I interviewed David Wyss, chief economist for Standard & Poor's for this week's cover story on the economy. Wyss is brilliant--one of the world's most knowledgeable economists who can explain just about everything from kitchen table economics to world trade. I also interviewed Richard Marston at the Wharton School at Penn, Richard Jackman at the London School of Economics and Jeff Rosensweig at Emory University. Their predictions for 2008? There's a rough patch ahead, but it doesn't have to be a recession. The weakened dollar will ease our pain significantly. That's right--the falling greenback is our long-overdue friend. Here are some highlights:
1-The weak dollar is a huge godsend, with Europeans, Asians, as well as Chileans, Colombians and Brazilians showering us with their foreign currency.
2-Foreign banks won't loan our banks money, so we have to sell off assets. That's why the Abu-Dhabi Investment Authority's purchase of $7.5 billion in Citigroup shares was such a lifesaver. Arabs? Yes, but Citigroup's largest shareholder was already an Arab. The infusian is a shot in the arm for banks that need money to invest.
3--If the dollar falls against the Chinese yuan we're going to see a boost to our long-beleuguered manufacturing sector. With the way the greenback is plummeting, it's not out of the question. If it happens, it would signal Japanese and Korean currency to rise, which would give us a competitive nudge against Japanese and Korean goods. Before that happens, we could edge Europe out of the Asian market. Europe is the largest exporter to Asia, but the Euro has risen so much that the Asians are reluctant to buy European products. Now, they can buy American.
4--As for selling off assets, the Europeans and Canadians are buying up huge chunks of our coast from Miami to Maine. (Will that include Georgia's Golden Isles?)
5--The Euros and British pounds are flowing (via exchanged dollars, of course) into Phipps and Lennox Square where employees and shoppers report droves of German, French, Italian and British visitors on shopping sprees. This is great news for retailers who were worried about American consumer confidence failing them during the busiest shopping season of the year.
6--What about $100-a-barrel oil? Good question. According to Wyss, we won't know how hard that will hit us until we know how cold the winter will be. It's home heating that puts the biggest demands on the oil market in winter. (Thank goodness for global warming, eh?) Rosensweig points our that at those prices Canada and Brazil will be more than happy to send more oil our way, helping to stabilize the market a bit. In the longterm, all the experts agree, what we really need is an energy policy. As Wyss points out, we haven't had one in 34 years.
7--Best quote in the article is from Wyss:
"In the long term, we need savings, but in the short term, we need the spending. It’s kind of like what St. Augustine said: ‘Lord give me chastity, but not yet.’"
Until next time.--Steph