Paul I’m going to start calling you Rhino! Because you undoubtedly have the thickest skin of anyone I know! Certainly thicker than mine! You can’t win for trying. Usually I’m in the camp of bashing you for the Pollyanna view that you seem to take on every issue. I was scrolling the headlines on the home page and saw “Strong Bittersweet dollar.” And thought WOW, SOMEONE THAT GETS IT! I have to say I was floored when I saw it was you, and then to see such even keeled journalism… Tip of the hat to you sir! Personally I think the WORSE thing for the economy right now is a stronger dollar. Take exports and job effects (weak dollar benefits) out of real GDP and you have a negative GDP back to back for several quarters in a row already. These benefits go away with a strong dollar, job losses will accelerate, exports will drop not much different than commodities have, and keep in mind that the dollar is only “strong” now because the other currencies are weakening. It’s a relative thing, it doesn’t mean the dollar is great, just better than the other choices.
I disagree with Paul, I think a weaker dollar would benefit the average American in the long run. The reason why is because it is too high when compared to its actual value. As we should have learned (but never actually do) from the .com bust and the housing bust, running around feeling rich on false value comes back to smack us.
The one and only thing (IMO) that will induce America, American companies, American consumers, to balance our trade deficit, to produce what we consume, to live within our means, – and a list of other phrases to say the same thing – is for the dollar to drop against world currencies over all.
Yeah, we may keep rising against the Euro. But we don’t buy most of our stuff from Europe. We buy it from OPEC, from India and from China. It is how we balance against THOSE currencies that will make the difference. Keep in mind, our government is pushing China hard to get them to revalue their’s higher against ours.
Paul-YOU TOO OPTIMISTIC? HAHAHAH! No, really partner, what is in your coffee? This is the same guy that prints headlines about a “Recession”, “Slump”, “Slowdown” to get his liberal politicans that CNN favors elected!??
There is no recession, slump, slowdown etc. Trust me Paul, no one would accuse you of being too optimistic. A shill for liberals, maybe.
A weak dollar is in our country’s best interest as it forces U.S. away from manufacturing/polluting to service (finance, law, etc) jobs (greater standard of living, less pollution etc). We think. They sweat. Liberals favor strong dollars (See Bob Rubin who just got demoted at Citi) so they have an excuse to raise taxes.
Besides, we have too much debt to tolerate a strong dollar. We wouldn’t want to actually pay our debt back at face value, would we??!! That would not be wise.
Let our lenders take the losses.
There’s one point that’s missing from the discussion. Even after the recent rally, the dollar is still weak. A strong (or weak) dollar is both good and bad for the economy, depending on how you look at it. I hope the dollar gains a bit more strength, but not so much that Europeans can’t afford to come here and can’t afford to buy American goods. We’ve got a long way to go before that happens. A 6-month high in the dollar is almost meaningless, but a 10-year high would cause problems.
Lindsay, you raise a valid point. Still, it’s kind of amusing that I’m being accused of being too negative since the overwhelming majority of readers who email me and comment on this Talkback post seem to think I’m being overly optimistic. All I am trying to do is take a level-headed view of the economy and markets and point out the pros and cons. Sometimes, as you can imagine, headlines don’t tell the whole story because we are trying to entice the reader to read the story. So all I can ask is that people read the entire column before making any judgments about the content. Thanks and take care.
PRL
A stronger dollar is bad for the overall economy. As a nation we need to be competitive in the world and we can’t do that with foreign goods. A weaker dollar will help ramp up our manufacturing, which in turn will help our economy by providing more jobs. Also, a stronger dollar is misleading to our people, and they won’t be ready for the next wave of the bank crisis to hit. We’ve only just begun to filter through the system one type of bad loans, others are on their way. The weaker dollar gives us more time to prepare. Another good thing that comes from the weaker dollar is immigration. The people here illegally are here to send money home. A weaker dollar sends them home in a natural and non-confrontational way. This will in turn lower our auto insurance costs, healthcare costs, and our overall welfare costs. Then we would have a much better chance of dealing with social security issues. Currently our welfare tax is as high as our social security tax. A weaker dollar focuses our country into producing our own goods and being more self-sufficient making us a stronger nation.
Paul, I still disagree. If it was your intention to highlight the good news in a stronger dollar then your headline should have reflected it. Instead, it reads to the negative. This is what most readers will see and may not read this article (or read a few paragraphs) and come away with a negative impression of a strengthening dollar.
This is the usual BS from the news….good news for most people is portrayed as bad news. The fall of the dollar has had less to do with fundamental economics and more to do with politics and emotion. The US is and has been the economic engine of the world and a premium of 50% against the Euro is way overdone. The dollar still has significant room to improve against the Euro and should approach parity. This will be great news for most Americans and should be the theme!!
No. The logic of the article is that I’m pointing out both the positives and negatives of a stronger dollar. I clearly make the point towards the end of the column that a stronger dollar is ultimately better for the economy because of the impact it will have on reducing inflation pressures and increasing U.S. consumers’ purchasing power.
All I’m doing is laying out some of the risks of a stronger dollar. But my final conclusion is consistent with the other columns I’ve written in the past few weeks, i.e. that there is some good news for the economy and that the stronger dollar and pullback in commodity prices reflects that.
PRL
By the logic of the article, a stronger dollar is bad because it increases labor costs and makes American industry less competitive. Similarly, salary increases increase labor costs. So, as responsible Americans, I suppose we should all be rooting for a weaker dollar and volunteering for lower salaries. After all, a stronger dollar is like a raise in that it increases our purchasing power both at home and abroad.
Traders are obviously coming to the conclusion that the meteoric rise of the Euro was mostly hype. Europe, with its high tax socialist agenda, simply cannot compete with the less government invasive policies upon business that the U.S. has.Of course this could all change depending on who is elected in the fall.The productivity in the U.S. combined with recovery, in my prediction, should see the dollar return as the dominant currency in the world.