WEAK DOLLAR? FUGGEDABOUDIT

BIG SHOTS FEAR THE WEAK DOLLAR

WORKING FOLKS FAVOR IT

Professor Larry Summers former Secretary of the Treasury  to President Obama and presently President of  elite Harvard University (wealthiest university in the world) penned a piece for the Washington Post, entitled: “The dollar is getting weaker. That should worry us.” (March 5, 2018) In it he journalistically grinds his teeth and whines  about the weakening dollar.  Sommers points out that the dollar has dropped in value recently against the average “basket” of other currencies, falling close to 10%, and has fallen even lower against the euro.  Summers claims the weak dollar may be the result of expectations of higher inflation in the US in coming years.   In his gilded palatial digs at Harvard, Summers sees little of the common folk—hoi polloi.  Perhaps his concern is that with a cheaper dollar his imported footwear, tailored Oxford Street duds and French champagne will cost him somewhat more than at present.  He apparently knows little of and cares less for the working folks that have been economically scarred by the “strong dollar” policy he has favored over the years.  

His Wapo piece rehashes the “strong dollar” baloney that has been US policy for decades..a policy that has created only hardship for average Americans.  

Let’s look at what the strong dollar policy from the Clinton era has got us.  Flight of massive amounts of capital from the nation.  The exponential growth of Chinese jobs, national wealth and military prowess.  Loss of profitable US industries which once were the source of good middle class jobs and which supported the economy of whole regions of the heartland. The hollowing out of our middle class and the plunge of vast areas of our countryside into “rust belts”.  Shift of our jobs and industries abroad. Massive imbalance of trade.   Cheap imports competing with and neutering our domestic businesses.  What’s so good about the strong dollar? 

The strong dollar of the past decades was favored by the big multinational industries which sell goods in the USA (the world’s premiere market). Their balance sheets show big profits. A strong dollar also makes investment in the US more attractive to foreign companies and investment firms.  Costs for borrowing money by the government and by banks and businesses is lower.  These entities thus prefer a strong dollar.    Tourists going abroad carry more valuable dollars into countries with weaker currencies.  Interest rates tend to stay low with a strong dollar..since investment money flows into the county with the stronger currency and the more money means it is cheaper to borrow money. These big business interests have held sway in Washington in the last decades...to the detriment of vast swaths of the nation and the American workers who live there. 

But as we know from experience a strong dollar does not help to create jobs.  If the dollar is strong—US products cost more abroad.  Industries must keep their costs very low to compete effectively with their foreign counterparts.  As a result of the stiff price completion, businesses strive for high levels of efficiency. The first action they take is to cut employment to the bone. They hire staff for temporary slots. Then fire them as soon as the need evaporates.  Does this sound familiar? Strong dollar means stagnant wages...intense competition for jobs...in other words least eight years,,,,the Obama economy.  

Let’s not worry too much about a weaker dollar.  It is a good thing for our suffering small businesses and our working and middle classes.  

Oh perhaps that bottle of Veuve Clicquot champagne will go up a few tens of bucks, and it might be more expensive to buy a foreign made car. But middle class and working folks with better paying jobs will not notice that too much .