> > Actually, I don't overlook this. In fact I wrote my dissertation on
>> this and looked into the role of historical "inertia" quite closely
>> and it doesn't hold up.
>
>Sounds like a great diss. Did you ever publish an article summarizing it?
>If not, what school did you do it at?
>
>> The official dollar role has been over since 1973. The US has run
>> current account deficit in every single year since then, deficits that
>> grow each year
>
>I thought that we'd run a trade deficit every year since then, but that
>the current account didn't go into deficit until Reagan.
And the size of the CAD (and trade deficit) is not correlated with
the value of the dollar; if it were there would be some reason to
expect Tom W's scenario of an imminent mass dumping of dollars. Why
does there seem to be no correlation? Ellen's analysis seems to
provide an answer.
Another point: For many the rising trade deficit indicated the loss
of American competitiveness, but the picture has always been more
complicated if one considers sales from foreign subsidiaries and the
US surplus in high tech goods (see Scherer). Another point: Brenner
makes the dollar devaluation the key to regained US competitiveness,
but the US has been sitting pretty with a relatively high dollar for
years now. Is that because the high dollar encourages capital inflow,
thus reducing interest rates and encouraging a high level of
investment in capital goods in which technological progress has been
embodied?
Rakesh
