[soccer_linux_mozilla]

Advantages of a Weak Dollar

1. Can help U.S manufacturing exporters, making their goods cheaper abroad.
2. Since the weak dollar causes American companies to sell more products cheaper abroad, this will reduce the U.S. trade deficit.
3. Overall a weak dollar can boost U.S output.
4. A weaker dollar can possibly lead to more jobs

Disadvantages of a Weak Dollar

1. A weak dollar can lead to higher interest rates.
2. A weak dollar can lead to higher inflation.
3. Imports become more expensive. This can hurt companies that import production components.
4. Less capital inflows by foreign investors

Advantages of a Strong Dollar

1. Imports are cheaper as there is a greater "purchasing power."
2. Lower inflation
3. Lower interest rates
4. When traveling abroad, the U.S dollars exchanges for more foreign currency.
5. A strong dollar encourages investment in U.S. equities and corporate bonds among foreign investors. These capital inflows from foreign investors benefit U.S companies.

Disadvantages of a Strong Dollar

1. Exports become more expensive, as there is a higher cost overseas for American products.
2. Increased U.S trade deficit.
3. Reduced U.S output
4. Foreign travelers find the U.S. more costly.

I think a "strong dollar" policy will always outweigh the advantages of a weak dollar.

[Moonman62]

I think a "strong dollar" policy will always outweigh the advantages of a weak dollar.

Nothing beats a sound or stable dollar that fluctuates with an efficient market. In theory that's what the Bush administration supports, but in reality it's nothing more than a Clintonian promise. Currency policies whether strong or weak cause problems in the long run when they are taken too far, which is almost always the case.

[Dat Mon]

"Advantages of a Weak Dollar............"

Good synopsis of the pro / con arguments.

IMHO we are playing a game of currency "chicken" with the Chinese. We are betting that they will flinch first and float their yuan sometime early next year. This will be a critical point to glimpse the China strategy for economic domination at work. The time frame for this...vis a vis their capacity to absorb losses and internal pressure by keeping their yuan pegged to the dollar will be illuminating.

On another related matter....there was a local news story this morning relating the story of one of our local malls here in PA, which happens to be one of the largest on the east coast.

People were literally lined up starting at 3 AM to get good spaces in line for the annual Black Friday sales events at the mall. One guy bragged that he had spent over a grand before 6 AM!! (pre-dawn sales!)

Now, this to me is indicative of SOMETHING. There are a couple options IMHO:

a) The economy is booming, people have lots of money, and have the confidence to spend it on bargains.

b) Credit is cheap, housing has appreciated dramatically, and home equity loans / credit is abundant. Couple that with the easy availability of credit, and you have the classic recipe for people living on credit beyond their means. When interest rates rise, many of these people may see negative equity on their homes (purchased recently) and large variable rate mortgages. Many will be squeezed. If one or more spouses gets laid off, bankruptcy will probably result.

Choose a, b, or a+b, or maybe your own option c.

[Axenolith]

Unfortunately, to have a "strong one" one needs to not print and spend them like they're... made of paper...

[GOP_1900AD]

A weaker dollar helps those whose only debt is a small, fixed rate mortgage, especially a 15 year fixed, with monthly payments far below local monthly rents for similar homes and harms those who have large consumer credit card debts and large, adjustable home mortgages with monthly payments at or greater than locally prevalent rents.