Why is a weak dollar bad for the economy?

Discussion in 'Economics' started by og5, Oct 6, 2007.

  1. og5


    A weak dollar makes our exports cheaper overseas and international imports more expensive, which should be a good thing for american companies. I suppose this will also drive away investors but is that more important than a discount on america?
  2. empee


    the strength of your currency is a proxy for your standard of living. For example, in Euroland right now their fuel is cheaper since its priced in Euros not Dollars. Exporters make up a minority of the economy. The average Joe loses buying power and essentially is a tax/theft of capital.

    No country has ever devalued itself to prosperity. As a side note, you really can't go by currencies either since they are run by central banks. better proxy might be Gold since in theory its a constant/commodity (ie the powers that be cant print more).

    Think about it like a stock that is representative of the USA. When our currency is strong, we have more options (since people believe in us, believe we will pay back our debt, etc). When our stock price is low (ie devalued dollar) we have less options since there is less confidence in us. (ie our cost of financing new projects goes up, etc).

    While it is true at times it make sense to devalue, this propoganda around weaking the currency being a good thing is unbelievable. If its such a good thing, maybe we can devalue to be on par with the lira, then we will all enjoy prosperity!

    At the very least, if we are saying that our currency will stay at a permanently lower plateau, it just means we won't live that much better than foreigners than we have in the past.