Weak is Strong, Strong is Weak
Politicians and editors assume that it is automatically good for a currency to be strong. The words create a bias: strong must be better than weak, high is superior to low, and it is better to rise than to fall. But I have spent my life in exporting and, believe me, strong, high and rising are the last things you want your currency to do if you are trying to sell around the world.
There is an excellent post up by Michael Pettis on his blog China Financial Markets that cogently puts the case that the U.S. dollar must fall if we are to get worldwide economies back on track. Pettis, given the nature of his blog, concentrates on Chinese resistance to a lower dollar, but his arguments have global application. I recommend you take a look, either directly at his site or on greenfaucet where I first spotted it.
And I love the quote that Pettis discovered in an October 9 Financial Times editorial: “Politicians everywhere see strong currencies as national virility symbols …”
