"Number of the Week 0.50"

".5 percentage point: The potential boost in annual U.S. economic growth from the dollar’s decline since August 27.

...A little move in an exchange rate can have a big impact on a country’s growth.

Consider the recent fall in the dollar. Since August 27, when Federal Reserve Chairman Ben Bernanke signaled the central bank was likely to pump more dollars into the economy, the greenback’s value has fallen about 4.8% against the currencies of U.S. trading partners (data through October 15).

Given the historical behavior of U.S. exports and imports, a sustained move of that magnitude should shrink the U.S. trade deficit by nearly $140 billion over the next two years. That’s the equivalent of an added 0.5 percentage point of economic growth in each year.

If the natural cycle of laissez faire capitalism
revolves between risk and aversion
what should happen if government intervention perverts the process
to forestall short term economic pain?

...Treasury Secretary Timothy Geithner had a point when he said, in an interview this week with The Wall Street Journal, that “no country… can devalue its way to prosperity and competitiveness.”

When one country devalues its currency, others tend to follow suit.

As a result, nobody achieves trade gains.

Instead, the devaluations put upward pressure on the prices of commodities such as oil.

Higher commodity prices, in turn, can cut into global economic output.

...the price of oil is up 8.7% since August 27.

What’s more, says Brandeis University economist and trade expert Catherine Mann, competitive devaluations do little to remedy one of the biggest maladies of the current recovery: a lack of business and investor confidence. “It’s very damaging from the standpoint of firms trying to make decisions,” she says. “The use of the currency as the tool to generate economic growth and jobs is just so blunt that it’s absolutely focusing on the wrong thing.”"

Mark Whitehouse

Ponzi finance units must increase outstanding debt
in order to meet financial obligations

A transition occurs over the course of an expansion
as increasingly risky positions are validated by the booming economy
that renders the built in margins of error superfluous
encouraging adoption of riskier positions

Eventually, either financing costs rise
or income comes in below expectations
leading to defaults on payment commitments

Hyman Minsky
Believed excessive debt causes financial crises