Headline on yahoo finance today:
http://biz.yahoo.com/ap/071107/wall_street.html
This has been no doubt one of the most discussed topics regarding our economy and is usually looked upon as a negative. Keep in mind that the feds do have the power to influence exchange rates, if they chose to put positive pressure on the exchange rate all they would have to do is decrease supply of the dollar on the world market. I believe the feds may be purposely lowering the value of the dollar. Here’s why: Read More
US Trade Deficit Declines Again
Saw this article today on Yahoo finance, exactly inline with what I mentioned two days ago. Not very suprising that the deficit with China is getting better anytime soon since the yuan is fixed to the dollar by the Chinese government(yes governments are capable of manipulating exchange rates if they have enough reserves!) which is why the US government is so desperately trying to persuade China to increase its exchange rate for the yuan.
Increasing the exchange rate for the yuan has potentially positives and negatives. The primary negative for China is that it will make Chinese goods more expensive to the world and China has become heavily dependent on exports. The US argues that it’s not fair that China gets to sell its goods at much cheaper prices, but the benefits of a more valuable yuan also have mixed affects on the US economy. It will decrease the trade deficit but will also have a negative impact on corporate profits.
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