Ask Consumers if They Like a Weak Dollar
According to a Washington Post story today, “the weak dollar is one problem the United States loves to have.” The story reports how the fall of the dollar against the euro and other currencies in the past year has boosted U.S. exports and discouraged imports, cutting the trade deficit and allegedly boosting the U.S. economy. A weaker dollar has spurred complaints in Europe and elsewhere, but here at home the Post story leaves the impression the approval is practically unanimous.
Nowhere in the 1,058-word story is the impact on consumers ever mentioned. But it is American consumers who pay the biggest price when the dollars we earn buy less on global markets. We are paying more for oil, which not coincidentally has zoomed toward $80 as the dollar flounders. A weaker dollar means higher prices than we would pay otherwise for a range of goods, from imported shoes and clothing to food, that loom large in the budgets of American families struggling to make ends meet in this difficult economy.
Ignoring consumer interests is widespread in reporting about trade. It reflects the strong bias of elected officials to see trade issues strictly through the lens of producers and never consumers. After all, it is producers who form trade groups and hire lobbyists to promote their exports or protect themselves from imports. Nobody in Washington represents the diffused, disorganized but much more numerous 100 million American households.
The dollar’s value should be set by markets, and I have no reason to believe the dollar is over- or undervalued. But pardon me if I dissent from the consensus that a falling dollar is unambiguously good news.
Filed under: International Economics and Development; Trade and Immigration
What’s A Dollar Worth?
It’s not just Americans worried about the flood of dollars from the Fed. The Chinese and now the Malaysians also are wondering if they should keep dealing in greenbacks.
Reports the Wall Street Journal:
Malaysia’s prime minister said China and his country are considering conducting their trade in Chinese yuan and Malaysian ringgit, joining a growing number of nations thinking of phasing out the dollar.
“We can consider whether we can use local currencies to facilitate trade financing between our two countries,” Malaysian Prime Minister Najib Abdul Razak told reporters at a briefing Wednesday after meeting with China’s premier, Wen Jiabao.
“What worries us is that the [U.S.] deficit is being financed by printing more money,” Mr. Najib said. “That is what is happening. The Treasury in the United States is printing more notes.”
The dollar won’t easily be displaced as the world’s principal reserve currency. But Washington appears to be doing everything possible to hasten that day.
Perhaps Americans should consider keeping their wealth in yuan or even ringgits. At least they might retain their value even as the Fed and Treasury attempt to inflate and spend the U.S. economy into oblivion.
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