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?