I like this Los Angeles Times story this morning reporting why the falling dollar might be good for the country—something that’s counterintuitive if you read much of the press.
And there are serious tradeoffs.
But, speaking of trade, the weak buck is helping to reduce our enormous trade deficit. That’s because when the dollar falls it’s cheaper for foreigners to buy American products. Like, for instance, a California manufacturer’s goggles:
For a customer in Brazil, the company’s top overseas market, buying $10,000 of Paulson’s face shields in early March meant shelling out more than 24,000 Brazilian reals. That same order costs only about 17,000 reals now.
It also makes the U.S. cheaper to visit for foreign tourists.
Of course, the converse of all this is true, as well. If you’re planning to go overseas, plan to get stung. And a weak dollar means imports like oil get more expensive—although some of us don’t exactly consider that a bad thing (sorry to my truck-driver dad!).
The LAT is good to note that the effects of a rising greenback don’t apply to everyone, especially the Chinese, who peg their currency to the dollar. That’s a whole ‘nother story, but the LAT does well to report this:
Leading China experts believe that the yuan is undervalued against the dollar by 20% or more.
And it has a nice kicker on the long view, courtesy of the goggle maker:
“Everything is lining up for next year to be wonderful,” he says. But he has bittersweet feelings about what’s happening. Like many U.S. business owners, he sees the dollar as a sign of a weakening economy, with the country’s debts growing and foreigners coming to pick up land, companies and assets at bargain-basement prices.
If that trend continues, he said, “people will view us as a second-rate country.”