So, in theory, now American goods are cheaper for everyone else in the world to buy, and everyone else's products are more expensive for Americans to buy. This should lead to a manufacturing boom for the USA, right?
Unfortunately, the weak dollar means that the only bargain has been until recently, US labor, whose cost to employers has grown modestly. US real estate was a bargain early on, before the bubble got heated up, and now it may be becoming a bargain to overseas investors again. But for manufacturers and any business that consumes any natural resources, the cost of those resources -- metals, plastics, energy, etc. -- has skyrocketed with global competition for the resources.
Looking ahead, resource competition will continue to drive up the cost of raw materials and powering all businesses. The cost of goods bought will reflect thoses costs. And the cost of labor will likely rise as employees find it harder and harder to make ends meet, to keep their families fed and their homes warm, and to commute to work.
It may not be a depression, but it does look like the return of "Stagflation". You cannot blame cost increases on an over-heated economy, and if you drop interest rates, you can crash the dollar, and if you raise interest rates, you will shut the door on R&D and capital investment.
It's a fine fix you've gotten us into Dubya!
