Tradeoffs

I submitted the following letters to the WSJ in response to this editorial:

I’m happy to hear about Barack Obama’s favoring of a stronger dollar (“Barack and the Buck”, Aug. 8). Unfortunately, I fear he’s only making a well-timed political move related to high gas prices (not unlike Republicans banging the “drill now” drum) he doesn’t intend to carry out. The question for both him and the Republicans should be: “Why are you supporting this now instead of months or years ago?”. In Senator Obama’s case, I imagine it has something to do with an attempt to strike a balance between decreasing the cost of oil and appealing to his manufacturing base.

Many of us learned a long time ago that as the value of the home currency falls relative to that of foreign currencies exports rise (which is exactly what has happened in the US, especially over the last year) and imports fall. The reason imports fall, for example, is because their prices, in dollar terms, increase (oil, anyone?). The flip side of that is what Obama is hoping undecided voters in the Rust Belt don’t fully grasp: when the dollar strengthens, exports fall and imports rise. The result, of course, is that the prices of foreign imports, like oil, and the number of manufacturing jobs available to American workers will both decrease. While I’d like to see both candidates take a strong dollar stance, I don’t think the mercantilist mentality running through the country will let that happen. So much for a good idea.

Matt Hutchison
Atlanta, Georgia