Since 1995, Treasury and Federal Reserve officials have constantly repeated the mantra that the United States favors a strong dollar. But that’s wrong, says Christina Romer, former chairwoman of President Obama’s Council of Economic Advisers.
There are times when a weak dollar is more appropriate, and now is one of them, the University of California, Berkeley economics professor writes in The New York Times.
“In a depressed economy, it isn’t so clear that a strong dollar is desirable,” she explains.
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“A weaker dollar means that our goods are cheaper relative to foreign goods. That stimulates our exports and reduces our imports.”
As a result, domestic production and hiring increase, as industry ramps up to meet higher foreign demand for our products.
“Given the desperate need for jobs, on net we are almost surely better off with a weaker dollar for a while,” Romer writes.
She points out that members of Congress have no problem calling for a weaker dollar against the renminbi, but that when it comes to a weaker dollar overall, they act as if it’s unpatriotic to contemplate a decline by the dollar.
“Perhaps it is time for a more adult conversation,” Romer says.
For now, though, the dollar is rising, and many currency experts expect the move to continue. “The chance of a further bounce in the dollar is quite strong,” Ken Dickson, investment director of currencies at Standard Life Investments, tells Bloomberg.
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