Are people behaving as if they believe this is a weak economy? I see no indication of that. In fact, I see the contrary.
On the other side of the trade deficit, of course, is the capital surplus. We are buying more goods than we are selling, but, on the other hand, the capital account surplus means that the United States is such an attractive market...that individuals from abroad are investing in the United States...at a record rate.
We would see lower levels of investment, lower economic growth, and as a result, lower wage gains.
If you look at the housing market and say, are housing prices going up where job growth is high, where wage growth is high, where demographic movement brings people into the housing market? All of those things seem to be true.
Most who have been looking at the fourth quarter view that as a blip rather than a trend and expect a continued strong economy.
The only way to eliminate the deficit in the long run is through growth.
We are moving into that phase where we expect that wage growth will catch up and take productivity over.
If we were to see an abrupt change in exchange rates, we might expect there might be some change in that. But again, I don't think anybody's predicting any kind of abrupt change.
It would be a significant problem and it would move in exactly the wrong direction.
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