The US will up the exports now the dollar has fallen so far

US export growth is lively, and will receive a further boost from the latest drop in the dollar.

So far the Fed has decided recession fighting is the order of the day, and has been cutting interest rates, whilst the ECB and the Bank of England are still fighting the last battle against inflation and are keeping interest rates up. As a result the USA will export more, and the EU/UK will export less.

In the UK there has been a double tightening of monetary policy in the last two months. The first tightening occurred because market rates of interest have risen above the recommended rate by the Monetary Policy Committee. The second tightening has occured thanks to the rise in the pound against the dollar, given the importance of dollar trade to the UK accounts.

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2 Comments

  1. Tony Makara
    Posted November 9, 2007 at 10:50 am | Permalink

    Gordon Brown does not see fit to worry about exports because his entire economic strategy is based around having a service sector economy buoyed by consumer credit. Gordon Brown is happy for imports to supply Britains basic needs. This is a strategy that works so long as our currency is very strong. However its a dangerous game to play because currencies do not stay overvalued forever. Gordon Brown will under no circumstances want to see the pound weakened or interest rates cut. Such a scenario would help our exporters but would completely scupper Gordon Brown's demand led economy.

  2. Bazman
    Posted November 10, 2007 at 10:35 pm | Permalink

    What you are saying Tony, is that Britain should have a strong manufacturing base.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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