What counter measures can the US government use to strengthen our dollar or is it good for the trade deficit?

Answer 1

Your question presumes that the "weak" dollar is a problem that needs to be fixed. In reality that's not the case -- it's just something for talking heads and ignorant journalists to yak on about. I promise you that if the dollar was unusually strong, that too would be a problem and everyone would be complaining about it -- as has occasionally been the case in recent years.

The weak dollar does help the trade balance and stimulates the economy. It makes US goods relatively cheaper overseas, and encourages multinational firms to move parts of their business to the US to save money (think lots of miscellaneous stuff like getting brochures printed in the US instead of in Europe).

Now, one potential problem of a weak currency is that imports could become too expensive and it could threaten inflation. However, that is simply not the case here. In fact, the dollar is not weak compared with the Yen and the Chinese Yuan anyway -- where much of our imports come from. It is weak compared with the Brit Pound and the Euro -- which is far less important to imports. (Right now US automakers are complaining about Chinese and Japanese currency manipulation, and they want Pres. Bush to do something about it. The complaint is that those countries artificially weaken their own currencies against the US dollar)

But finally to answer your question. Exchange rates for the dollar are after all caused by supply and demand for the US dollar among people outside the US:

- Reducing the government deficit or cutting government spending will NOT make the dollar stronger -- as these actions will do nothing to either increase the demand for or decrease the supply of US dollars overseas.

- Raising interest rates would likely strengthen the dollar, as it increases demand -- foreigners will be more interested in buying US bonds.

- By classic theory the dollar should strengthen if the trade deficit fell. This is a moderating feedback loop -- as a currency weakens that country's exports get cheaper. As exports get cheaper, foreigners buy more of them, which increases foreign demand for the currency. That resulting demand for the currency then strengthens the currency again.

Answer 2

There are a few tools at the government's disposal to strengthen the dollar. However, a stronger dollar would tend to add to the trade deficit as it makes US exports more expensive and non-dollar denominated imports less expensive.

The easiest way to strengthen the dollar would be to balance the budget and to start hacking away at the public debt, which currently stands at about $ 8 trillion. This would require forethought, fiscal discipline, and financial savvy. Unfortunately, we have congress. While it is possible this may one day occur, keep in mind it is also possible for a hurricane to hit a junkyard and randomly produce a fully functional Boeing 747. It also seems just as likely.

Another easy way to strengthen the dollar would be to address the imbalances in medicare, medicaid, and social security. The deficits for these programs are forecast at approximately $75 trillion over the next 70 years. That is beginning to be a lot of money, even by Washington standards.

By far the easiest way to strengthen the dollar would be to outsource and off-shore the entire federal government. Given China's and India's propensity to work quite cheaply - approximately 10 cents on a dollar compared to domestic services - we could have them run the entire government for approximately $300 billion/year as opposed to the almost $3 trillion it costs to do internally. The resulting savings of $2.7 trillion could fund a massive tax cut while allowing us to get the debt paid off in just a few years. I would guess the trade-weighted value of the dollar would almost double under those circumstances, as $2.7 trillion is about the same as total French GDP. We could literally save the entire French economy in our piggy-banks.

Answer 3

nonetheless all GWB's fault; could not be the 787 billion dollar miscalled Stimulus kit it is principally will strengthen in entitlements, the 400Billion to end the three hundred and sixty 5 days for the government which were vetoed via GWB as being too severe at 350Billion and delivers money to pay for issues already interior the Stimulus kit? The administration used their financial forecast for his or her figures and not the CBO's which bills for a good number of the version. they did not prefer to apply the Jan 9 CBO comments because of the fact it reported then the economic device might financially turn around overdue this three hundred and sixty 5 days yet unemployement might upward push with the aid of the 1st 0.5 of next three hundred and sixty 5 days and any government action does not result that-because of the fact the administration necessary the disaster to get their money for the stimulus bill they ignored it and went with their own projections it is something stopped with the aid of mutual consent between Congress and the administrative Branches years in the past while the two reported to make the sector even they might use CBO forecasts. basically extra centrifuge via the present administration which it seems it is way less truthful and clean then the final.

Answer 4

The dollar floats in the free market, it would be foolish to defend the value of the dollar, that is what created the Great Depression.