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I think Todd and I are stranded on the same island.

A weaker dollar helps U.S. exporters only if there is someone to export to. Every country is struggling to devalue their currencies to spur their economies. That tells us that overcapacity is still the problem.

But the U.S. is in a particular fix. Our economy is highly dependent on the consumer, and the highly leveraged consumer is dependent on low interest rates as supplied by foreign investment.

A lower dollar hurts the consumer by making import prices higher. More importantly, a lower and lower dollar signals that foreigners are less prone to invest in financial assets of the U.S. The latest figures show that foreign buying of U.S. financial assets has slowed to $4 billion in September from $49 billion the previous month. That is the worst month of inflows since the autumn 1998 (LTCM crisis) and worse than anything we saw in the aftermath of 9/11.

I remain focused on the dollar. The real trouble begins when (if) it begins to affect the U.S. bond market. It hasn't yet.
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