Philip Mause
Philip Mause
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There are undeniably negative impacts on exports, industries that compete with imports, and tourism. Of course, these impacts do not show up in statistics within 24 hours of changes in relative currency values - they occur over a period of time and may even lead to irreversible changes as domestic industries are dismantled because they become uncompetitive. On the other hand, a strong dollar helps keep inflation under control.
Right now, deflation seems to be a bigger potential problem than inflation so the anti-inflation impact of a strong dollar is a mixed blessing.
My concern is that with no German currency and with a weakening yen, the dollar (like the last man standing after a bar brawl) could strengthen a considerable amount in a risk off wave of sentiment and that this would tip the balance into deflation as well as reducing GDP due to a decline in exports, a decline in tourism and the replacement of domestic production with imports.
It is another reason that I do not think we will see higher interest rates for a very long time.
By the way, the yen was in the 250 range when I started working on international trade cases in the 1970's and 125 when I traveled to Japan in the early 1990, so it has still appreciated against the dollar on a net basis over a long period of time.
Cisco Is Using Its Balance Sheet Constructively [View article]
Cisco Is Using Its Balance Sheet Constructively [View article]
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