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Drudge cheers bad news for Trump

Wednesday, November 16, 2016 14:18
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Of course Matt Drudge doesn’t think he is cheering bad news but he is definitely cheering what is terrible news for the president elect. Let me explain…

First, it is important to understand that a strong dollar is not purely good news and a weak dollar is not purely bad news. In each case, it is a mixed bag.

A strong dollar means that imports are really cheap. If your dollar buys a lot more yen than it used to, then Hondas and Toyotas get real cheap. Unfortunately, it is equally true that a strong dollar means that yen buys fewer dollars. That means US products in Japan get very, very expensive. The net effect? Imports skyrocket, exports fall and trade deficits increase. This generally decreases manufacturing in the US and increases unemployment.

A weak dollar, on the other hand, means that imports are expensive. If your dollar buys fewer Euros, BMWs just got very expensive. Fortunately, it is equally true that a weak dollar means a Euro buys more dollars. That means that American made goods get cheap in Europe and the net effect is that imports fall, exports increase and the trade deficit falls. This generally creates more manufacturing jobs in the US and unemployment decreases.

Every promise that Trump made during the campaign is made much, much more difficult to keep if the dollar is strong. A sufficiently weak dollar, on the other hand, would make many of his promises seem happen on their own.

Do you think Matt Drudge understands this? I don’t.


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