Why I Am For a Strong Dollar

Every President since Reagan has said they want a strong US dollar.  No President since Reagan has actually pursued a strong dollar policy using all the fiscal and financial tools available to them.

It’s better for America, and Americans, to have a strong dollar.  Certainly, we manufacture stuff that would become more expensive with a more expensive currency, but there is more manufacturing being done outside the US than in the US.  There are costs to sending jobs outside the US for the manufacturer’s that aren’t always apparent to the general public.  In addition, much of the manufacturing in the US is designed to be consumed within the US.  Many of the parts for these goods are from overseas, and stronger dollar helps with profit margins.

The other thing to look at is the changing demographics of American society.  The much vaunted boomer generation is entering retirement age.  Low interest rate policy impacts their retirement packages since once people retire they tend to redeploy assets into fixed income securities.  To ensure that the purchasing power of this generation is strong, a strong dollar is the path home.

The top reasons stated for a weak dollar policy are without merit.  One is foreign tourism.  America becomes cheaper for tourists when our dollar is cheap.  Ask yourself a question, do you decide where to travel based on currency valuation?  People want to come to America because it’s America, not because the currency value is cheap.  Another reason is that foreign investment will increase.  This is a moot point as well since regulations and corporate taxes are among the most onerous in the world.  Businesses don’t account for currency fluctuation in making long term investment decisions because it’s assumed that the currency will move around.  They hedge those risks in the marketplace.

Yesterday, we linked to a couple of articles showing why higher interest rates are better for the economic conditions today.  They are correct.  Hand in hand with that policy is pursuing a strong dollar policy.  It’s good for America, and good for Americans.

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