Jul 08 2009
USA Export: G8 Meeting and the US Dollar
Will the G8 meeting have any effect on USA Export numbers? Eight of the industrialized nations of the world are meeting in l’Aquila, Italy this week. Other nations will participate as well. Italy’s Prime Minister, Silvio Berlusconi had decided to change the venue to l’Aquila to draw attention to the need of the region. Indeed the meeting was originally planned to take place on the beautiful Italian Island of Sardenia. After a strong earthquake with many afterschocks hit l’Aquila earlier this year, it seemed like a good idea to move the venue there. But what does that have to do with USA Export numbers?
China and India hold many of the US Dollar reserves and will be in l’Aquila. Russia is a G8 member and also wants to see changes in the world’s currency systems. China has been suggesting to start working on a global currency. It too is seeing what the rest of the world is seeing. The huge amount of new money that went into circulation for the American stimulus adds to an already weak US Dollar. All the countries with heavy investments in US Dollars have a double edged sword:
- Their Treasury Departments cannot afford for the Dollar to weaken much more.
- Nevertheless, any slump in the US Dollar makes it less competitive to export their products into the US.
However, American manufacturers would have it easier to export their wares overseas.
China will be attending the G8 meeting this week. It has a great interest into finding ways to start moving away from the Dollar, while at the same time trying to keep its value. A big decline in its value would have catastrophic consequences on these emerging markets where the global recession has also hit hard. For the past 45 days one Dollar has been worth about 0.70 Euros. It has been sliding from a year high in February at 0.79 Euros. US Manufacturers would not mind to see an exchange rate of 0.64 Euros as it was a year ago so that they can increase their USA Export numbers. But, what about the rest of the world?
