Saturday, February 13, 2010

Weak or Strong - Which is Better?

Strong, obviously, right?

How about for currencies? Would you rather have a "strong" dollar, high in value against other currencies, or a "weak" dollar, lower in value against other currencies? Well a strong dollar seems to be a matter or pride with many conservative politicians, and their richer constituents, who tend to buy more luxury goods from abroad, and travel more.

But the fact of the matter is that a "weak" dollar is much better for our economy. A weak dollar makes our products cheaper than our competitors, both abroad and domestically. We produce and sell more, and employ more workers, when the dollar is weak.

The Chinese know this very well. They keep their currency, the rembibi, artificially weak, so as to spur their economy and continue its incredible growth. It's their weak currency that allows them to experience huge trade surpluses year after year, and accumulate huge dollar reserves.

Right now, Greece, Spain and Portugal would love to weaken their currencies as their economies struggle, but they can't. Their currency is the Euro, over which they have no control.

So the next time you hear a politician railing against the weak dollar, maybe you should think twice.


  1. No argument here - though a weak dollar can make foreign travel pretty pricey.

    However, it's great for our balance of trade as heavyweights like Boeing and Caterpillar shold find themselves building a lot of export products.

  2. Whether or not a weak dollar is beneficial to a few corporations is inconsequential in comparison to the small businesses that can benefit from it over the long haul, as they are truly becoming the economic engine of the future and exemplify the entrepreneurial spirit that drives everything in this internet savvy (and increasingly small, small) world, IMHO.

  3. I should add that given the fact that we are a resource poor nation, a weak dollar is extremely detrimental to the possibility of bringing back the kind of blue collar middle class jobs that manufacturing jobs provided at the economic peak of this nation. Importing resources for production becomes too costly to allow us to really be competitive in that sector.

    It is and always will be a double edged sword, just as a really strong dollar is.