Re: ATR-72's and Airbuses

Date:         13 Dec 96 04:26:02 
From:         tschell@s.psych.uiuc.edu (Terry Schell)
Organization: University of Illinois at Urbana
References:   1 2 3
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Jean-Francois Bosc <bosc@mauve.recherche.enac.fr> writes:

<snip>
>Also, all analysts I heard agree that the current low rate of the US dollar
>is a subsidy for US exporting companies, and that the normal rate should
>be around 20% higher (if I remember correctly).

The value of the dollar is set almost entirely by market
pressures/perceptions. You cannot consider that a subsidy in any
traditional sense of the term.  Furthermore, there is no generally
accepted way to determine what the value *should* be.  One way would
be to look at the net international trade... since the US has the
world's largest trade deficit, one might argue that the dollar is
actually too strong.

>Finally, considering that market loan rates are around 5%, even if you
>are right this doesn't leave much room for significant "subsidies".

You are kidding right?  5% on billions of dollars/marks/pounds/etc of
development costs that might not be repaid for 10, 20 or 30 years
(you cannot even begin to repay these for 5-10 years).  That amounts
to significant "subsidies".... almost certainly into the billions of
dollars.  Interest/opportunity costs are the single greatest expense
in the production of many airplanes; anything that reduces that cost
will allow the company to bring their product to market at a reduced
cost.

Sincerely,
Terry