The Power of a Weak Dollar
For many years, Uncle Sam was the big buyer in the world market. In part this was due to a “strong dollar ” A big buck could buy foreign goods inexpensively. It was also due to the outsourcing of production in countries with cheap labor. The finished product found a heavy market in the United States.
But now, it appears, that the American dollar is weak in global trade. The Wall Street Journal reports, “The U.S. dollar has grown weaker against the Euro, the British pound and other currencies.” This month the Euro rose to $1.39 cents.
But, irony of ironies, our weak dollar has its own strength. The weak dollar finds that imports from countries that have a stronger currency have become quite expensive. So, we import less. And vice versa. Buyers in other countries with strong currencies find American products a real bargain. So we sell more. The balance of trade turns in our favor.
Foreign producers have also opened factories in the U.S. Although the wages paid are high, they are not as costly as they seem because the foreign currency is able to lay its hands on U.S. dollars inexpensively.
To paraphrase Gilbert and Sullivan: “ Things are seldom what they seem. A weaker buck may rule supreme.”
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