Strong dollar or weak dollar ?

In fact there is no strong or weak dollar . The dollar is strong whether its quotation is higher or lower than it should be against main direct currencies , as long as the dollar remains the only currency accepted as world means for measuring economy and paying petrol and other commodities .

The doubts of the White House and the FED however as regards what may be the optimum dollar quotation are perfectly understandable

Considering the latest moves however it looks like the american administration with the implicit support of world economic agents is opting for a strong dollar .

This of course will ease pressure on the price of gas at petrol stations throughout the U.S. which will be highly appreciated by american consumers so much depending on their own transport and home comfort .

On the other hand europeans and asians will have to pay more for their petrol excesses and economies in european countries will need an export drive to compensate for their ailing domestic consumption .

With a strong dolar exports to the US will be eased . But then at the end of the day imports by the US will much depend on the purchase power of americans and in this respect let me just remark that purchase power in US is sliding down the hill because of the high unemployment and which is worse because that unemployment is fed by a great percentage of middle class jobs loss in the range of 70.000 through 120.000 $ as a consequence of the international relocation of high added value ventures .

So if a highly quoted dollar is to promote imports by the US in a significant manner , it will need to be accompanied by a further increase of private american debt which in fact means an acceleration of american sovereign debt through current account deficit and in the long run also by the higher private debt .
On the other hand budget deficit will be eased through tax revenue on a bigger consumption . That is more of what we have been having in the past although perhaps it is now the only emergency option at hand .

Outside the US the greatest beneficiaries will be in Asia because of their strong growth potential , while europeans inevitably will have to manage a much more difficult situation specially in some countries which exports to US are not so much depending on the dolar value as in the low rated added value products of their exports . Germany will have a big reward in a strong dolar but not so the exports of southern economies having to compete with a bigger number of emerging economies offering the same at lower prices .

Brahmason

Brahmason@gmail.com

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Published in: on marzo 23, 2013 at 12:05 pm  Comments (4)  

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  2. Dorris

    Strong dollar or weak dollar ? | Brahmason’s Blog

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    Strong dollar or weak dollar ? | Brahmason’s Blog

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    Strong dollar or weak dollar ? | Brahmason’s Blog


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