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Message-ID: <373CA347.AC3B118A@xxxxxxxx>
Date: Fri, 14 May 1999 15:27:19 -0700
From: Mervin Yeung <tinyeung@xxxxxxxx>
Organization: @Home Network
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To: ericrogers@xxxxxxxxxxxxx
Subject: Dynamic Economics
References: <373C88A1.FC41D8DF@xxxxxxxx> <373C8D0A.2D986CF1@xxxxxxxxxxxxx>
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Hi Norman,
No question is stupid. I am glad that you asked.
Currency value is decided by several factors: some are static factors
(cause-effect), some are dynamic factors (positive feedback). Capital
flow is dynamic while current account deficit is static. If dynamic
factor is absent, we take static factor. If dynamic factor is present,
forget about static factor.
If capital inflow no longer occurs in the US, we must focus on current
account deficit. Yes, the rest of the world may import more from the US
if their economies improve. But, if the dynamic factor (capital inflow)
which helps support USD value, ceases to exist, USD will be in trouble
because the time required for current account balance to improve is
longer.
Mervin
Norman E. Phair wrote:
>
> Mervin:
>
> I am not good in this area, so please excuse what maybe
> a stupid question.
> If the developing countries improve then won't they
> have more money to buy our goods and reduce out balance
> of payments?
>
> Norman E.
>
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