When the dollar gets weaker relative to other currencies, it makes it cheaper for foreigners to buy our goods and services. but mi amigo.. it also makes it more expensive for our manufactures to make our goods. with a weakening currency it costs more for raw materials and makes capital investment for production more expensive. then our manufacturers either have to raise their prices or scale back, or even shut down if their margins are too thin.
the fact is that time after time, the examples are that nations with strengthening currencies have strengthening economies and higher rates of production, and the opposite with weakening currencies.
i used to think that monetary inflation had at least SOME effect on price inflation, but now i think it has none. more dollars can't cause inflation provided they are created or brought into the economy with value. the only reason price inflation happens is because the dollar weakens. and the reason the dollar weakens is because the efficiency of our labor declines. what affects the efficiency of our labor? many negative things like high tax rates, government spending and burdensome regulations. all the things that increase the cost of labor, making it less efficient. on the positive side are the things that lessen the cost of labor, making it more efficient. things like advancing skills and technology and especially automation, which really lowers the cost of labor.
I would suggest that the USD is the dog and that stocks are the tail. i think stock prices are driven a lot by psychology. the dollar much less so (unless most people begin to think it can no longer be trusted). many of us already believe it can't be trusted, but many more than that number, do trust it. for a long time i believed there were excess dollars getting into the system. i no longer feel that way. even the bernake laughed at the thought of the trillion dollar coin. i think that proves that the FED isn't totally nuts. i hate the FED's apparent manipulations and keynesianism, but i don't think they're counterfeiting money yet. anyway, the point i'm trying to make is that even though the dollar is generally going down, it's still much more stable than volatile stocks. |
