Is a Strong Dollar Good for the U.S. Economy?
March 19, 2015 1:30am by Barry Ritholtz
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The short answer is no. Viewed from my eyes it is easily seen that a strong dollar hurts the export markets. Historically the price of corn and all ag commodities are inversely related to the value of the dollar. As the dollar goes up the price of commodities like corn goes down. Corn now is priced at just about the cost of production. There is no short term reason for corn prices to go up, unless there is an unforeseen weather disaster. So you will start hearing about the crisis in the ag community.
Riccadonna gets it right. In most cases, and certainly now, an expensive dollar is not good for the US economy.
As farmera1 points out, an expensive (AKA “strong”) dollar generally has a negative impact on commodity providers but, more generally than that, it has a negative impact on the national current account which is almost always bad for employment in multiple sectors.
Yellen is the first Fed president in decades to take the dual mandate seriously so the inflation hawks may squawk and stomp their feet but I honestly don’t think she will be willing to move until there is clear evidence of wage pressure.
I can see both pros and cons for a direct impact on the US economy, but don’t think it is a big deal based on first-order effects. After all, we have had periods when the USD was MUCH stronger than it is today, and those had no obvious impact per se on the US economy.
But when it comes to secondary effects, the use of dollar-denominated debt instruments might have some blowback …
Greenback, bareback: the cost of a strong dollar [The Economist | Espresso Edition | 2015-03-19]
Like oil, we don’t make the distinction between the economy and the stock market.
Lower oïl is good for main street, not that good for wall street as the Energy sector represent more than 10% of the S&P profits (lower oil for other industries as input costs are offset by lower capex by energy companies, which represent 35% of the capex).
Stronger dollar is good for main street, but not for wall street as 40% of S&P’s profits are made overseas (25% exposure to the $ … ie 10% appreciation lowers S&P profits by 2.5%, or $3 out of $125 expected this year).