The Tradeoffs Between A Strong & Weak U.S. Dollar

Описание: Why does the strength of the U.S. dollar matter so much and who does it actually help or hurt? In this video, we break down the tradeoffs between a strong USD and a weak USD.

America is a consumption-driven economy, and a strong dollar makes imported goods cheaper, which is great for U.S. shoppers. But there's a catch: it also makes U.S. exports less competitive, hurting American manufacturers and widening the trade deficit. We’ll explore how this dynamic plays out, why the dollar’s value fluctuates, and what it all means for the U.S. economy.

Here are some key takeaways from the full video...

🔹 The USD Has Been Strong Since The GFC:

Despite the recent slump in the USD over the past year, the currency has been incredibly strong since the global financial crisis. This strength in part is because as globalization took hold, the dollar’s stability helped establish it as the global reserve currency.

🔹 Stronger USD = Lower Import Prices:

There exists is an inverse relationship between U.S. import prices and the USD. When the dollar is strong, U.S. consumers can buy goods for relatively less USD. This means that a strong currency is generally a boon for consumption growth.

🔹 Weaker USD = Lower Export Prices:

On the flip side, when the USD is weak, that generally leads to increased export growth. This is because U.S. goods become more competitive from a price perspective to consumers overseas.

🔹 The U.S. Economy Is Driven By Consumption:

The U.S. has the widest gap of any country between its consumption component and its export component of GDP. Since nearly 70% of U.S. GDP is driven by consumption, a stronger dollar is generally more beneficial of the U.S.’s economic growth.

🔹 Export Strength Has Lead To GDP Contractions:

Many of the previous economic contractions (negative GDP growth) in the U.S. were during periods when export growth was strong, but consumption growth was weak.

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