Comment by adventured | Hacker News Reader

Comment by adventured | Hacker News Reader

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Real American wages increase with the dollar, not decrease.

The dollar climb has boosted American purchasing power dramatically. That is especially important for a nation that imports as much as the US does.

Americans can buy more with their wages than they could prior to the dollar climb. That covers nearly every economy the US imports from, as the dollar has gained against essentially every currency on the planet. Simultaneously, real wage growth has been outpacing inflation for years now and is set to continue to climb at an accelerating pace due to a dramatic decrease in labor slack in the last five years.

  Real American wages increase with the dollar

I don't follow. I can see how the wage earners' buying power for imports improves with the dollar's rise against corresponding foreign currencies, but not a generalized wage increase.

In general, an increasing dollar does not have effects on the real price of domestic goods, but decreases the real price of imports. Because that is no change and increased purchasing, it results in a real increase in purchasing power which is therefore an increase in real wages. You can buy a larger basket of goods because the imports cost less.

A strong dollar also reduces export, so how does this pan out net-net?

Just saw this, but American consumers are more sensitive to import prices than export, because consumers generally do not directly receive the proceeds of exports.

Net-net, it'd be hard to say what happens long term in the economy because that has a lot to do with long-term changes in the macro environment, if economic growth remains strong consumers will continue to make out better, if the strong dollar ultimate hurts the economy (and that isn't impossible), a weakening economy hurts consumers more than the stronger dollar.

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