Word: dollars
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Dates: during 2000-2009
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Economists who study currency movements aren't so sure. They figure the usual cyclical ups and downs are a big factor in the dollar's fall. How much of a factor? Who knows? "I try not to talk to reporters too much these days," says Menzie Chinn, a University of Wisconsin economist who is one of the nation's leading academic currency watchers. "Because, frankly, I'm confused...
Which brings us back to a basic question: How strong a dollar do we actually want? Over time, a currency's value reflects an economy's fundamentals--how well a country allocates resources, how productive its workers are, how it contains inflation, etc. So in that sense, a strong currency is reflective of a strong economy. It's something any country would want...
When your currency is in the declining part of the cycle, as the dollar has been since 2002, that puts upward pressure on inflation, spooks investors and generally leaves people feeling cranky. It eventually gives an important boost to the economy by stimulating exports, but that takes years. During an upswing, by contrast, everything feels good. But it's the downswing that makes the upswing possible...
...distinguish a cyclical downswing that's clearing the way for good times ahead from the wheezing of a currency and a nation in decline. Pessimists look at the budget deficits being run by the Bush Administration and the easy-money policies of the Federal Reserve and see a dollar that will never recover, leaving Americans permanently poorer...
...what should U.S. dollar policy be? Probably something along the lines of "We'd like it if the dollar got a bit cheaper, especially against the Chinese yuan and a few other Asian currencies, but then stopped falling." Can you blame the President for not wanting to say that at his next press conference...