Should the U.S. Dollar Be Weak or Strong?

                                                                                                  Link to the article above

                                                                                               Link to the article above

The words "strong" and "weak" for a currency can mislead people into thinking a strong currency is good and a weak currency is bad. That isn't right. As I was quoted by Angelo Young in the article above:

“It is not right to say in an unqualified way that a ‘strong’ dollar is good, or to say that a ‘weak’ dollar is good,” Miles Spencer Kimball, a professor of economics at the University of Colorado Boulder, told Salon.

It depends on why the dollar is strong or weak.

  • If the dollar gets stronger because demand for US products has increased, that is a good sign.
  • If the dollar gets stronger because the US government is borrowing a huge amount, including from foreigners who have to buy dollars to lend to the US government, that is a bad sign.
  • If the dollar gets stronger because the Fed is raising rates to keep the economy from overheating, that is appropriate. 
  • If the dollar gets weaker because demand for US products has fallen, that is a bad sign. 
  • If the dollar gets weaker because Americans are saving more and put some of the savings into foreign assets that they trade away dollars for, that is a good sign. 
  • If the dollar gets weaker because the Fed is cutting rates to bring the economy out of a recession, that is appropriate. 

Unfortunately, I don't know of a convenient, compact, vivid terminology for changes in exchange rates that makes the direction clear without seeming to assert a value judgment that doesn't necessarily follow. If the dollar strengthens, it can be called the dollar appreciating, which also sounds good. If the dollar weakens, it can be called the dollar depreciating, which also sounds bad. But strengthening/appreciation can be bad and weakening/depreciation can be good. It all depends.