Falling dollar is good news. You don’t need Krugman to tell you that.
Your standard of living is in large part what you create for yourselves. Does Nigeria have low standard of living because their currency is too low? Or are there other factors at play?
Did American standard of living fall through the floor after Plaza Accord of 1985, when a bunch of bankers of the world came together and decided officially to devalue the dollar 2.5 times? Imagine that today is 1985, Volcker is the chairman of the Fed, and Krugman is in the background cheering him on. What dirty words would you think of for Volcker and Krugman? And yet you’d be wrong.
Yes – some imports will be more expensive, but imports aren’t a big spending category in anyone’s budget. (You’ll have to pay $30 instead of $20 for a pair of jeans! The horror!) Except oil. But oil prices are so unstable that you can’t predict them anyway. In exchange, you expand exports, you create jobs, and you get healthier overall economy.
