Who Wants a Strong Dollar?
George W. Bush is getting macho again, this time talking tough on the dollar. While this is probably less harmful than invading another country, it would be useful if he explained why we should care if the dollar is strong at all. The strong dollar is the cause of the $700 billion trade deficit. The trade deficit has consistently been far larger than the budget deficit, in fact often two or three times as large. Large trade deficits are just as unsustainable as large budget deficits. If the country persistently runs large trade deficits then it will have to pay more interest each year on the debt owed to foreigners, just as large budget deficits increase the amount of interest the government must pay each year on the national debt. The main difference is that the trade deficit is much bigger than the budget deficit. In other words, the dollar must fall, the only question is when and how. It is also important to note that a strong dollar puts workers who are directly subject to internat
