No Option to Strong Dollar Policy

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Jim Griffin:

"It’s a bad idea, for all concerned, to let key currencies get so far out of alignment, but Americans can run only American economic policies. On this side of the water, there is no alternative to a strong dollar policy. If the rest of the world will not take effective action to bring their own economies up to speed, there may be no way, finally, to avoid an unnecessary global recession. […] The U.S.’ interest-sensitive, nontradable housing sector can’t indefinitely propel the global economy."

I’m struggling to get a better grasp on macroeconomics. It amazes me how weak is the layman’s (put me in that category, I admit to have skipped more than a few parts of that syllabus in business school) understanding of monetary policy or inflation. Every day you hear about interest rates this and unemployment that, but I’m not sure we have the necessary tools to turn that kind of data into anything useful.
On a professional level, it doesn’t make much sense to me to become the expert in foam who wouldn’t know what is an ocean as a whole. And in these times of globalization, we need to keep learning, if we want to at least try to make our own educated opinion.
Can we even make sound personal investment decisions without that kind of knowledge? I’m European but most of my assets are stocks priced in dollars. I’ll most probably move from France to another European country next year, but even a shortlist of two countries requires hours of research on local laws, real estate markets, and business opportunities. I don’t know how I’d do it without the Internet, but it’s still a lot of data to gather, compare and ponder. I guess intuition will have to handle what analysis can’t. Ants didn’t need to understand the life of elephants to carve their successful niche in the ecosystem. But hey, they’re not trying to beat the system and retire by age 40! For one, ants would have to retire by age 7 to enjoy such a long period not having to work. Some say it’s only a matter of not being the greater fool.
06/19/04 update: I relocated to Portugal last year, and I’ve been subscribed to The Economist for a while now, so I’m a bit more familiar with these issues, but trying to guess whether a major currency is going to go up or down seems to be quite an ordeal even for the best investors and economists. Right now we’re considering moving to a dollarized economy as real estate in Europe is just too expensive in dollar terms, and we’re fed up renting the place where we live (though we know it’s the smart thing to do when you’re in a real estate bubble).

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