This is an interesting article. I began with reading Irwin's article first and the cepr one second. Irwin does bring up the point that the dollar is gaining in value and that the economy is doing better, but it appears he is only looking at a few months worth of data. He is not able to back up his statements with years of evidence. He kind of just says that the dollar is doing better and here look so is the economy, they must be related.On the other hand, the cepr article directly negates what Irwin has to say. The article says that some economists "know that an over-valued dollar is at the root of our current economic problems." The points about trade and the Clinton administration further support that a high value dollar can be bad.I think Irwin should expand his graph several years and then explain his argument again to us. He might have something different to say.
I agree that this is an interesting article, but I wish it would have been developed more. It does make sense that a weaker dollar would lead to more exports which would be helpful for the economy by decreasing the trade deficit. However, I wish the author would have discussed more of the negative effects of having a weak dollar. This article seems very one-sided and under-developed. Regardless, I did find it interesting to think of the strength of the dollar as not directly related to the health of the economy.
Given one of the theme's of our class, that the common-sense answer is rarely the right one, this article makes sense. While a weak dollar is unfortunate for those who love French wine, vacationing in London, or travel a lot, it does a great deal for helping our (x-m) factor of GDP. In fact, a weak dollar would both drive down imports and lead to more consumption of domestic products, goods, and services. Unfortunately it is unlikely that dollar will maintain its weakened relationship to other world currencies, given Europe's plans for continued austerity, although the relationship of dollar to yuan is becoming more important than dollar to euro or sterling.
This article reminded my a lot of our discussion in class about the value of the dollar compared to the euro. As we mentioned, compared to Europe's currency the dollar is very strong, yet as we know the U.S. economy is not really thriving and thus the conclusion that a strong currency does not equal a strong economy is not hard to reach. Therefore I agree with Ellen that the article is underdeveloped because in my opinion the subject matter was obvious enough that bringing it up with out analyzing deeper was trivial.
Going off of what Carter started off with, I think this is one of those issues that is very difficult to approach in conversation because people so often tend to go with common sense instead of looking deeper into a given issue. That being said, I think that the weak dollar is a very valuable (tho not literally) aspect of improving our economy. I found it interesting to read the comments because the people there also bring up some really compelling points. I think the article is very interesting, however just like Professor Goldsmith pointed out in his piece (he was instead speaking about Government spending, and how one cannot look at the immediate repercussions of spending and not acknowledge the long term benefits when calculating the effect of spending that money), you do yourself a disservice if you only look at the more obvious effects of a situation. It would be really interesting to weigh the pros and cons of a weak dollar. That would allow for a more thorough case for the argument the author makes.
As Carter pointed out, a weak dollar is not a good thing for your average American consumer. For a self-interested person simply looking at the short run, a strong dollar is awesome because you can go to Walmart and buy something made in China for less or vacation out of the country at a lesser cost to yourself. That said, it is not good for the long run. And speaking of China, this article reminded me of something that became prevalent in the previous decade, the issue of China supposedly undervaluing their currency. China is a very special case in terms of their rise to global economic power status in that it was achieved in a very "nonstandard" way, but I think there is something to take from this here. Perhaps we could implement some similar institutions as China began to in the 1990s and 2000s to devalue their currency. This might not go over well with the public, but this again brings up the issue of us needing to focus on the long run instead of the short run.
While I understand that a weak dollar will bring in exports, I would be curious to see if the benefits of a strong dollar are more helpful to our domestic economy. Even if there is no obvious direct correlation between the health of the economy and the strength of the dollar, then how would it work the other way around? If the two are unrelated like the author says, than I do not believe a weak dollar will stimulate the health of our economy. I think that it will improve trade deficits in the short run, but is not better than having a strong currency. I think all consumers would be happier with traveling cheaply and buying foreign goods for less than the gradual fixing of a trade deficit. I would also assume that the trade deficit could be fixed by fiscal policy, not just monetary policy. -Annie Murphy
At first glance, a "strong" dollar brings forth positive thoughts about the state of the nation's economy. This article goes to disprove that fact, although as many here have stated, does little to offer two sides to the weak/strong dollar debate. I don't think we should be so quick to condemn the idea of a strong dollar because it obviously must indicate positive stock market performances as well attracting foreign investments. the issue here is avoiding a bubble, which we can look to 2008 for the effects of an over-inflated sense of value, or a popped bubble. On the other side of the issue i like how the article focuses on lowering the trade deficits. Although a commonly discussed issue, i feel we see far too few solutions to our deficit problem other than drastic cuts. I also like how most of these comments refer to the importance of long-run benefits, since the long run supply curve plays such an important role in our class discussions and macroecon as a whole.
