Morgan Stanley: It's A Good Time For The Dollar To Fall

A dollar decline is much-needed and good news for the U.S. economy, as long as it is orderly, according to Morgan Stanley’s Richer Berner in a piece today.

Richard Berner: Some fear that, by allowing the dollar to decline, the Fed is playing with fire, risking a destabilizing crash in the currency. I disagree. I view a weaker dollar as an adjunct to US monetary policy that helps prevent inflation from falling too low and is a stimulant to growth.

His key points:

  • It counters deflationary forces in the U.S. economy.
  • It helps shift production back to the U.S. and boosts exports, thus helping the country achieve more balanced growth.
  • It will be tolerated by foreign countries as long as it is orderly.
  • Yet we should remain vigilant that the decline doesn’t get out of control.

We’ll point out that export-heavy countries in Asia haven’t been afraid of a weaker local currency, so perhaps it is the U.S.’s turn. The dollar decline this year actually hasn’t even been that bad, as shown by Mr. Berner:

Dollar Decline

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