jeopardy 
the prospects for an export-led recovery in Japan, and may lead the 
Japanese central bank to intervene further to try and weaken its 
currency.

Financing the gap
The US has been running a huge trade deficit for several years, but 
up to now it has avoided a run on the dollar because foreign 
investors were happy to make up the shortfall by buying US stocks and 
bonds.  But the falling US stock markets have made foreign investors 
reluctant to put more money into the pot.  In the long run, the 
weaker US dollar should boost US exports by making them cheaper and 
more competitive - but that could take years to come about. 
Meanwhile, the huge trade deficit is adding to protectionist 
pressures in the US Congress, which is considering a bill to allow 
the President enhanced authority to negotiate a new trade deal.

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