Nov 09 2007
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.
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
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.
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What you are saying Tony, is that Britain should have a strong manufacturing base.
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