Is a strong US dollar a good or a bad thing for the average American, and if it doesn’t matter why does it get reported like it matters?
I can see why it would matter if you travel to foreign countries, but is Europe ‘cheap’ now that the dollar is strong?
It depends on what that American buys. If that American buys lots of imported things, then a strong dollar is good because imports become relatively cheaper. If that American works at a job that might be outsourced to a foreign country with cheaper labor costs, then a strong dollar is bad because foreign production is relatively cheaper than producing in America.
If that American travels abroad a lot, but is still paid in US dollars, then it would be good because the purchasing power of those dollars is greater. If that American works in an industry that exports goods or services to other countries, then it would be bad to have a stronger dollar because American exports become more expensive relative to those of other nations.
I think the only factual answer that can be given is that there is no sufficient definition of ‘average’ that allows a simple answer to the question. No one is really average - we just all have different methods of production and consumption in an economy, and there’s no way to average an apple buyer and an orange grower into one meaningful number.
A ‘strong’ currency is good if you are travelling abroad, or buying foreign made goods, but bad if you are selling a home grown product overseas.
For the man on the Clapham omnibus, or the average Joe, it probably makes little difference in the short term. In the longer term its best if the exchange rate stays stable.
So the only reasonable answer is ‘it depends’, which is a perfectly good answer. I hear newscasters boast that the dollar is stronger than it was a few years ago, but I don’t know whether to go yeah! or oh no! I guess the appropriate response would be meh.
It’s also good for the government, because it makes borrowing cheaper.
A strong dollar is also usually(!) evidence of a economy that is performing well overall, or in one sector and prospects continue to look good - confidence. (I.e. for now, a pretty good recovery plus an extremely busy fracking oil production sector) it never hurts to have an economy that is working well.
I echo the “it depends” answers. Are you buying foreign goods and services or trying to sell stuff overseas?
Having said that, the dollar is strong in relation to other currencies. Much of this relates to poor economies in Europe and Asia. Not sure that we should be happy that Europe and Japan are in a recession and that China is slowing down.
Currency movements are not necessarily indicators of much. There are too many unpredictable factors that influence currency movements from day to day. The primary reason the US$ has strengthened recently against other currencies is due to the flight to quality. As other economies struggle, investors (corporations and governments) look to move their excess cash in more stable currencies, i.e. the US$. This causes the demand for to go up resulting in the price of the to go up.
One of the other effects is that a strengthening dollar makes imported oil cheaper, thus tending to lower gas prices in the States.
And the toppings contain Potassium Benzoate.
You might want to check out the book Currency Wars.
It used to mean something when the US was a producer of goods and exporting those goods… i.e. tools, machinery but all that has been sold out to offshore countries and mexico. Low dollar meant more sales, high dollar; less sales. Now that the only thing the US seems to provide is “services”, not so much.
If the people who buy your debt are overseas a strong dollar makes their purchase more expensive, which can drive down purchases and thus lower the price of the bonds and thus increase the interest rate. If the foreign purchasers are convinced the dollar will continue to strengthen, it might increase the number of buyers.
You do know that the US is the second-leading exporter in the world?
Yeah but most of that is McDonald’s and Adam Sandler movies.
Just in case you’re being serious, here are the top 10 exports by the US:
Machinery: $213,108,199,000 (13.5% of total exports)
Electronic equipment: $165,604,449,000 (10.5%)
Mineral fuels including oil: $148,426,743,000 (9.4%)
Vehicles excluding trains and streetcars: $133,640,479,000 (8.5%)
Aircraft and spacecraft: $115,380,944,000 (7.3%)
Optical, technical and medical apparatus: $84,281,276,000 (5.3%)
Pearls, precious stones, precious metals and coins: $72,830,232,000 (4.6%)
Plastics: $60,836,970,000 (3.9%)
Organic chemicals: $46,510,903,000 (2.9%)
Pharmaceutical products: $39,742,717,000 (2.5%)
Why would exporting services be any less valuable or beneficial to the US than exporting goods, or any less threatened by a strong dollar?
…and just to tag on in supportwith a related but slightly different number. The US is still the second largest manufacturer in the world.