Baker: Weak Dollar- Not All Bad News

Why a weak dollar is not all bad news -Gerard Baker
The global economic power balance is said to be shifting towards Mighty Europe and Emerging Asia:
"But currencies don't always fluctuate because of seismic, epochal, geopolitical shifts. The decline of the dollar is for rather more prosaic reasons: short-term interest rate differentials, the rebalancing of temporary financial and economic imbalances, sudden changes in commodity prices.

The historically short-sighted may need reminding that a 43 per cent decline in the dollar between 1985 and 1995 laid the foundations for strong economic growth. Those taking the millenarian view should also be aware that the net wealth of American households has increased by $11 trillion in less than six years.
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According to Gerard Baker: Two changes are taking place that mean these developments are not as alarming as they at first appear, and indeed less worrying than they would have been in previous economic cycles.
First, the weak dollar is starting to have exactly the effect that any economics student would predict. America's current account deficit has been shrinking for most of this year. A huge improvement in America's trade balance is taking place.
American exports, relative to American imports, are the best they have been for more than 20 years! Even American car exports are flourishing.
The other transformation is even more profound. Asian demand is sustaining the world economy in a completely new way:
As the IMF's World Economic Outlook noted a few weeks ago, China is now contributing more to world demand than the United States.
That's a first.
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