New York Times Column on the "Weak" Dollar

I am always surprised by how many people believe the weak dollar is a negative economic indicator. Maybe they shouldn't call it a "weak" dollar. Maybe they should call it an "export strong" dollar. At any rate, the "weak" dollar is the source of much unnecessary anxiety, typically fueled by the media. Lowering the value of the dollar without inflation is actually considered one of the most significant achievements of the Reagen Administration. On Saturday, the New York Times published an opinion column by Tyler Cowen, a professor of economics at George Mason University, that sets the record straight. Here is an excerpt,

ANXIETY about the dollar continues to spread. The falling greenback is often seen as a sign of an impending recession or the fall of the United States from global leadership. A low dollar simply looks bad. We are, after all, used to judging ourselves against others — comparing our salaries with the earnings of our peers, and our homes with those of our neighbors. We’re used to thinking it is a big advantage to stand at the top of a numerical list.

But when it comes to currencies, a higher value neither brings national success nor predicts future prosperity. The measure of a nation’s wealth is the goods and services it produces, not the relative standing of its currency. Take a look at 1985-88, when the dollar lost more ground than in the last few years. Those were good times, and the next decade was largely prosperous as well....

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