Last Wednesday, Beijing turned the tables on Treasury Secretary Hank Paulson. After enduring years of criticism from Washington on its handling of the Chinese economy and its currency, China's Chen Deming, the incoming Chinese Commerce Minister, said the falling U.S. dollar had pushed up the cost of imported resources and has been a destabilizing factor. Deming stated that "What I'm worrying about is the weakening dollar and its potential impact on global growth." Hmmm. I wonder if the Chinese are starting to feel jealous of our new manufacturing advantage.
The U.S. seems to be the new hot spot for global firms looking for lower production and transport costs. France's Alstom, for instance, said it will build a $200 million plant in Chattanooga to take advantage of the weak U.S. dollar and reach its biggest customer base without trans-Atlantic shipping costs. Since the dollar is down so dramatically to the euro since 2001, many European firms are opening up manufacturing divisions here, including car-makers Fiat and Volkswagen. The German steel giant Thyssenkrupp is also building a $3.7 billion plant in Calvert, Alabama. Earlier this year, Airbus opened an engineering center in Mobile, Alabama, for cost advantages.
Technology firms are also opening up plants in America. The Swiss drug company Novartis has a huge research center in Cambridge, Massachusetts. Another example is Finland's Nokia, which opened a research and development center in San Diego, focused on designing and developing handsets for the North American market. In addition, memory-chip maker Samsung Electronics spent $3.5 billion on a new plant that opened earlier this year in Austin, Texas.
Some prominent politicians keep telling us that a weak U.S. dollar in bad for the U.S. economy. Any time I run into politicians of either party, I am asked about my opinion on the U.S. economy, since some of them recognize me from appearing on CNBC or Fox News. This happened on Saturday night, when I ran into Clinton acolyte James Carville at an event near my Florida home. Carville asked me about the status of the U.S. economy. I told him that the weak U.S. dollar is causing exports to soar and is responsible for much of our economic growth. This was clearly not the answer Carville wanted to hear. He walked away, mumbling a response I could not decipher.
I hope that James Carville and other key political advisors can see what is unfolding. The weak U.S. dollar may be very controversial, but it can also be beneficial. The fear is that the weak U.S. dollar could cause hideous inflation as the price of imported goods rise. In fact, some might cite the dramatic rise in the PPI and CPI in November as evidence that the weak U.S. dollar is bad. But provided that the U.S. dollar does not strengthen too much, it will likely help to unleash an incredible economic boom as more multi-national companies shift their operations to the U.S.
