When the Dollar Bill Comes Due

[Kidlicious]

There's an interesting OP-ED piece in the NYT this morning by Catherine L. Mann and Katharina Pluck.

The short version of it is that import prices for consumer goods have not increased much thus far because the US has a low "pass-through-rate." That means that changes in the exchange rates do not cause significant changes in the price of imports.

So exporters to the US are not raising their prices because the dollar is falling. This can't go on forever though because further decrease in the exchange rate will put further strain on the profits of exporters.

The main reason that exporters to the US are hesitant to raise their prices is that they don't want to lose market share in the US. But it's really cost/benefit analysis and sooner or later the costs are going to add up and the **** will hit the fan.

[Lawrence of Arabia]

whats wrong with that? then people will buy more american made stuff. isnt that what you want? then your overpriced workers in the manufacturing sector can keep their jobs. this is no burger king, you cant have it both ways. either lower priced imports are good, or they are bad. they cant be both. figure out which they are, and then stay consistent.

[Kidlicious]

It's going to start with inflation. Filling the gap with US products isn't a given.

[Lawrence of Arabia]

of couse its a given. you just said that all import PRICES go UP, so higher priced home market prices get RELATIVELY CHEAPER, so people buy america. its a given.

so sell bonds if theres inflation.

[Kidlicious]

Originally posted by Lawrence of Arabia
of couse its a given. you just said that all import PRICES go UP, so higher priced home market prices get RELATIVELY CHEAPER, so people buy america. its a given.

so sell bonds if theres inflation.

Of course it's a given. Everything is a given according to your little models. Go on with your little fantasy world and don't worry about anything. The free market always takes care of everything. In fact, that's all you have to say.

[Imran Siddiqui]

Originally posted by Lawrence of Arabia
of couse its a given. you just said that all import PRICES go UP, so higher priced home market prices get RELATIVELY CHEAPER, so people buy america. its a given.

Bingo. If import prices go up, American goods' prices look cheaper and thus people will buy them more.

This is common sense, Kid, not even detailed economic theory. Of course if its common sense, no surprise you don't get it.

[Lawrence of Arabia]

aight, im done here. the fastest resolved argument ever. 6 posts. comon Imran, lets go get a beer.

[Kidlicious]

Of course LoA, because both you and Imran know that it doesn't take much time to build a factory.

[Whoha]

Originally posted by Lawrence of Arabia
of couse its a given. you just said that all import PRICES go UP, so higher priced home market prices get RELATIVELY CHEAPER, so people buy america. its a given.

so sell bonds if theres inflation.

only if there is a substitute good available. If there isn't the imports are still more expensive but people have to just deal with that.

[Imran Siddiqui]

Usually there is... and if there isn't, there soon will be (in order to capitalize on the imbalance).

[Kidlicious]

Originally posted by Imran Siddiqui
Usually there is... and if there isn't, there soon will be (in order to capitalize on the imbalance).

With what resources Imran? Resources aren't just sitting around. Have you ever heard of "scarce resources?"

[Whoha]

Originally posted by Imran Siddiqui
Usually there is... and if there isn't, there soon will be (in order to capitalize on the imbalance).

The trade deficit and the fall of the dollar belie that statement. The dollar has plummetted 30% and that deficit continues to rise. Most of what I've read on the matter would seem to support DanS's position that this is a long term fix.

[Imran Siddiqui]

Originally posted by Kidicious
With what resources Imran? Resources aren't just sitting around. Have you ever heard of "scarce resources?"

So if, say, Japanese cars become more expensive, you don't think American cars will sell more? Come on... the resources are there to be utilized, however, because of relative prices, it isn't worth it.

[Lawrence of Arabia]

yeah but that would be logical.



btw, scarce resources dont mean that they arnt around, it means that there is a limit, and that you need to pay more the scarcer they are.

[grumbler]

Originally posted by Whoha

The trade deficit and the fall of the dollar belie that statement. The dollar has plummetted 30% and that deficit continues to rise. Most of what I've read on the matter would seem to support DanS's position that this is a long term fix.

In large part because the much of the deficit is for petroleum, which the US consumes in increasing but produces in decreasing amounts. Another factor is the general antipathy to "buying American" right now, despite the more advantageous prices.

The "free market" isn't really "free" in the sense of being perfectly rational. If it was, the French would be looking more closely at California wines, for instance.