US Exports and The Falling Dollar
Exports may begin to gain ground on news that the Fed is going to buy back 300 billion in long term treasuries. The market’s reaction last week was positive, but whether or not it will have a lasting impression is anybody’s guess at this time. The one sector that could really benefit from any short to mid term inflation is exports. With the price of fuel slowly but steadily climbing again, and with less money to spend abroad on imports, many countries will see the falling dollar as an excellent opportunity to buy up some US exports and get some great deals.
The US has really fallen off the chart in terms of production and export creation, leaving the last pillars of exportable goods intact with raw materials like lumber and coal. Perhaps though, with the recent turn of events and the monetizing of some of the debt the US has incurred over the past year, we will see things begin to pick up for many US exporters. The Baltic Dry Index has been showing a very weak pulse recently but has picked up slightly with the new that the dollar is beginning to be devalued. The dollar’s slump could give rise to a concurrent rise in the Index itself. It will be interesting to watch in the coming months.
Really cashing in on the declining dollar will be tough. American industries have been hurting as of late, many of them for years. The big three automakers are in no position to really make much out of the export demand increase and neither are America’s big producers of aircraft, ships, or other large consumer products. If the dollar remains low and stocks begin to pick up, the shortage of American export products could end up cutting off the circulation of the Wall Street boom and ultimately kill the bull. Financial suffocation through inflation is another possibility, and unless the Obama Administration is able to do something to stir the pot of American goods producers, and create a viable option to open up the lines of trade for American exports to new or emerging markets worldwide, I fear that the shift downward in the dollar will be a missed opportunity to jumpstart the American economy.
One way the US economy could really cash in though on the falling dollar is through the export of precious metals and other commodities. These commodities will be brining in top dollar as US inflation increases and the world economy reacts to the giant fire sale of US goods. As long as the US commodities exports are helping to cancel out US trade deficits worldwide, the economy will benefit. Perhaps American miners and commodities producers could cash in on the weak dollar and the ever-changing supply and demand curve for commodities worldwide. Either way the ball bounces; playing US commodities short right now would be a very bad idea for any investor. I predict a rise in the price of commodities worldwide followed by a swift fall in prices as the rest of the globe begins to very cheaply import their more highly-demanded commodities from US producers.
