Much has been made by the supposed decopuling of the U.S. economy from those of our traditional trading partners. This (as Yul Brynner said in "The King and I") is a puzzlement. Our trading partners are, by and large, export driven. To where do they export? To the U.S.! If our economy slows and we aren't buying, they aren't selling.
The whining has already started ahead of this weekends G7 meeting. The Europeans and Canadians are already whining about the weak U.S. dollar's impact on their economies. That is right, they ae upset that their currencies are too strong versus the dollar.
Some blame the Chinese for keeping the dollar weak. Although it is true that China is a big reason why long-term interestrates are not higher in the U.S. (China buys long-dated treasuries). Who can blame China? The Chinese do not want the yuan to appreciate too much versus the dollar to keep their exports competitive. China will do what is right for China.
This is driving other countries (or blocs) insane. Relatively-low U.S. rates makes investing in dollars unattractive. No foreign exchange into dollars keeps the dollar weak. A weak dollar makes most foreign imports to the U.S. more expensive and it amkes U.S. exports more competitive.
Please understand that I do not advocate a weak dollar. A weak dollar is negative in other ways (energy inflation etc.) but has been inetresting to see central bankers from economies which thought they had a "better" model squirm when the market they rely on for their very existence begans to be closed off from them.
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