The dollar is too strong for the recession that just began, Mr. President:
http://dailytorch.com/2020/03/the-dollar-is-too-strong-for-the-recession-that-just-began-mr-president/
In the wake of coronavirus-induced recession, the dollar is probably far too strong and it could be a key obstacle to a rapid recovery after the virus passes. The Trade Weighted U.S. Dollar Index remains near its highest levels in years. The Great Depression dragged on for years not because of government intervention or tariffs per se, but because of the failure to recognize the adverse impact of keeping the dollar exchange rate to gold so high while the rest of the world was engaged in competitive devaluation and retiring the interwar gold standard. It was this distortion in monetary policy that caused a recession to turn into a massive depression. It was not until the federal government ended the interwar gold standard in 1933 that some relief was felt as unemployment began collapsing. Now, the scourge of deflation could be upon us once again as asset prices plunge after the coronavirus crash. With the global economy essentially frozen while the world waits out the virus, the economy will likely contract massively in first quarter, which ends in a week. Layoffs will be in the millions, and the unemployment rate could be in double digits.To alleviate the long term impacts over the coming months, the Treasury and Federal Reserve should consider doing precisely what the Exchange Stabilization Fund says, which is to stabilize the exchange rate of the dollar versus trade partners during this national emergency. If there ever was a time for a weaker dollar, it’s right now, Mr. President. We’re going to need all the help we can get. What do you think?
