Faulty Decisions

The November Import Price increases in combination with the October Trade Deficit increase expresses to me, if not Anyone else, that the Trade Deficit position will only worsen for the United States with a weakening Dollar. Widespread segments of the economic community believe that a weakening Dollar will gain the United States a Trade advantage. The Import Price increases clearly show that the multiplex World economy will adjust Prices equally as rapidly as American business competition, and a weakening Dollar will only generate immediate Production Costs increases. The convex is also true, and a strengthening Dollar will lower Production Costs. Monetary policy will not sell Product, only quality Product at efficient Production Cost will sell Product.

Here are initial numbers which I do not trust very much, though they may be solid. Wall Street may expect a 0.6% rise in Sales, but I smell an air of putridity in that belief. Car Sales, Gas Sales, and Home furnishings Sales all dropped, and Black Friday Sales did not continue through the month, though many of the Discounts of the Big Box stores remained in place. December Sales seem a far-off dream for an increase, especially in the face of the volatility of the Markets in recent Weeks. American Consumers feel a great deal of insecurity as the present time, something which is not conducive to strong Sales increases.

I think highly of Mark Thoma as an economist, but disagree with him on this one. The Fed action will put more nominal cash in Markets unlikely to expand significantly due to exterior economic conditions; adding excess funds pressuring a weaker Dollar. The Move will push up the Price on Oil, overall Imports, and Wage Demands; all without producing an expansion of business. The Market positions will worsen, as P/E ratios become untenable with artificial increase in P and reduction of E through Capital Cost charges. Economists and Wall Street wants the easy Money which fueled the Mortgage Crisis in the first place, but it comes with hazard equally as great as when it was generated by the Crisis run-up. lgl