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August 6, 2008
Currency Fluctuations
By: Wade Rousse
A consistent “weak dollar” policy is not a good long-run growth strategy for the U.S. economy. Allowing the dollar to float freely in the foreign exchange market is more effective. But remember that when the dollar floats freely, fluctuations in its value will occur. Also remember that when a currency is depreciating, some market participants will benefit. And when a currency is getting stronger, others will gain.
The U.S. last year exported about $1 trillion worth of goods, up 39% from 2002 when the dollar started its decline, according to a recent article in the Wall Street Journal. A declining dollar is making U.S. goods relatively less expensive compared with goods from countries with stronger currencies.
Many American manufacturers are benefiting from the weak dollar. The citizens of the Wisconsin city of Manitowoc are a good example. The article I mention above explains how young people who had abandoned the town are returning to Manitowoc with business degrees and breathing new life into old factories. Many of the goods produced at these factories are exported.
My very simple point is that a declining dollar is not horrific for all Americans. Some benefit, and others don’t. It depends on which side of the equation you’re on.
Your thoughts?
Posted by Wade at August 6, 2008 3:19 PM
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