The Phaserl


Welcome to the Currency War, Part 18: Dollar Soars, Economy Disappoints

by John Rubino, Dollar Collapse:

The point of competitive devaluation, aka currency war, is that a cheaper currency gives a country several advantages over its trading partners, leading to better growth and generally happier voters. The trading partners, meanwhile, get the ugly mirror image — slowing growth and disgruntled citizens — so they eventually respond in kind, with devaluations of their own. If nothing happens to stop the war, everyone’s currency ends up being worth a lot less and a whole generation of savers is partially wiped out.

In the current skirmish, Europe is crushing the US, which is to say the dollar is soaring against the euro. So if the script holds, the US should be suffering. And — despite all the breathless reports of plentiful jobs and plunging unemployment — the recent numbers do paint a picture of a country hobbled by a too-strong currency. From Bloomberg this morning:

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