Pete Murphy

A Fed Rate Hike Won't Solve the Current Crisis

Your identification of the trade deficit as the root cause of our ills is right on. But you are wrong to believe that the falling dollar will have any significant impact. Yes, "exports" are up, due to the soaring price of grain but also due to the soaring price of oil, driving up the value of U.S. oil exports. (Yes, the U.S. does export some oil.) Our trade deficit in manufactured goods is as bad as ever. The demise of U.S. manufacturing has actually accelerated as the dollar has declined.

Rather, the trade deficit is due to granting free access to our healthy market to grossly overpopulated nations who are unable to offer access to equivalent markets in return. Their markets are emaciated by over-crowding and low per capita consumption.

A falling dollar won't help. Foreign exporters won't stand idly by and watch their share of the U.S. market evaporate just because their profits are down. They'll aggressively cut costs (and "dump" if they have to) to sustain and even grow their market share.

Pete Murphy
Author, "Five Short Blasts"