In November of 2007, Brazilian supermodel Gisele Bundchen claimed that in order to remain the richest model in the world, she wouldn’t be able to accept the U.S. Dollar. Nearing the end of 2015, Bundchen is still the wealthiest supermodel on the planet, but experts are betting she’ll change her mind about American greenbacks.
The U.S. dollar is back, and it’s getting stronger.
Reaching a 13-year high against other currencies just last week, the U.S. dollar has been strengthening for most of 2015.
While most financial experts prefer a Reagan-styled “strong dollar” policy that include pro-American trade policies and major tax reform, the current dollar strength is heavily steeped in sapping other currencies, as well as whether or not the Federal Reserve will raise interest rates in the next few weeks.
Here are the pros and possible cons of a strong U.S. Dollar:
Pros:
- First and foremost, a strong dollar equals a strong country; putting America back at the top for world reserve currency.
- Imports such as clothing and cars will be less expensive.
- Travel expenses will be less expensive for Americans vacationing abroad.
- The risk of inflation on the cost of goods goes down when the value of the dollar goes up.
- Because most commodities (such as gas) are traded in dollars, the average American will see an improved standard of living with the lower cost of goods; thanks to the strengthening dollar.
Possible cons:
- U.S. manufacturing could potentially be less profitable due to exchange rates. Less profit could have a negative impact, such as job loss, for the workers who created the product.
- Exports will become more expensive. Manufacturing will be hit hard when the price of commodities drop while the dollar rises. Additionally, many American farmers could be adversely affected due to lower global prices on commodities that cost more to produce in the U.S.
- Foreign consumers will pay more for American goods. For U.S. companies that rely on export income, the cost of doing business goes up while the profits go down. Lower export profits equal lower stock prices. And lower stock prices could cause the market to go down, which could affect your 401k.
The cons of the U.S. Dollar getting stronger are only speculation; while the pros balance it all out. Having a strong dollar is what American needs to recapture economic vivacity and resume our position as a world financial leader. As with all facets of markets and finance, there a pros and cons. A fundamentally sound strong dollar is ultimately beneficial to the U.S. economy.
All of your money is affected by the performance of the dollar. If you have questions, or would like more in-depth information, contact us today to learn more about how we can increase the flow of money in your portfolio.