Is the Dollar Depreciation Good for the American Economy? Essay

Currency derogation continuously affects both sides of the coin. By landing the horse, it go away enhance the price combativeness of US product overseas except down(p)er dollar sign maybe counter generative especially if there is non enough popput for further expansion. Thus the fall to lower or to appreciate the bullion is very strong for economy not provided to the US but in the global economy as well. Maintaining the dollar at its value therefore is excessively very important as it provides balance on imports and exportingingation commodities. Over the old age the dollar has been swinging superior and low against some of the worlds leading currencies.The question that magnate be ask is, was it intentionally depreciated as part of economic strategy or was it a result of economic regrets collectable to interior(prenominal) or transnational circumstances that hamper economic growth, such(prenominal) as, the 9/11 tragedy and the US led war and continues occupation in Iraq? In the midst of ever-increasing competitiveness in the world market, dollar wear and tear is darling for America because it puts them in the economic competitive advantage position in the global market relying on the quality of the US made earnests. It is often a reckon economic litigate to cope with the ladened external market competition.However, there is a contraindication to this economic action as sound the dollar would mean sinister the maintenance standard back home. Depreciating the dollar could stimulate strong economic operation but it also poses bad jar because it allow be at the write off of cutting American wages. Paul R. Krugman prognosticate out Depreciating the dollar is a bad way to reduce the flock deficit because it amount to meeting international competition by cutting American wages, thus lowering the living standards of the American workers (119) In view of the macroeconomic article of beliefs, it allow be more advantage fo r the U.S. to depreciate the dollar at a definite level because it go away help to win back some of its economic deficits such as unemployment problem and good deal deficit. What the US needfully to do is expand its market conflicting turn increasing domestic productions of export goods. If there is enough output for export expansion, the impact of lower dollars maybe marginal as more money impart circulate in the market. Japans yen is certainly undervalued compared to the dollar and heretofore the Japanese enjoy a high standard of living comparable to that of the linked States.By mass production it go out create more jobs, which can tranquilize the problem of unemployment Another thing the U. S. should do is to put a substantive gear up on domestic product for domestic consumption in order to adduce the inflation rate at its rate of flow level. Because of the lower dollar, imports from other countries will be balanced by the US exports thereby wiping trade imbalanc es because of the higher dollar. Thus lowering the dollar provides ample economic proceeds for America. It maybe a bitter oral contraceptive to swallow for others but it may bring round some of the economys diseases. altogether it cannot be denied that depreciating the dollars have a serious economic implications to some maturation countries. As a matter of principle the US should not play the mathematical function of a shrewd manager who only cares of its interest at the expense of the weaker countries. Jacob Frenkel historied The U. S. decision on an exchange-rate regime will clearly affect international economies, and it is not clear that what is best for America will be best for the rest of the economy, we must(prenominal) reformulate our notion of how a good exchange rate system performs (158).Frenkel cited that due to dollar depreciation, the corresponding appreciation of foreign currencies against the dollar worsens the situation abroad compared to the revive exchang e rate case. Frenkel stated, By allowing the U. S. to export some of its unemployment, the dollars depreciation has a beggar-thy neighbor government issue (158). Thus, while the dollar depreciation might block out the U. S. economy from the adverse effect of inflation, but it has an black eye effect on U. S. vocation collaborates.To explain this further Frenkel said,The beggar thy-neighbor effect of dollar depreciation can be thought of as a honorarium made by the foreign terra firma to the United States in states of the world where U. S. marrow demand is copulationly low. In the opposite situation, the United States, by allowing its currency to appreciate, compensates foreign countries (Frenkel, 158). Thus the depreciation of the U. S. dollar requires a more sensitive study of the thinkable implication on other countries oddly on the job partners of the U. S. if the United States is hit of its trading partners economic developments.Not only in the international market t hat the dollar depreciation had its impact but in domestic economy as well. Allen J. Lenz pointed out that contractionary policies could slow U. S. economic growth relative to foreign growth rates (68). Lenz exclamatory that what counts is not just good trade performance but how that performance is achieved. unfluctuating U. S. market performance based on productivity gains contributes to gains in living standards. unafraid performance achieved by dollar depreciation can lower living standards.The depreciation therefore is an important economic action of the United States that will have significant impact not only in the U. S. but also to its trading partners. It may be good for the U. S. economy, and bad for the trading partners, but it may also be bad for the U. S.Work Cited icago PressFrenkel, Jacob. Exchange post and internationalistic Macroeconomics. U. S. A. University of Chicago. 1988. Krugman, Paul. Diminished Expectations U. S. A. The Washington dribble Company 1994 . Lenz, Allen J. Narrowing the U. S. Current mark Deficit A Sectoral Assessment. U. S. A. Institute for International Economic. 1992.