The U.S. dollar has seen a downturn in recent months and the slide in value has many in the U.S. and around the world worried about inflation, stagflation and the overall economy. But even with all the negative buzz, some financial analysts say the dollar is just where Americans want it.
We’re taking a look at different perspectives on the dollar’s future from Bloomberg, CNBC, The Wall Street Journal and The New York Times.
Bloomberg TV explains that an undervalued dollar isn’t always bad, since it means more money for many American businesses.
“The weak dollar, well, obviously when companies, U.S. companies, sell goods abroad and they bring those products back to the U.S. as the dollar falls, they make more money. It’s a tail wind. It could add five, six, seven percent to earnings.”
Paul Krugman writes in The New York Times it’s people worrying about the dollar that will lead to a real downfall—not its value on paper. In fact, Krugman claims the downturn highlights just how much people actually trust the dollar. He writes...
“The truth is that the falling dollar is good news. For one thing, it’s mainly the result of rising confidence: the dollar rose at the height of the financial crisis as panicked investors sought safe haven in America, and it’s falling again now that the fear is subsiding.”
But Steve Forbes says on Bloomberg not only is a low dollar harmful to business, it’s actually the product of the Obama administration trying to lower trade debt and increase exports.
“We’ve had a weak dollar policy since the Bush administration, which was the first administration since that of Jimmy Carter’s to have a weak dollar as its policy. They thought it would improve the trade balance and ignored the devastating impact. We’ve could have never had this housing bubble if you hadn’t printed so much money. The field wouldn’t have been there for it."
On CNBC, one analyst blames a weak dollar policy for the current credit crunch and the dollar’s demise.
“Every bubble in the history of the world has been created by excessive credit and easy money and we’re doing it again, so this isn’t going to end well. We can party for a little while, while we’re still in the middle of it, but the end result is, unfortunately going to be tough on a lot of people.”
And The Wall Street Journal says Obama’s unofficial weak dollar strategy could end up like those tried during the 1990’s in Mexico and Russia. It says...
“No countries have devalued their way into prosperity, while many—Hong Kong, China, Australia today—have used stable money to invite capital and jobs.”
And The Wall Street Journal says the solution is ...
“...more competitive tax structure, spending restraint, and common-sense bank regulation so small business lending can restart.”
On CNBC, one analyst says that despite the ups and downs, the dollar is actually pretty stable.
“I think what the dollar’s done is it went up dramatically during the crisis because people rushed to it for a safe haven asset. And now that the crisis has wound down, the safe haven premium has come back out, but really the dollar has been fairly stable over the last year, or couple years even.”
Tell us what you think. Is the dollar and the American economy in serious trouble? Or have the rumors of the dollar’s death been greatly exaggerated?
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