The weak dollar, according to this article, will allow for higher demand for US exports. In our equation to find GDP, this would increase the quantity of (x-m). However, this would also increase the prices of goods who's resources are imported from other countries, resulting in higher prices domestically. In order for the argument expressed in this article (that our economy would benefit from a weaker dollar) to be true, we would have to prove that the benefit of increased exports would be greater than the loss of domestic demand as a result of higher prices. Relatedly, as we often point out in class, what is good for the economy as a whole is often not good for every individual American. A weaker dollar means higher prices, and for a family living at or near the poverty line, that could mean the difference between a meal or going a day without eating. This would then reduce our human capital, reducing economic capability as a whole country. Ultimately, it seems that there are a lot of other factors that this article seems to not evaluate that could affect how beneficial a weaker dollar could be.
While devaluing the dollar to increase exports and decrease imports may appear to be a means of raising GDP, the reality is that the depreciation of the dollar has already been occurring for some time as a consequence of massive government spending in the form of borrowing. The expansionary monetary policy of buying up government debt that the Fed has been carrying out to lower interest rates has simultaneously depreciated the dollar through substantial increases in the money supply. If the depreciation of the dollar is an effective means of increasing GDP, net exports should have already shown signs of having the potential to increase enough to offset a significant portion of the deficit. The US has inadvertently been depreciating the dollar as the government has continued to borrow over the past few years and the results do not seem to indicate that further devaluation of the dollar would be the most beneficial means of raising GDP.
This article attempts to make the case that a weak dollar is in fact good for our economy. I think there is some validity behind what it says, however it doesn't really apply to this current situation. In theory, the idea that a weaker dollar would decrease imports and increase exports is logical; we would also be putting more money into local small businesses which would be great for the economy. The problem is this theory only works if you can kind of magically snap your fingers and have everything else stay constant while the dollar goes down a little to boost domestic spending. This simply isn't the case, and it disregards how we have come to get to the "weak dollar" we currently have. If the article addressed how we got to where we are now, I don't think it would be able to make the case that this is a good thing for our economy. That being said, maybe we all read too much into it. Maybe it was just intended as food for thought and nothing more. In that case, very interesting stuff.
I agree with the previous commenters that not only does this article read as "slanted" and one-sided, it's even fairly condescending, (rather than funny, as I hope the author intended).While his idea is sound in theory, a weak dollar encouraging exports and discouraging imports isn't holding up at the moment. Look at the American auto industry, one of our biggest exporters: they've been struggling throughout this recession. People are out of work and production is down; hardly the environment for increased exports.
I agree with Marino, the article makes a good case that a weak dollar is good for our economy but this argument is only successful if the rest of the economy stays consistent. I think that one of the important things I have learned in this class thus far is that an economist can manipulate a graph to say what they want it to say. This article uses a graph to support its point but a model can be manipulated into many different circumstances. If the dollar were to decrease, it would devalue our current economy, which would have negative effects on the immediate economy. We have to look at all of the effects of something drastic like this before supporting it.
As the Ellen said, this article on its own is not a well developed one, but it is a response to the Neil Irwin Washington Post article. The US government is trying to rasie GDP, and a weaker dollar means that it is cheaper to buy US goods, and more expensive to purchase imports.However, the auto industry, as Christina mentioned, may not be the best example of increasing exports. The auto industry was one of the biggest exporters when the technologies in the Japan and Korean were not so advanced. I would argue that the Japanese auto industry has caught up and surpassed ours. For the record, the auto industry has increased the amount of cars exported compared to past year.