Bernanke’s Export Initiative

President Obama's goal to double U.S. exports in five years is getting a boost from Federal Reserve Chairman Ben Bernanke.

As expectations built in recent weeks that Bernanke and some other Fed officials were steering the central bank toward a powerful second round of economic stimulus, through unusual money creation moves known as "quantitative easing," U.S. exports have gone on sale.

That's because with this "QE2" on the way and likely to drive down long-term U.S. interest rates, global currency markets are trading the U.S. dollar downward. That automatically makes dollar-priced goods cheaper in foreign markets. Bernanke gave a closely-watched Oct. 15 speech in which he all but confirmed QE2 is coming, presumably with the Fed's next policy meeting Nov. 2 and 3.

And the dollar's slide could continue for quite a while, because after the Fed launches QE2 it will keep pouring lots of extra money into the economy until the recovery gains much needed muscle. Currency markets left guessing on QE2's size could not as easily lock the dollar to a price range against the euro, yen or other major currencies for international trade.

The latest U.S. trade figures show the value of exports rose 17.9 percent this year through August, a pace that if maintained to 2015 would double U.S. export sales and meet Obama's target. The trick, of course, is how to keep the momentum going.

The president's National Export Initiative is just taking shape, and could come up with new policies that do more to spur exports. In the meantime, the Export-Import Bank is ramping up its export finance aid, and even the Department of Transportation is targeting export growth as a policy goal for some transport project spending.

Bernanke's QE2 should also stimulate the inbound flow of goods. Since the U.S. imports much more than we sell abroad, spurring the economy means U.S. consumers will buy more foreign goods that will arrive on container ships and feed the intermodal network here. So far this year, imports have grown even faster than exports in a global trade rebound that was sharper than freight handlers anticipated.

But by cutting the price of U.S. goods for perhaps many months to come, QE2 gives overseas buyers more incentive to look at U.S. products. A lower dollar in the coming year gives our exporters an extra lift, and creates more outbound demand for cargo boxes that are often hard to come by in the interior.

Bernanke wants to cut the U.S. jobless rate from its dangerously high level. And the Fed hopes to lift inflation from a dangerously low pace that reflects weak demand to a still-mild but stronger pace that shows buyers are coming back into the goods markets. That will not happen in a few weeks or months, so expect QE2 to be around for 2011.

And expect those export numbers to benefit.

-- Contact John D. Boyd at jboyd@joc.com.