A Strong Dollar No Longer Suits U.S. Interests
One way to help reduce the trade deficit would be to diversify the world's foreign exchange reserves.
A strong dollar doesn’t make the U.S. stronger.
Photographer: Bloomberg
The U.S. needs to rethink its currency strategy. Our leaders are grudgingly realizing that the strong-dollar policy no longer suits either national interests or current economic realities. But the dangers involved in altering the global monetary system mean that transitioning to something new is fraught with peril, and the U.S. needs to move carefully.
For years, the U.S. maintained the official policy that a strong dollar was good for the U.S. and for the world. That probably sounded great to a lot of people for whom the word “strong” carries positive connotations. But in fact, a strong dollar makes it harder — all else equal — for other countries to buy U.S.-made goods. So a high exchange rate actually makes U.S. exporters weaker in terms of their competitiveness in world markets.