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What does a depreciating US Dollar hold for the world?

Topic of the hour.

The problem the US has right now is that it is grossly uncompetitive. When an engineer hired in India and China for USD20k a year costs USD100k a year in the US, you have a problem.

A depreciating US dollar will solve this problem, but not in the way most people think it might.

The Chinese rightly point out that yuan appreciation will cause low end manufacturing to shift to other Asian countries, and this will do nothing for the US.

Also true.

Actually, what I think a proper USD devaluation will achieve is return the US to its role in the early 1900s, the world’s primary and most efficient supplier of commodities, especially agricultural commodities. When I think of American exports, that’s where I see the opportunity, not in manufacturing, not in Boeing but in Cargill.

However this implies a vast structural shift. How many factory workers are going to want to return to farming? There’s going to be some serious pain to come.

 

 

 

 

October 7, 2010 Posted by | Uncategorized | | 2 Comments