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Comment by DrScump | Hacker News Reader

  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.

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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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