More on the dollar

"The growing external deficit appears to be structural: since 1990, US exports of goods and services have been growing at 5.7 per cent a year, in constant prices, while imports have been growing at 8.8 per cent. To avoid a continuing deterioration, one alternative is for the US to grow more slowly than the rest of the world. But Mark Cliffe of ING argues that it would need an 11 per cent fall in US GDP, relative to trend, to reduce the current account deficit to 2 per cent of GDP. It should go without saying that the US would not tolerate such a slump. There are two possible escapes from the recessionary trap: depreciation of the real exchange rate and faster growth in the rest of the world. But, according to Mr Cliffe, it would take a 36 per cent increase in the rest of the world's GDP, a 34 per cent decline in the trade-weighted dollar, or some mixture of the two, to reduce the current account deficit to 2 per cent of GDP." - from the FT on Dec 16, 2003.

I found this just to give an idea of the size of decline people are looking for in the dollar to alter the balance of trade in a meaningful way.