Hi Jay,
Historically speaking, the US$ has been much lower than it currently is against other world currencies. Granted, the Euro didn't exist back then, but the French franc, the German mark and a bunch of other currencies did, and the US$ was much lower against those currencies than it is now against the Euro.
Back about 4 or 5 years ago now, when the US$ was peaking at its top strength against the other world currencies, I sure don't remember Europe or any country in Asia complaining about how expensive US goods and services were compared to the prices of European/Asian goods and services. Now that the shoe is on the other foot, there seems to be a problem.
However, from my perspective, the problem does not reside in the US. The problem exists elsewhere. Therefore, I agree with the current rhetoric of advocating a strong US$ policy while at the same time enjoying the benefits of the reality of a weaker US$.
The reality is that American produced goods and services can and do appeal to foreign markets on both a price and quality level. American companies can produce a higher quality product at a lower cost thanks largely to the less valued US$.
However, there's a flip side to the coin. As US$ denominated debt pays a lower interest rate, and therefore an implied higher level of risk, foreign direct investment capital should eventually find its way into European and Asian markets. That hasn't happened yet to any large extent. Caveat: China/India are not really exceptions because FDI in those countries is happening largely because of internal growth, not currency advantages.
So, again from my perspective, the USA can and should do nothing. The ball is squarely in the European's hands. It's up to them to do something, take some kind of action. Up till now, mostly what we've heard is a lot of whining. You can talk the dollar up and the Euro down only so much. If and when Europe becomes truly concerned, then and only then, will they collectively take some action, perhaps flooding the currency market with Euros. (Wouldn't that be interesting? More US$s, Euros, Yen, Yuan and every other currency than you can shake a stick at... <g>)
KJC |
