Just a quickie, this morning. I noticed on Yahoo that US stocks are set to open lower because of the weak Dollar. This seemed funny to me because when the Bush administration engaged its "Screw the Dollar" policies which have undone all the efforts in the Clinton administration to build a strong Dollar, I kept reading how this was good for the economy. You see, a weak Dollar is good for exports, as we can make more back selling goods in countries whose currancy is strong in comparison to the Dollar. It also discourages tourism out of the US, but encourages tourism in. So, basically, the average American who wants to visit Paris is screwed (but, really, they're a traitor anyway for wanting to visit France) but the Frenchman who wants to, say, the monument to Marquis de Lafayette in Washington, D.C. is in luck. So, weak Dollar is good for the US economy!
So why is it dragging stocks down?
Well, as you might have already guessed, its not that simple. In addition to screwing over folks planning European honeymoons and border-jumping Canadians trying to get cheap booze and cigarettes, there is a downside for the US, too. For starters, the weak dollar is bad for the rest of the world. Remember that whole global economy thing? The stock market is so knee-jerk that anything which is bad for the rest of the world will be bad, here, too. Also, a little fact that seems to have slipped past the single-minded advisors in the White House is that most of our corporate borrowing comes from international investors. A weak dollar makes for a bad investment for them, which hurts the bond market.
Obviously, there are trade-offs in both directions, but the Bush defenders repeatedly talked about the weak Dollar as if it was magical. Kinda like the tax cuts.
I guess it still is the economy, stupid.