And (those) like
today's Paul O'Neil. They think too much about competitiveness and know
too little about capital markets ...
Secretary of the Treasury Paul O'Neil, comes from manufacturing and
thinks like a manufacturer (who) have a perspective on the economy that
is from the rabbit hole up. They think a weak dollar is good for
exports and a hard dollar hurts sales and market share. Hence they
wince any time they face a strong dollar and have wishy-washy answers
to any dollar policy question."
The truth, as usual, is somewhere in the middle. Until recently, the
dollar was too strong - as strong, in trade-related terms, as it was in
the 1980's. Fred Bergsten, head of the Institute for International
Economics, calculated in his testimony to the Senate Banking Committee
on May 1, that America's trade deficit soars by $10 billion for every
percentage rise in the dollar's exchange rate.
American manufacturers shifted production to countries with more
competitive terms of trade - cheaper manpower and local inputs. The
mighty currency encouraged additional - mostly speculative- capital
flows into dollar-denominated assets, exacerbating the current account
deficit.
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