What a Stronger Dollar Means for the Economy

Here is an interesting perspective from the New York Times

The Upshot

JAN. 5, 2015
Neil Irwin
It just might be time to book that vacation in Paris you’ve been thinking about.  That is one practical conclusion to draw from a remarkable set of shifts ing lobal currencies that started in the second half of last year and has continued in the early trading days of 2015. The seemingly inexorable rise of the dollar versus the euro and most other currencies has 200556773-001broad implications for the global economy this year and beyond.

The euro traded below $1.19 at times on Monday, the lowest level in nine years (it was $1.39 as recently as May). The dollar index, which tracks the dollar against six other major alternatives, is up almost 15 percent since June 30. Those swings are big enough to reshape the terms of economic interaction among the most powerful nations — and will affect almost any company or individual doing business across national borders.

The underlying causes are straightforward enough. The United States economy is doing far better than that of most other advanced countries, achieving a recently revised 5 percent G.D.P. growth in the third quarter. The Federal Reserve is planning to raise interest rates this year, at a time its counterparts in Europe and Japan are pushing toward easier money.
But the consequences are quite a bit more varied, some straight from Econ 101 and others unique to the current circumstances.  Read More