Martin Wolf’s FT Economist’s Forum, 13th December 2006
Second comment from Andrew Smithers on Martin Wolf’s column “Falling dollar saga still has a long way to run.” 6th December, 2006.
I suggested in my previous comment that the high growth and low investment ratios of the US and UK in recent years were the corollary of their rising trade deficits and that a reduction in those deficits required either a recession or a rise in the overall investment levels to create tradeable output capacity.
Martin’s response was to question the relative capital/output ratios of traded and non-traded goods and services.
I set out some relevant data on this, for which I give many thanks to James Mitchell for his help.
In Q3 2006, US goods’ imports ($1.938bn.) were 30% greater than all its exports (1,420 bn.) and nearly five times US service exports ($427.7bn.)………………
Full response: The US Dollar and the need for more US Domestic Investment.