Is the current weakness of the dollar a catastrophe?

The dollar is obviously weak against the pound and the euro. What does this mean for those entering the job market in the next decade, and what does it mean for our country in general?

IANAE. These folks anticipate 2004 being the U.S.’ best year economically in 20 years, and predict the dollar will be stronger than the Euro by year’s end. Who know? As I said, IANAE.

I’ve wondered about thisissue as well. We are currently running a trade deficit with China of >120 billion $/year. The Chinese can continue as they have (buying nothing from us and selling everything), but at somepoint, they will have to face the fact that sending goods for green pieces of paper makes no sense. So, suppose the Chinese attempt to covert some of their dollar reserves in to Eros…that could trigger a run on the dollar.But, in the end, who would the Chinese sell their goods to? They are locked out of europe and asian markets.
So I don’t see the Chinese being so foolish as to cause a collapse of the dollar.

A week dollar is great for people who make stuff in the states to sell the stuff abroad. It means that they can sell the stuff for less undercutting their foreign competition. So It is probably pretty decent for some parts of the job market.

A “weak” dollar can be very good for a country’s economy because it means that overseas people can more easily afford to import US goods. This means that the US exports get stronger, Imports will probably go down as people find the price of imported items go up. This is also good for the domestic market as people will be encouraged to buy local produce due the increased overseas prices.

There are many countries that have a moderately weak dollar on purpose. Currently in Australia some export companies are anxious about the high Aus dollar because it makes it harder for them to sell their produce.

“Weak” doesn’t automatically mean “bad”

You forget that a) the Chinese are running deficits with places like Europe and overall, the Chinese have pretty flat trade. b) the chinese are putting a lot of money into US treasuries, and effectively helping to keep US interest rates low.

Since you bring China into it: China has hitched their economy to the US’s, keeping the yuan tied in value to the dollar, this allows them some benefits (at the value they did this at, the yuan will always be cheaper than the dollar, thus making wages attractive to the US companies), but also some drawbacks: if the dollar smashes itself, they’re screwed.

Tying their currency to the dollar was not a bad idea when they did it (that is, when the USD was above reproach as far as currencies are concerned), but now they may very well be dragging themselves down with the dollar.