Wednesday, July 07, 2010

The Problem With ‘All Things Constant’

Northern Trust’s Asha Bangalore writes,

``All other things constant, a stronger currency reduces exports of a nation as does weakening economic conditions in importing economies.”

But at what point of our lives or of anyone’s life has all things been constant?

The sun rises tomorrow if we are lucky enough to be alive to see it. Yet ultimately the sun dies in a few billion years.

So if there is anything constant is the cycle of life and death, but we never know WHEN. Therefore not knowing equals inconstancy or uncertainty.

Of course, as Benjamin Franklin would have it, there are taxes too…

But if one argues in terms of the relationship between currency-exports/economy, there is hardly any merit to such premise.

Proof?

“Stronger currency reduces exports”...

Here is the Euro since its inception...

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From Yahoo Finance

Here is the 15-year chart of the Japanese Yen...

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From Index Mundi

And here are Japan’s and Germany’s Exports as % of their respective economies...

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From Google

All things constant?

1 comment:

DARG said...

Aye, sir. As the cliche goes... The only thing that is constant ...

Thanks for the sharing the cool new google toy. :)