June 5, 2002
Views on the dollar
Art Laffer argues to keep the dollar strong, while this piece from Barron's suggests there are benefits to a weakening dollar, and this piece in the WSJ suggests a weak dollar could be good, bad, or both! Milton Friedman, as noted in R21, says: it doesn't matter as long as there isn't government interference in the exchange rate.
I think the talk about a strong/weak dollar is a little cart before the horse. Exchange rates are market phenomena, and should reflect, more than dictate, economic reality. A strong dollar is a sign of a healthy US economy but to prop it up artificially would hurt exporters. The best way to maintain a strong dollar is to adopt pro-growth strategies. As Laffer writes in his piece:
If the U.S. wishes to maintain our leadership role in the world economy, we've got to proceed undaunted in our pro-growth agenda. Just talking about a strong dollar won't cut it. In the words of Nobel Prize-winning economist Robert Mundell, we need tight money and tax cuts -- and then we'll have prosperity, asset appreciation, employment growth, and a strong dollar.
If you'd like to meet Art Laffer, let me know.