Is a cheaper dollar better?

[Woolygimp]

I've heard this said numerous times recently, and it's argued that a cheaper dollar will boost our export market with multinational US companies receiving full benefit. Won't this help to balance our problem of consuming more than we sell?

Anyway, I was wondering if anyone here believes that a falling USD index can be a good thing. Either way can you explain yourself, all this is fairly interesting and I'm new to it all.

[ilikeaces86_]

I have read similar things to what you must of but I admit I know little to nothing about currency and its effects on the economy.

[ActionTodd]

I guess better for exports not imports

so would that not result in higher price
on goods imported into the country

not so good for consumers then?

[DcifrThs]

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I guess better for exports not imports

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i.e. much better for net exports, which have been less negative for the past months.

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so would that not result in higher price
on goods imported into the country

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when import prices rise, we import less and usually export more (As that rise in price is usually the result in a falling dollar) and thus reduce the quantity and overall dollar value of the imports.

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not so good for consumers then?

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if those consumers desire to continual purchasing those same foreign goods imported to the US then certainly...

...and arguably in the long run even if only purchasing domestic things since domestic things many times require the input of foreign things.

america, however has a very strong competative/comparative advantage in managing finance/money and services(i.e. things that don't require other physically imported things to produce).

Barron

[adios]

[ QUOTE ]
I've heard this said numerous times recently, and it's argued that a cheaper dollar will boost our export market with multinational US companies receiving full benefit. Won't this help to balance our problem of consuming more than we sell?

Anyway, I was wondering if anyone here believes that a falling USD index can be a good thing. Either way can you explain yourself, all this is fairly interesting and I'm new to it all.

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Yes a country can devalue their way to prosperity (again just kidding). Saw articles today that Sarkozy is putting pressure on ECB to loosen monetary policy because the value of the Euro is threatening to kill a lot of European exports. To answer your question, think about people/businesses in the U.S. that benefit from a weaker $ and thing about people/businesses that benefit from a stronger $. The fundamentals for continuing weakness in the U.S. $ seem to be in place. However, I'm starting to get a little bit leary of bets agains the US $ since my perception is that so many people/institutions are on that side of the trade i.e. betting agaisnt the US $.

[T50_Omaha8]

Here's a great example of dollar devaluation increasing industrial output:

BMW Spartanburg Output

The article is from around May of this year.

The idea is often taken much too far, however, by development banks (in my opinion; this is an extremely contentious issue). Organizations like the IMF and World Bank encourage third world countries to devalue their currency before extending credit to them.

While this will tend to result in a short-term boost for the export economy, lots of third world countries have very inelastic demand for imports, like medicine, automobiles, electronics, oil, etc--that's essentially why they're poor in the first place.

This can cause fragile debt situations to spiral out of control.