After much reading and learning, I find that a pattern is emerging. For the last 30 years, we've been fed a line about why we need a strong dollar. A strong dollar meant that our country was strong, and gas would stay cheap. Neither promise came true.
While our dollar was strong, first the Japanese ate our lunch. Then China came along to eat our breakfast. And the Middle East ate our dinner while we watched the news, all before we could even get to the table.
Someone benefits from a strong dollar and it isn't the middle class. When was the last time you heard of someone in the middle class going to Europe for 2 or 3 weeks? Hardly anyone in the middle class can get the time off to go on vacation, and if they do go, they take their computer, their cell phone and anything else that ties them to work to be sure that they have a job when they return. I sincerely doubt that the middle class has an opportunity to worry about the exchange rates.
That would leave the upper class to worry about that, if they worry at all. They want a strong dollar to make it cheap to import goods from afar. A strong dollar keeps fuel cheap, and that means lower shipping costs. They want a strong dollar to take advantage of cheap labor in places like China and Vietnam.
If the dollar were to become substantially weaker in world markets than it is now, a few interesting things would happen. For one, cheap labor would no longer be as appealing as it was. Not only that but if the price of oil goes up, the cost of shipping goes up, piling onto more expensive foreign labor. As we can see, the effects tend to compound on each other.
Some in the mainstream press and in Congress, particularly the Tea Party types, worry about China. They say that some day, China will start to unload their US debt. But at least one economist has made it clear that China buys US debt in order to support the value of the dollar. China sees the writing on the wall: if the dollar becomes weak, *they* will see huge unemployment numbers. China is a much larger country and the effects of a shift in currency value would be much more pronounced. That one lone economist, Dean Baker, has noticed that the threats from China are hollow.
A weak dollar would make foreign oil more expensive than it is now. So what? Since 1973, we got the message that the Middle East can set the price of oil and we decided, for a short time anyway, that we can make more efficient cars. When we didn't, Japanese, Korean and European car makers were happy to oblige. Now that the Big Three automakers were saved from bankruptcy by the Federal Government, they have a chance to change their ways and make cars that sip gas. If gas were to hit $5 a gallon or more, SUVs would get smaller or stay in the garage. We'd use public transportation. We'd walk, ride bikes or telecommute to work. One way or another, we'd work around high gas prices like the internet works around damage.
It seems ironic that a weak dollar would make this country strong again. We'd be making things again. We could build infrastructure again. Andy Grove wrote a rather long piece, that in sum, says that we can't afford the things we don't make. When we make things, we get the experience needed for innovation to occur. And we save on the shipping.
All those MBAs who were trying to dress up the bottom line with foreign manufacturing seem to have forgotten the source of innovation. The source? The manufacturing floor. Each time we make a widget, we refine the process down to the simplest steps, eventually refining the process down to a science.
We can't do that with a strong dollar, and we'll never get a chance to make the things we buy unless move the dollar down with other currencies. A weaker dollar will not only bring jobs home, it will bring innovation back home, too.