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It’s a waste to worry about the dollar

Kai Ryssdal Nov 9, 2009
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It’s a waste to worry about the dollar

Kai Ryssdal Nov 9, 2009
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TEXT OF COMMENTARY

Kai Ryssdal: About the only thing that didn’t do well in the markets today was the dollar. Stocks rose. Oil and gold were up. The greenback, however, continued its recent slide. The general perception is that that’s a bad thing. Commentator Paul Kedrosky says it might be time to re-adjust expectations.


PAUL KEDROSKY: The U.S. dollar isn’t doing all that bad. It has actually climbed in the last year against a bunch of currencies. Well, some. All right, maybe eight: the Argentinian peso, the Algerian dinar, the Fiji dollar, the Ghana cedi (which we’re clobbering mercilessly), the Jamaican dollar, the Pakistani rupee, the Sri Lankan rupee, and, of course, the Vietnamese dong.

All right, we’re not keeping great currency company. That is why plenty of people are unhappy about the dollar’s decline. Some worry that it will mean inflation and a diminished U.S. standard of living.

Others see it as a loss of status. As the dollar sinks, there’s fear that cabals of U.S.-hating merchants will move to price major commodities, like oil, in other currencies, making the dollar sink further.

The worry is wasted. Yes, a lower dollar is going to cause some prices to go up. And an uncontrolled decline in the dollar would be calamitous for funding the giant U.S. deficit. But both remain unlikely. For all its fiscal flaws, this country is in better financial shape than many of its largest trading partners, like Japan.

A lower dollar, to a point, is actually good for U.S. trade. It makes U.S. exports cheaper and more competitive, which increases sales. That’s important if we want to cut down our trade deficit and try to get this economy healthy again.

Sure, given China’s loose currency peg a lower dollar won’t slash our huge trade deficit with that country. But the weak dollar is already helping raise exports to every other top trading partner, from Canada on down.

This country might like a higher dollar — it feels so good — but it needs a lower one right now. More exports will take pressure off U.S. consumers. It’s time someone else drove this economy for awhile.

RYSSDAL: Paul Kedrosky is an economist in San Diego. His blog is called “Infectious Greed.”

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