On Jan 28, 2008 4:26 PM, Mike wrote:
> bottom line if trade deficit shrinks via export strength that has to be
> extremely dollar bullish-which has all sorts of implications (both of
> you are saying the same thing in that respect)…

sort of. it is shrinking as they are puking $ financial assets to
people who will take them to buy our stuff. so the dollar doesn’t go
up until they use up some of their $ assets and slow down their desire
to get out of them. think of it as an inventory liquidation of $
assets held abroad that drives the dollar down far enough to be able
to sell their $ to someone who wants to buy US goods and services or
US assets.

that’s the exit channel for $ held by non residents. for the US the
process is inflationary and expansionary- good for earnings and gdp.
But the inflation keeps the US domestic real consumption lower than
otherwise.

When the ‘$ inventory liquidation’ by foreigners starts to slow the $
starts to bounce back.

warren


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