As the US dollar continues to strengthen against other currencies, particularly the Euro, some U.S. economists seem stuck on the notion that it’s bad for the U.S. I however, can not buy into this. A strong dollar is a good thing. However, in traditional, historic economic policy, if the strength of the dollar increases, essentially signaling that the U.S. economy is healthy and getting healthier, that’s a bad thing. This insane thinking must end.
First let’s answer the question of why many economists sees a strong dollar as a bad thing. Essentially, it’s because it makes our exports more expensive oversees. The rationale of course is if U.S. products are more expensive, no one will purchase them, thereby hurting the bottom line of U.S. companies. Walmart exists because of inexpensive Chinese made products. But what about the 300 million Americans here at home? Do they not matter? A strong dollar will make those inexpensive products even more affordable. Why shouldn’t Americans have more buying power at home as well as oversees?
Please take note, the way to sell more products oversees is not by making our currency less valuable, (that’s what 3rd world countries do) but rather by making our products the best in the world so that everyone desires them. Apple is a great example of that. An i-phone will sell in Europe regardless of whether is costs 30 euros more than it did 6 months ago. Quality and innovation sells and will always sell, regardless of price or strength of currency. This applies not only to luxury items like I-Phones and I-Pads but all products as long as they are desirable and well-built.
A more important issue that needs to be addressed surrounding a weak dollar is what it does to our economy at home. Make no mistake, the single most important factor weighing on our economy since the crash of 2008, has been high gas prices due to a weak dollar. People will spend more money when they have it to spend. Relatively few people benefit from high gas prices but many benefit when people are shopping on-line, in retail establishments and eating at restaurants because they haven’t sunk and literally burned up their hard-earned disposable income in their gas tanks. OPEC plays a large role in fluctuating gas prices but that aging, boys club is losing it’s relevance over time. American refineries and a strong dollar are the greatest tools we have to fight high fuel prices until alternative fuels become more mainstream, i.e. battery technology and hydrogen fuel cells.
One other very important point, a strong dollar makes it easier for us to lower our ever-growing deficit? If the dollar is strengthening against the Chinese Yuan, we should take advantage of that and pay down our debt. There are other factors that must be considered but a strong dollar is a key ingredient. The ballooning US debt will negatively impact the economy of this country and our children’s and grand children’s lives for decades to come if we do nothing to reverse the trend. Just like climate change, a solution can not wait.
Being the best and the strongest is always a good thing. Americans should be proud of that. It’s what will make and keep us competitive at home and abroad. We must continue to strive and reward companies like Apple for innovative and creative technology. We must create demand for our products because they are the best in the world. Then and only then will the American economy continue to grow. If we change our thinking and approach, perhaps we will even be able to hold on to the #1 spot as the world’s largest economy for a few years longer than expected.