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U.S. exports helping the economy
Commentator David Frum.
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Kai Ryssdal: While it's tempting to believe the markets have been rallying on all this talk of some kind of deal on the debt, fact is, traders are a bit more base than that. Strong corporate profits from the likes of Apple, IBM and Coca-Cola are really what's going on.
That's one economic bright spot. Commentator David Frum says there's another one.
David Frum: Here's some good news amid the economic gloom: U.S. exports continue to surge. April set a record, $175 billion. May fell a little short, but the United States is well launched to increase exports in 2011 by 25 percent over 2009 -- and to double exports by 2014.
An economy as big as the U.S. cannot export its way out of recession. But the export surge does contain promising signals of the U.S. economy of tomorrow.
The U.S. is increasing its exports to China faster than to any other country -- despite China's manipulated currency. Computer technology and foodstuffs head the list of sales.
U.S. grain exports have surged to their second best year since 1982, as the droughts in Russia and Ukraine impelled those governments to halt international sales.
Some U.S. industries faced weaker competition as Japan absorbed the shock of the tsunami and nuclear disaster.
Above all, exports are driven by the drop in the cost of the U.S. dollar relative to other currencies.
If to make up an example, a Martian dollar used to buy $1 of U.S. products and now can buy $1.50 worth of U.S. products, odds are that the Martians will increase their U.S. purchases.
A cheaper dollar cuts the pay of U.S. workers relative to the rest of the world -- without depressing their ability to buy non-traded goods like housing or to service their debts.
A cheaper dollar is not pain-free: imported goods cost more, starting with the oil that moves American cars and trucks. Everybody who holds U.S. dollars loses a little wealth. Those who hold the most, lose the most -- one reason that Wall Street squawks when the dollar declines.
Through the pain, though, the cheaper dollar shows the way forward to servicing U.S. debt more easily -- and spurring global competitiveness. Growth resumes. Recovery accelerates. It's a start.
Ryssdal: David Frum was a speechwriter for President George W. Bush. Today he's the editor of FrumForum. Next week, Robert Reich. Your views, whenever works for you -- leave a comment.
Dear Mr. Frum: Thank you, thank you, thank you!
I was thrilled to hear your discussion this week regarding the benefits of a weaker dollar.
While it's true that a weaker dollar does make foreign-produced goods cost more (most notably, oil), it also makes domestically-produced goods cheaper, by reducing the relative cost of American labor. (Labor is always one of the biggest costs (if not THE biggest cost) in producing anything.)
When labor costs less, businesses feel more comfortable about hiring more. And with a national unemployment rate hovering around 9%, more hiring is definitely what the doctor ordered.
I liked this commentary from Mr. Frum; exports is indeed some good news in a heaping pile of bad. But, I suspect his estimations of doubling exports by 2014 are exaggerated. Yes, our exports are up because grain production went down in Eastern Europe, because Japan faced an unprecedented natural disaster, because the emerging market economies continue to grow in local demand for food stuffs. But, these are all temporary anomalies, and, going forward, US exports will face the same and increasing competition from artificial monetary deflation and lack of regulation in other countries.
Finally, I wonder what exactly qualifies for an "export" for these statistics. Does GM building a car in China and selling it there count as an export? Or does the "exported" car actually have to be built in the US and then put on a ship to China? One would imagine the latter, but when it comes to government statistics these days, that would be a bad assumption.
Very true, US needed to do this long ago. US has good products and good industries, exporting is the best way to create new jobs. Many Americans do not see the value in exporting - exporting creates the 2nd front of economy. China makes its fortune from USA by exporting, so is everyone else.
It's time to change the trend. I live in Canada and Australia, and I always support Made in USA.
Are there any circumstances under which neo-conservatives would not tout the virtues of an unregulated, pro-business, global economy? Here he is, talking about how a devalued dollar is good for us, because it lowers workers wages relative to the rest of the world, and, by golly, that makes export products more attractive; and by the way, Coca Cola’s profits are up (never mind that trade deals with Columbia are in the works—a country that holds the world record for the number of union organizers murdered every year, with Coca Cola implicated in the practice). This is David Frum’s idea of “the way forward,†allowing our currency to inflate until it rationalizes all of Wall Street’s financial machinations, diluting and undermining the wages of U.S. workers and the purchasing power of U.S. consumers, cheering on a financial environment of increasing prices (and interest rates, eventually), and “spurring on global competitiveness� A similar strategy was sold to the public with the Savings and Loan bailout, with taxpayers and future homebuyers (rather than currency depreciation) absorbing the costs of fraud and malfeasance, via Fannie Mae and Freddie Mac, and with the whole stinking mess taken global in the derivatives market. Sounds more like the way backwards to me, on steroids.
