Dollar for dollar, you can't beat the dollar.

Photographer: Andrew Harrer/Bloomberg

The Burden of a Stronger Dollar

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Most people with even a passing interest in finance are aware that the U.S. dollar has been strengthening. What's less apparent, unless you have access to particular data sets, is just how relentless the dollar's ascent has been in the past three years. And as the world wrestles with how to keep the nascent global economic recovery on track, it's clear that the U.S. is doing more than its fair share of the heavy lifting.

Here's the dollar's performance against its seven major currency peers, calculated by the Federal Reserve and weighted for the relative trade the U.S. does with each region:

It's clear that the dollar was heading higher long before the Fed said it would end quantitative easing. It's unknowable how much stronger U.S. sales overseas might have been had the currency's strength not hobbled exporters. But with imports outpacing exports by an average $42 billion a month for the past five years, it seems reasonable to assume that the U.S. trade balance would have been better.

Nevertheless, the U.S. expansion, with gross domestic product growing at an average quarterly pace of 2.3 percent in the past five years, is proof that a strong currency need not be a curse. Japan's experience, meantime, is evidence that a weak currency isn't a cure-all. Even with the yen at its weakest level against the dollar since October 2007, Japan slumped back into recession in the third quarter, with GDP shrinking 1.6 percent.

Group of 20 leaders agreed over the weekend to hundreds of policy measures designed to add $2 trillion to the global economy in the next four years. U.S. policy makers know they need other countries to grow to buy the stuff U.S. companies make, hence their willingness to tolerate the dollar's 22 percent trade-weighted climb since 2011.

That patience, though, has limits. Unless those vague G-20 pledges produce results, the time is fast approaching when the strong dollar might start to feel more like an anchor. The minutes of the Fed's Oct. 29 meeting are scheduled for publication on Wednesday; it might do the global economy some good if that report puts the world on notice that other countries need to pull more weight.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at

To contact the editor on this story:
Paula Dwyer at