My hope is that massive reductions in regulations and taxes will overcome the negative effects of a bit of protectionism.
A trade and devaluation war with the rest of the world would crush our economy. Need to make the USA a worthwhile investment place again by eliminating environmental extremism and socialist tax policies.
There are advantages to a strong currency and advantages to a weak one.
The squealing about Trump saying the dollar is too strong is from offshore manufacturers wanting to continue having their cost advantage over domestically produced goods.
It’s certainly not from domestic companies wanting to increase exports.
The value of the dollar has minimal effect on what we in America pay for goods and services produced and marketed in this country. It is an excellent reason to bring mfg back home to America.
This article ignores several factors that greatly impact the valuation of currency one nation vs. another and the effect of exchange rates in any given instance.
1. Safety-The globally recognized “safest” currency in the world is (and has been for decades) the US dollar. This is why oil is denominated in dollars. It is also generally deemed a safe currency due the relative size of our economy versus other world economies together with relative political stability.
2. Interest rates-Given the safety of the US dollar, the main ingredient in determining exchange rates between the dollar and other currencies around the world is interest rate levels. In the case of the dollar, increases in rates tend to strengthen its value. It’s simply supply and demand. If rates of return increase for a given currency (all other factors being equal) money tends to move into that currency given the safety/stability mentioned above. The demand for the currency with a higher return is increased and at the same time demand for other currencies is likewise lessened through the conversion necessary to have the correct denomination. For example, pesos to dollars.
Over the past year this is precisely what has caused the dollar to strengthen (beside upheaval from Brexit and EU.) The Fed is the primary reason for this. Not only has the Fed raised the benchmark rate twice in the last year, it has continually expressed an inclination to continue on this path. This is part of the reason the stock market pauses ahead the regular Fed meetings except for banks and financial stocks which have experienced significant increases in value.
“If” our currency is, relative to other currencies, over-valued than that disturbs the economic equilibrium and creates pressures towards returning to the equilibrium. Either under-valued currencies increase or over-valued currencies decrease but homeostasis will rule the day...
Dollar strength is only a concern for those in the import/export business.
When we are importing more than exporting a strong dollar is needed, but how does one get a strong dollar if it is economically weak??
I don’t want unnecessary imports, and I could care less about exports. If we get exports that’s just gravy for the economy, but to manage our economy solely on export is retarded.
For all this talk about strong American exports, we’ve lost that battle so far and now import far more than we export.
Let’s try something else now, shall we?
All you chickenhawks claiming America must be weak and cower need to F yourselves.
For later