I think that national security concerns require a fairly strong dollar. We can’t play the devaluation card like other countries or the Dollar would loose its reserve status. That would be a catastrophe.
We have a national interest in maintaining a fairly strong dollar. Remember America is the only country fairly insulated from currency movements because commodities such as oil are denominated in Dollars. Our corporate and government debts are also in dollars.
What caused the 1997 Asian financial crisis (and the crises in Mexico, and Latin America) was that their debts were in dollars but their currencies were crushed. Their debts doubled practically overnight.
I don’t think we can devalue our way of this mess. If anything we’ll push harder for China to revalue the Yuan.
