From the Cincinnati Enquirer, "Drooping Dollar Driving Growth, Firms see increased foreign sales because of weak currency.” BY JAMES MCNAIR
“Maybe because it touches a patriotic nerve, the phrase "weak dollar" sounds like a symptom of national feebleness."
“Weak it is. Five years ago, a dollar got you a Euro and change. Today, it gets you a lousy 73 Euro cents.”
This is a media story called good is bad, bad is good. They tell you facts but they tell you in a way designed to make you feel good about bad news. No truths were injured in the writing of this news because there are many facts in it but very few truths. Yes five years ago a dollar got you a euro and change but five years ago a dollar bought you almost an entire gallon of gasoline.
Mr. Miller implies that it’s our patriotism, just an emotional response, like a bunch of old women. Strong and weak dollar are just meaningless adjectives that hold no real relevance. Weak is good so is strong bad? The Japanese and the Germans both have strong currencies, the poor fools!
“But the traveler's lament is the producer's bonus. American manufacturers are enjoying a welcome windfall from the stronger buying power of customers in places such as Europe, Great Britain, Canada, Brazil and Australia. That windfall has trickled into Greater Cincinnati and Northern Kentucky, and local executives say the weak dollar is spurring more sales abroad.”
"The dollar to the euro is significantly in our favor," said Jim McLaughlin, sales director for Goettsch International, an exporter of corrugated packaging machinery in Blue Ash. "We're selling more in Europe now, and that's the backyard of the European manufacturers."
“Goettsch doesn't make the machines it sells, and all of its sales are outside the U.S. McLaughlin said sales rose 20 percent to about $35 million in 2006. He attributes a small part of that growth to the currency exchange rate.”
If Goettsch doesn’t make the machines it sells, who does? Chinese perhaps or Mexicans who benefit from their own weak currency. But America is better because Goettsch sells more machines manufactured over seas.
Overseas business can benefit, but the products we purchase are more expensive, now what commodity do we purchase from overseas…. Oil? In the last five years the price of crude oil has doubled but the price at the pump has tripled. Greedy oil companies or that weak dollar that Mr. Miller likes to brag about.
The administration that likes to boast about economic growth rates between 3 and 4% the administration has doubled the amount of dollars in circulation. That’s how you make weak dollars more dollars with less value in each bill. The administration points with pride to rising wages but they are being paid in those weak dollars.
The rising stock prices are purchased in weak dollars, dividends are paid in weak dollars.You cash in your stock portfolio and head for Euro Disney World and you will be in for a shock. That portfolio that had done so well had done well in weak dollars and when the market began to hiccup the value of the Euro went up and the dollar went down.
Mr. Miller might think weak currency is cool tool but world investors don’t. The sub prime troubles will encourage world investors to avoid Wall Street in favor of Tokyo or London those fools with their strong currencies. After all, the dollar could get weaker still and what good is 3 or 4% growth if the currency weakens by and equal amount.
Government statistics tell us inflation is a 3% but most Americans suspect there is something wrong with that number. They’re working harder to get by and are losing ground. Maybe those weak dollars have something to do with it?
Our number one trading partner China has been accused of manipulating the value of it’s currency to keep its exports cheap as well. But China buys our treasury bills with weak dollars so who kiting whom?
“Tom Duesterberg, president of the Manufacturers Alliance/MAPI, a public policy and business research organization in Arlington, Va., (AKA Industry lobby) said the dollar began weakening in 2002. For U.S. manufacturers, the weaker dollar is a mostly positive turn, in spite of the fact that many companies built plants overseas and are now making products there with a higher currency basis.”
Oh it’s good for manufacturers, I see, I thought it was good for everybody that’s what Mr. McNair implied. but what will become of those poor manufacturers that moved overseas.
"In general, U.S.-based manufacturers, especially smaller- and medium-sized manufacturers that don't have the flexibility to move abroad, have largely been helped by the slow decline of the dollar," Duesterberg said. "Three or four years ago, most manufacturers were getting hammered by the lower-cost producers like China, Korea and Taiwan."
They don’t have the flexibility? Meaning they would if they could?
“Gold Medal Products Co. of Evendale makes concession equipment such as popcorn machines, Sno-cone machines and nachos-and-cheese dispensers for customers in more than 60 countries. Bob Burns, vice president of administration, said the company has added China, India, Japan, Russia and South Korea as markets in the last three years. Favorable dollar exchange rates, he said, have helped make selling easier.”
"We're the world's largest manufacturer of concession equipment and supplies, and we keep ahead of competitors through investments in new technology, new products and quality improvements," Burns said. "But exchange rates have certainly helped our international sales. It's not making or breaking us, but about 17½ percent of our sales are outside the U.S. It was 13 percent in 2005."
I’m confused the title said the weak dollars were driving growth but the Sno cone king says it helps but not that much? “It's not making or breaking us” Well the average consumer is being broken maybe weak dollars help manufacturers but it doesn’t help retiree’s or working people or students or anyone that drives a car or eats food.
So whom does it benefit? The best example is post war Germany after the treaty of Versailles Germany was forced to pay out 200 million marks so the Germans turned on the printing press and simply printed them. The value of the Mark plummeted and the price of a loaf of bread went from one Mark to 1000 Marks. The baker simply factored in the cost of materials, labor and profit and business went on as usual. Except the baker had borrowed 100,000 of the old Marks to build a new bakery, now with the new revalued Marks he was virtually debt free a whole new bakery for the price of hundred loaves of bread.
The German middle class was wiped out but the German government and industry’s debt had evaporated. The loans made by the American banks after the war were repaid in new Marks. The weaker German currency has created a hole in the credit markets and someone had to take the loss. As it turned out it was American banks and depositors but to the German ruling elite they favored a weaker currency or were favored by a weaker currency.
There is no free lunch, a weaker dollar is a pay cut to every American worker. Industry and manufacture’s benefit and their workers gain by extra work hours only to be paid in less valuable dollars or screwed twice. But what sort of article headline would “American’s Take Pay Cut” be when “Drooping Dollar Driving Growth,” sounds so much better.
http://news.enquirer.com/apps/pbcs.dll/article?AID=/20070812/BIZ01/708120356/-1/all
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