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Thread: Why a Strong Dollar Hurts the U.S.

  1. #1
    Registered User LAGC's Avatar

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    Lightbulb Why a Strong Dollar Hurts the U.S.

    The dollar's current status as “the nicest horse in the glue factory” is a source of pride for some, but on the whole it is bad for the economy.

    Moreover, it may get worse, depending on how acute the smoldering problems of the eurozone get. Yet, politicians in both parties continue to prattle on about how they favor a "strong dollar."

    That misunderstanding of the effects of an expensive currency is nothing new. As econ students learn, an expensive dollar, unfortunately often characterized as “strong,” means imports are cheaper for us and U.S. exports more expensive to foreign buyers. Yes, that benefits U.S. consumers. But having an expensive dollar is bad for a nation's employment, business profitability and economic growth.

    For agriculture, it means U.S. soybeans, corn, wheat, poultry and other exports are more expensive to our historic customers So are the heart valves, pacemakers and other high-tech manufactured goods that are so important in my home town of St Paul, Minnesota. Higher prices mean reduced U.S. export sales and, ultimately, lower prices for farmers and lower profits and fewer jobs in manufacturing.

    It also means that anyone competing with goods or services imported from Europe faces stiffer competition. A stronger dollar, for example, means imported cars become cheaper compared to domestic ones.
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    http://www.idahostatesman.com/2011/1...an-says-a.html

    Ed Lotterman has regular columns in the Idaho Statesman. Unlike a lot of right-wing supply-side economists, he's much more savvy on the big picture -- macroeconomics.

    Sometimes I wonder if maybe it wouldn't be so bad if the Fed just started printing a bunch of money and intentionally caused inflation as a way to weaken the U.S. dollar and devalue the national debt.

    Imports would become more expensive and domestic manufacturing would take off again, greatly reducing unemployment. The trade deficit would eventually balance out, slowing countries like China from profiting from our consumerism, taking advantage of us.

    In theory, if the minimum wage kept up and employers were forced to keep giving people raises to match inflation, U.S. workers would be able to keep afloat, with consumer goods only costing slightly more (inflation-adjusted) in the stores.

    The rest of the world would hate us and probably never buy our debt again, but tough nuggets. We'll just have to learn to live within our means. It might make everyone be more cognizant of risky investments.

    Maybe all this angst against the Federal Reserve is misplaced. Maybe they should just start mailing checks to every American household and cause inflation to shoot through the roof. Maybe that's what it will take to save us from total collapse. All debts will be devalued, and the rich will be enticed to invest instead of hoard all that wealth. Sounds like a win-win scenario.

    What do you think?
    "That tyranny has all the vices both of democracy and oligarchy is evident. As of oligarchy so of tyranny, the end is wealth; (for by wealth only can the tyrant maintain either his guard or his luxury). Both mistrust the people, and therefore deprive them of their arms." -- Aristotle, Book V, 350 B.C.E

  2. #2
    Senior Member mriddick's Avatar

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    I think the dollar really isn't all that strong, it's just stronger then the Euro and the Chinese purposely keep their currency down, which results in an over valued dollar.

  3. #3
    Registered User LAGC's Avatar

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    Quote Originally Posted by mriddick View Post
    I think the dollar really isn't all that strong, it's just stronger then the Euro and the Chinese purposely keep their currency down, which results in an over valued dollar.
    What do you think about the idea of inflating our way out of our mess though? Macroeconomists often talk about the trade-off between inflation and unemployment -- it might just be what the doctor ordered to put people back to work.
    "That tyranny has all the vices both of democracy and oligarchy is evident. As of oligarchy so of tyranny, the end is wealth; (for by wealth only can the tyrant maintain either his guard or his luxury). Both mistrust the people, and therefore deprive them of their arms." -- Aristotle, Book V, 350 B.C.E

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    Senior Member cevulirn's Avatar

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    Until you forcefully bloat the minimum wage further, (And thereby drive up many union wages which are tied in as a multiple of minimum wage) and put even more companies out of business.

  5. #5
    Senior Member mriddick's Avatar

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    In a country of 330 million remember only 120 million or so work in private industry I'd be afraid you're going to drive up the difference between the haves and have not's unless you just start giving money away which would in it's own right destroy the workforce and economy.

    I don't trust the gov't that much to be able to do this without screwing it up worse. Rather then gov't manipulating the economy I'd rather they just get out of the way.

  6. #6
    Team GunsNet Silver 12/2012 Warthogg's Avatar

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    Coming out of - or when in - a recession, the dollar is supposed to be weak and we export our way back to prosperity. This time Europe sucks more than the US and China is manipulating their currency so probably the US dollar is “the nicest horse in the glue factory”.

    I'm not sure how much the above matters as I doubt we have the production capability to export our way out. We don't even have nearly enough machinist. Seems those with a four year degree in anything ending in "STUDIES" can't run a milling machine.



    Wart

  7. #7
    Team GunsNet Silver 12/2012 Warthogg's Avatar

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    Quote Originally Posted by LAGC View Post
    What do you think about the idea of inflating our way out of our mess though?
    Prolly should wait until the economy shows signs of deflation.


    Wart

  8. #8
    Registered User LAGC's Avatar

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    Quote Originally Posted by Warthogg View Post
    Prolly should wait until the economy shows signs of deflation.
    Arguably it already has, in regards to housing prices and most consumer goods. Really, besides food and gas, almost everything else has dropped in value.
    "That tyranny has all the vices both of democracy and oligarchy is evident. As of oligarchy so of tyranny, the end is wealth; (for by wealth only can the tyrant maintain either his guard or his luxury). Both mistrust the people, and therefore deprive them of their arms." -- Aristotle, Book V, 350 B.C.E

  9. #9
    Team GunsNet Silver 12/2012 Warthogg's Avatar

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    Quote Originally Posted by LAGC View Post
    Arguably it already has, in regards to housing prices and most consumer goods. Really, besides food and gas, almost everything else has dropped in value.
    Even excluding food and gas we still have some inflation.....about 3%. We've not deflated since 2009.



    Wart

  10. #10
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    Where Have you been? This has been addressed frequently over the last couple of years at least.

    Inflate our way out of debt? If we are going nuclear why not just print enough currency to pay off all outstanding debt?

    Duh....!
    CHOOT UM!

  11. #11
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    Do you remember awhile back I asked you to float a thread on DU to feel out the native's thoughts on stimulus spending? My thoughts were that it would lead to inflation, they felt it would lead to deflation, but probably not have any real effect.

    What has happened? How has it affected our ability to manage our national financial picture?
    CHOOT UM!

  12. #12
    Team Guns Network Silver 04/2013 alismith's Avatar

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    I'm not knowledgeable about economics, but if LAGC is in favor of it, I'm probably going to be against it. (Just basing my opinionon the law of averages.)

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