IPod, China and the falling dollar


Andy Kessler weaves an interest thread with his opinion piece in today’s Wall Street Journal. He points out that the mega success of IPod might have something to do with US deficit and the falling dollar. “A lower dollar means foreigners get a needless discount on our productive stuff — Pentiums and iPods, Windows XP and Oracle databases, and Cisco routers. They have to buy them anyway to run their economies (well, maybe not iPods) so why discount?,” he writes. Highly recommend reading this very well put together argument, even though it is hidden behind the WSJ subscription wall. Andy is at his wicked best! Here is a link to the piece on his website, which is much easier than dealing with WSJ pages.


Henrik Torstensson

A well-written piece based on pretty poor analysis. First, it is pretty pointless to talk about an discount in currencies as it is difficult to peg the true value of a currency at any given point. But assuming that foreign investors will accept 3 % nominal interest rates on dollar denominated bonds when the currency is devaluating rapidly is just dumb. The Economist did a pretty good piece on the risks of a falling dollar some weeks ago.

On the other hand, the argument that doing value-adding stuff is better than doing basic assembly is right.

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