$ weakness tends to correspond to economic weakness. the slowdown in the us is hurting manufacturing and manufacturing employment (see autos) even as the weak dollar is helping exports and employment in the export sector (see planes, GE turbines and the like). dollar weakness in my view is preventing an even bigger slide in manufacturing employment.

I agree with your points about oil and its impact on the trade deficit.

Rachel — maybe kuwait, which still manages its currency basically against the dollar, has discovered that diversification doesn’t work, as it just pushes the dollar down and thus creates other problems for a country that still basically pegs? or kuwait’s statement could be taken at face value: to buy the euro now, you reallly have to believe the $ is about to tank, as it is already very strong. the case for diversification into asia and ems is a bit stronger — however, bader may be a bit worried about the fall in asian equities. they likely bought in at sometime close to the peak. and the bigger relative fall in asian than us stocks likely has increased the us weight in the portfolio.

Interestingly, in a recent interview with Bloomberg TV, Bader Al-Sa’ad, the manager of Kuwait’s fund suggested that Kuwait had delayed its diversification away from the dollar in part because they sought to take advantage of dollar and US financial sector weakness.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHwjxvO2RV3s&refer=home

and this is from Kuwait, a country that abandoned its peg (although the dollar still dominates its basket as far as I know)

2) Every $10 increase in the price of a barrel increases the trade deficit by $45 billion. At $200 a barrel, our trade deficit from oil alone would be $900 billion. The US is caught in a vicious cycle. The higher the price of oil goes, the higher the deficit, the lower the dollar, the higher the price of oil.

3) The only solution to the above is to import less oil. The implications of this are far-reaching since oil consumption is directly correlated with the GDP.

4) The latest BLS report shows a rapid decline in manufacturing employment. This runs counter to the prevailing economic theory that a weaker dollar helps manufacturing. Over the last year we have lost 300,000 jobs in manufacturing. Even as we need more manufacturing to offset the rise in oil prices, we are in fact doing the opposite. This needs to be addressed by the economic community.

Write your Senator, Congressman, Bernanke, your local newspaper, every local newspaper, start a campaign, go on a hunger strike….but respect Brad and keep comments to topic which in this case is the Economists surprising hypothesis on a strange evolution in the ralationship between the USD and oil.

Is the Federal Reserve suppose to operate like the US Central Intelligence Agency keeping it monetary policy decisions in secret from the American people, or does the Federal Reserve operate exclusively as a branch of Goldman Sachs? A year ago, the Federal Reserve’s $915 billion balance sheet was almost all Treasury securities. But that number is quickly dwindling under Bernanke’s decision to accept subprime "garbage" securities from investment bank Goldman Sachs and others in exchange for liquid Treasuries. We don’t know what sort of subprime securities are on the Federal Reserve balance sheet because Bernanke refuses to disclose the classified information to the American people. So I have one request for the investment banks and the Federal Reserve. Show me your "real" balance sheets. Since my children and I will likely inherit this bailout of the securities industry, I would like to see exactly what the US taxpayers owe.

How many times will you post and repost the same ole stuff. We know your perspecive, why not find something new to say. It is like you have these articles in folders and pull them out because, possibly, someone differs with your take on things. Well, guess what, many do, so what, your need to spam the board. Why don’t you just move on to more fruitful pastures, where you can chum with pals who support your perspectives. It might satisfy your ego. Some of us actually like a different perspective, to push our beliefs, and test our assumptions. Yours have been duly noted, and, frankly, have been commonly accepted in many circles for years now. Things have not turned out as you repeatedly have predicted. The results, not as you suppose, despite what Lou Rockwell believes. Go hang out on the CD forum, it is more suited to your control.

Brad:

Why do you allow people to cut and paste without providing commentary? Spamming runs people away from the blog.