Dollar vs. All

So I have this "thing" going on where I bring you market news at the first of the week and then a way you can increase your knowledge going into investing.

Today I must bring you grave news, the dollar is just underperforming. But is this really grave or could it be good? Many people believe that if the dollar is down then we have a disadvantage when competeing in the global economy. I disagree on this judgement for a few reasons.

First of all, the dollar decreasing actually increases jobs in the United States. While this has not recently been seen in the latest job lose reports because of other variables including a downturn in spending and a subprime dabackel, this is historically accurate. A weakening dollar equates to a bigger incentive to avoid changing of money to another currency, if the incentive is large enough, like the cost of a Euro at $1.48, then companies over the long run will decide to bring manufacturing home. Eventually, you will see a decrease in Net Imports for this very reason, thus increasing GDP, a measurement of a country's financial health.

Secondly, there is an arguement that foreign money being more valueable relative to the dollar could encourage foriegn families to come spend their money here on goods, services and taxes. With an increase in tourism the market is bound to grow because of items people want being sold. also the tax variable of GDP will increase.

Our CPI, consumer price index, has not changed. You do not have to worry about what you are buying here short term because most business is linked to a plac ewhere they can still get a COGS at a rate much lower than the sales price and break even is still relatively low.

Last of all, there is a competitive advantage for companies that have a hedging focus. If for instance a company in Europe puts money in an American bank, as USD, then they are buying dollars for a cheaper price relative to their future expectations. For example, Company X buys $1 it really cost $.67 from euro to dollar. Therefore if, as in history, the dollar were to rebound there would be a realized gain of some amount. This is good for the American economy because it puts more money in financial institutions that loan out money to people and businesses and are ultimately able to grow the economy.

So when people are all against a falling dollar, just look at the silver lining. Yeah, it sucks and it would be better for that trip to Euro-Disney to have a strong dollar, but it is not the end of the world. I hope this helps sift through the financial crap.