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Comment by jacobolus | Hacker News Reader

Weakening currency and a bit of inflation would be great for most people in the US, reducing unemployment, strengthening US experts, and reducing debt load for all the folks struggling to pay off their mortgages and student loans. Prices on imported goods would of course rise a bit, but prices on non-tradeables like healthcare, housing, and education would probably stop rising so fast, or might even drop a bit. For the last few years now the US has had too little inflation (this year it’s stuck close to 0%), and too strong a currency. Getting inflation up to about 2–3% annually (the Fed target is 2%) would be great.

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This is nonsense. By that logic every country should continuously weaken it's currency in order to gain an advantage. So we would get caught in a descending spiral of every country constantly trying to have a weaker currency relative to its trading partners. If the USD weakened, which other currencies would strengthen and how do you think those other central banks would react?

> By that logic every country should continuously weaken it's currency in order to gain an advantage.

It might be an advantage for most people in the country (at least in the short term), but it would be a disadvantage (even in the short term) for the people with the most wealth, and, perhaps more specifically, for the people with the most power over monetary policy.

The advantages (particularly in the near term) that countries get from weakening currency is why the people who loan them money have come to insist than monetary policy should generally handled by independent central banks that are, while generally accountable in some way to government, also somewhat insulated from political pressure from the rest of government (and, often, with direct influence from the financial industry.)

You're missing the point. Every country would like to have a weak currency in order to boost exports. However every country can't have a weak currency simultaneously; it's mathematically impossible. If the USD weakens then other countries will respond by weakening their currencies in a race to the bottom.

We will be better off in the long run by not playing that game. Keeping the currency fairly stable helps to encourage long-term economic growth by allowing businesses and consumers to plan ahead. That's better than chasing a quick and unsustainable boost in exports through devaluation.

Well obviously if everyone races to weaken their currency as fast as possible, that causes a lot of instability. A weaker currency hurts lenders and the wealthy, and drives up consumer prices, so it’s not some infinitely applicable strategy that can be endlessly pursued by everyone.

But the point is, the US dollar has been kept “artificially” strong for a good while now, which goes along with a structural trade deficit, current account deficit, low domestic savings rate, unemployment, rising prices of non-tradeable goods, and struggling US export industries. On the other side, countries with artificially weak currencies like Germany or China have had high domestic savings rates, trade surpluses, current account surplus, etc. This kind of imbalance builds up pressure over time, and isn’t stable in the long term.

Can you explain how "weakening our currency" isn't equivalent to making us poorer overall? What's so bad about a strong currency?

I'll give it a shot. If the U.S. dollar falls 30% against the Euro, suddenly Tesla cars are 30% cheaper for rich Frenchmen to buy. Maybe now the company makes a nice profit and goes on a hiring/investment spree instead of struggling to survive. Similarly for Boeing jets vs. Airbus jets, etc.

A weakening currency is probably aimed to boost exports.

I think in theory, say the US Dollar weakens, everything appears cheaper, exports increase. US companies will then be able to employ more people within the country and thus improves employability and domestic consumption.

It makes us poor overall, if we consume imported products, travel internationally, and if the economic plan fails in which employability and domestic consumption does not increase. This can happen when other equally competitive countries counter by de-valuing their currency as well.

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