Our Thoughts

The Dollar is Strong. Yay! or Nay?

A strong dollar has always been a good thing for the United States,” Treasury Secretary Jacob Lew declared not long ago. But is it really a good thing? In his January 24, 2015 column in The New York Times, Jeff Sommer weighs the pros and cons. As he notes, there are clear benefits to a strong dollar. Global money flooding into dollar-denominated investments tends to keep interest rates lower than they would be otherwise. Consequently, home mortgages are cheaper and a variety of assets including houses, stocks, and bonds tend to increase in value. Imported goods cost less as well. But, a strong dollar also creates problems. U.S. exports become more expensive, hurting the businesses that make them. And, the earnings of U.S. companies generating revenue abroad are impaired when that revenue translates into fewer dollars.

Subscribers to The New York Times may read more here.