You would think the fact that the dollar represents the world's main reserve currency should be a source of pride for Americans, but not so, says Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities.
The dollar's strength—it hit a six-year high against the yen and a two-year high against the euro last week—exacerbates the country's trade deficit, which totaled $475 billion last year, he told Yahoo.
"I think if the dollar were not nearly as prominent as global reserve currency we'd definitely be better off," said Bernstein, who formerly was Vice President Joe Biden's chief economist.
"By dint of the dollar being a reserve currency, we're facilitating [trade] surpluses [for foreign countries], which makes it hard for manufacturers to compete globally."
A rising dollar hurts U.S. exports by making them more expensive in foreign currency terms. And the trade gap is causing major problems for the economy, Bernstein says.
"By dint of supporting large trade deficits, we've had consumption bubbles, investment bubbles and budget deficits. It's all connected in a very important way."
Bernstein likely wouldn't be happy to learn that Deutsche Bank analysts predict the euro will plunge 25 percent to $0.95 by 2017 from $1.2666 late Tuesday. That would represent a 10-year low for the euro.
The Deutsche Bank analysts wrote in a report obtained by Reuters that capital will flee Europe amid weak investment returns and huge trade surpluses.
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