Editor’s note: Marc Leavy,CFP? is a regular financial columnist for Business Reform Magazine, the leading Christian business magazine with over 100,000 readers. Each issue features practical advice on operating successfully in business while glorifying God.
The markets were closed Monday in honor of Presidents. Tuesday started off with triple digit gains on the Dow which were following last Friday’s triple digit gains. However, Wednesday’s economic news dampened the rally, Thursday remained flat and the markets rallied again Friday.
Retail sales are down due to the severe winter weather, which was exacerbated by this week’s storm. Semiconductor sales are down due to overcapacity and that dampens the anticipated tech turnaround. This week the NASDAQ did manage to get into positive numbers for 2003. The housing sector remains strong. The Producer Price Index took its biggest jump in over ten years Thursday. However, the Fed had indicated it sees no signs of inflation. In fact, the PPI news served to calm fears about deflation. Friday, the Consumer Price Index showed no signs of inflation and the markets rose. Jobless claims grew this week signaling a concern about economic recovery and the trade deficit grew to an all-time high.
The cure to the trade deficit also showed up this week – a weakening dollar. I do not understand the fascination with the trade deficit. I can understand wanting a healthy manufacturing base but why be concerned about where the people who buy the products live? Dr. Walter E. Williams helped me get my thinking straight on this issue and his brilliant and witty articles are available on this website. It may be “fair” to have balanced trade but a trade deficit is irrelevant when considering a global free market.
I bought my first Toyota twenty years ago when metric tools seemed mysterious. Since then, Toyota built a plant in the US and I made a living teaching their executives English. Toyota gave my neighbor a job. I do not care if the Japanese buy “American cars”. I do not even know how to define an “American car”. I chose Toyota as my first car because it was the best car I could get for the money. My brothers do not like my “foreign cars”. However, since they never give me money for a car, they can keep their opinion to themselves.
A neighborhood teenager mows my lawn. I pay him, he takes the money home and he never buys anything from me. He and I have a trade deficit. My lawn, however, looks nice and I have raised his standard living. This makes him less likely to put an El Camino up on blocks in the driveway, or steal from my garage.
People concerned about the trade deficit seem to worry that our economy is hurt because our manufacturing base is shrinking. They worry about this until you tell them they should be forced to buy more expensive products to help our American workers. I want to buy the best product possible and I do not care if it is manufactured in Mexico. In fact, I am glad if it is manufactured in Mexico because a healthy Mexico stems illegal immigration.
When we import goods, we pay for them and send our dollars to work around the globe. Eventually, those dollars have to come home. Our dollars are not gold to be hoarded. I would that they were.
The strong dollar creates a trade deficit because our dollar buys more goods than that country’s home currency will. If our dollar continues to weaken, more nations will buy our products and eliminate the trade deficit. Then people can complain about a weak dollar.
I want to buy the best good for the money, regardless of which country that good comes from. Unless of course that country is France. I cannot force my heroic American dollars onto the trade battlefield for French goods. My dollars are too good. Long live the Napa Valley, long live glorious Wisconsin cheese, and long live American bottled water.
Marc Leavy, CFP?, is President of Principled Investing, Inc., a ministry that teaches that we have been entrusted with our Resources for a Reason?. He speaks regularly on stewardship matters and may be reached at [email protected].
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