Locally, Falling Dollar
by Greg Stiles
Financial upheaval on Wall Street can be hard to translate into everyday activity in Southern Oregon.
Subprime fallout, liquidity issues and a wobbly economy led the Federal Reserve to take unusual and extensive measures this week.
The Fed provided JP Morgan funding to take over faltering investment bank Bear Stearns and lowered its "discount rate" to 2.25 percent in a move that weakened the dollar's value against other currencies.
The declining dollar, however, figures to be a boon for exporters. In the Rogue Valley that means companies such as Erickson Air-Crane, whose goods and services are sold to foreign clients, have gained a competitive advantage against global competition. Suppliers of components used by manufacturers also benefit.
"Lower interest rates without a strengthening in the economy lowers the dollar value overseas and makes our products a little more attractive," said Bill Thorndike Jr., Medford Fabrication president, a Port of Portland commissioner and a Portland branch board member for the regional Federal Reserve Bank of San Francisco.
The latest Commerce Department figures tracked by the International Trade Administration show Oregon exports grew at a 23.5 percent clip in 2006, while Medford excelled at a 50.3 percent pace. The Medford metropolitan statistical area, which takes in all of Jackson County, saw exports grow to $172,652,936 in 2006 after coming in at $114,858, 818 in 2005.
Even heading into recession, exports such as wheat, soda ash and potash from Western mines shipped from the Port of Portland.
"I don't think export growth has gone away," Thorndike said. "The Erickson Air-Cranes of the world, where there is a fairly long lead time for items, continue responding.
"When the dollar is down, it makes those heavy-lift helicopters more attractive."
Thorndike said his own company's No. 2 customer in 2007, Caterpillar, ships equipment to West Africa. In the NAFTA era, Thorndike said Medford Fabrication is building components for Canadian firms doing work in the U.S, because of the Canadian currency's relative strength.
"Whether it's a transformer plant or building supplies, our products are more interesting to Canadian customers now," he said.
Despite its gains, the Medford market still trails Willamette Valley exporters. Portland accounted for $14.6 billion worth of exports in 2006, Eugene $828.2 million, Corvallis $341.5 million, and Salem $262.7 million.
"I think it will keep growing," said Ron Fox, executive director of SOREDI. "We still dialogue with local manufacturing firms and they are still talking about growth and expansion. Those businesses not connected with the housing market are still expanding. They're going to discover their products are going to be more competitive than they are today, two years or five years ago."
Fox said products from Internet and catalog marketers such Harry and David or Rogue Creamery are more affordable with the dollar trading at $1.53 per euro.
"Rogue Creamery is expanding into the European market at just the right time," he said.
As for the drop in the Fed rate, Thorndike is confident the Open Market Committee deciding such matters is on the right track.
"I'm very pleased with attention the board and Federal Reserve has paid to the federal credit crisis," said Thorndike. "I go to sleep at night knowing the next morning the Fed is thinking about it and taking action to make sure there is liquidity in the system."
The flow of capital depends on a balance of leveraged risk and the ability to have cash to complete transactions.
"The financial system is appropriately built on some leverage," Thorndike said. "That allows for the economy to grow, and part of the way we do that is by having institutions that can basically loan money to entities so they can continue to grow and expand. That relationship allows for the economy to work in a more efficient way than if it were on a cash-only basis."
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