| | |  Business News | August 2008 
The US Dollar Makes a Comeback
 Dale McFeatters - Capitol Hill Blue
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Almost out of nowhere, the once-ailing U.S. dollar has come storming back. That's good news on several fronts.
A stronger dollar will quell simmering domestic inflation, which last month reached a worrisome 5.6 percent over July a year ago, a 17-year high.
And a stronger dollar is both a cause and effect of falling oil and commodity prices. Crude oil fell 24 percent in a month. One reason for that is the "greedy speculators" that Congress likes to denounce are getting out of commodities and into dollar investments.
Falling commodity prices, especially of foodstuffs, are a boon for poorer countries, and, as in the United States, will have the effect of dampening inflation in Asia and especially China, where inflation was running at over 8 percent early this year and seemed on the verge of introducing that country to the dubious joys of stagflation - flat growth and rising prices.
The strengthening dollar comes somewhat at others' expense. Japan's gross domestic product shrank in the spring quarter and so did the 15-nation euro zone's, the first contraction in its history. And the British government says it expects its economy to stagnate over the coming year.
The dollar reached highs for the year against the yen and the euro - 8 percent in the last month alone - and has a winning streak against the pound that the Associated Press says is the longest in 37 years.
The newly robust dollar represents a judgment by international markets that, as The Economist put it, "The mess in America suddenly seems less awful," and a recognition that the U.S. economy for all its problems is wonderfully resilient.
Certainly the recovering dollar does not mean we can ease up our search for fuel efficiency and new energy sources. And it means attention must be paid to two other causes of a weak dollar - the federal budget deficit and the trade deficit.
There is little Congress can do about the trade deficit, and what it tries to do is usually wrong. But the budget deficit is solely its prerogative. We have a second chance in the making and it's fair to urge our lawmakers: This time, don't blow it. |
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