Strong Dollar's Return

October 14, 1983

Report Outline
Global Currency Misalignment
Exchange Rate Management
America's Dollar Policy
Special Focus

Global Currency Misalignment

Benefits and Drawbacks; Foreign Protests

As any recent traveler abroad can testify, the dollar is strong again. It buys about twice what it did only three years ago in France and Italy, for example. The dollar even buys more in West Germany and Japan, the industrial giants whose currencies once rivaled the dollar's purchasing power in international markets.

But when Americans come home, they find that the dollar's strength is a mixed blessing at best. True, it makes imports a bargain, and their lower prices help keep U.S. inflation at bay. But the strong dollar, once considered a sign of a healthy economy, has also set in motion a vicious cycle of negative effects. It not only runs up the U.S. import bill but makes American goods costlier overseas, thus pushing this country's foreign-trade deficit to record figures. And the reduced competitiveness of U.S. industries in this situation has caused many of them to close down or lay off workers.

While foreign industries have profited by this turn of events, the home governments complain bitterly of inflation fueled by high-priced dollars. Essential oil imports, especially, are priced in dollars and thus become more costly. Third World borrowers additionally face higher interest payments on their dollar loans and are forced to cut spending to avoid default. Consumption is drastically reduced, drying up important export markets for the United States and other Western industrial nations and retarding their recovery from a worldwide recession.

ISSUE TRACKER for Related Reports
U.S. Dollar and Inflation
Jul. 19, 2019  The Future of Cash
Oct. 2008  The Troubled Dollar
Feb. 13, 1998  Deflation Fears
Mar. 13, 1987  Dollar Diplomacy
Oct. 14, 1983  Strong Dollar's Return
Jul. 11, 1980  Coping with Inflation
May 16, 1980  Measuring Inflation
Dec. 07, 1979  Federal Reserve's Inflation Fight
Jun. 09, 1978  Dollar Problems Abroad
Sep. 20, 1974  Inflation and Job Security
Feb. 26, 1969  Money Supply in Inflation
Feb. 14, 1968  Gold Policies and Production
Dec. 15, 1965  Anti-Inflation Policies in America and Britain
Mar. 15, 1965  World Monetary Reform
Dec. 02, 1964  Silver and the Coin Shortage
Oct. 17, 1962  Gold Stock and the Balance of Payments
Dec. 15, 1960  Gold and the Dollar
Oct. 10, 1956  Old-Age Annuities in Time of Inflation
Jan. 17, 1951  Credit Control in Inflation
Aug. 10, 1949  Dollar Shortage
Oct. 04, 1943  Stabilization of Exchanges
Jan. 21, 1941  Safeguards Against Monetary Inflation
Mar. 25, 1940  United States Gold in International Relations
Dec. 14, 1937  Four Years of the Silver Program
Oct. 04, 1934  Inflation in Europe and the United States
Jan. 30, 1934  Dollar Depreciation and Devaluation
Sep. 05, 1933  Stabilization of the Dollar
May 29, 1933  Invalidation of the Gold Clause
Mar. 15, 1933  Inflation of the Currency
Oct. 25, 1924  Bank Rate and Credit Control Federal Reserve Policies and the Defaltion Issue
International Finance