Strong Dollar Is Hurting US Business

Strong Dollar Is
Hurting US Business
By www.ForexConspiracyReport.com

http://www.forexconspiracyreport.com/strong-dollar-is-hurting-us-business/
As the US Federal Reserve slowly raises
interest rates, the dollar keeps going
up.

The result is credit problems in
developing economies and a correction
of the US stock market.

The strong dollar is hurting US business
for two reasons.

It makes exported products more
expensive for consumers outside of the
USA and it makes profits collected in
foreign currencies less valuable when
repatriated to the USA.

CNBC writes that the strong dollar is
largely at fault for the current dip in the
stock market.

“It could be a challenge for the stock
market in the fact that about 40
percent of the S&P 500 earnings are
generated from outside the United
States,” said Michael Arone, chief
investment strategist at State Street
Global Advisors.

“As the dollar strengthens, that has
certainly created risk to those earnings.

Another thing that could be a risk is, as
the global economy has been slowing
this year, the rising dollar poses a
problem for many countries outside the
U.S., and that has contributed to the
slowdown in growth.

The question is whether the U.S.
economy can withstand a slowdown in
global growth, and I don’t think it can
in the long run.”

But, the pain from a stronger dollar is
not limited to US companies.

The Dollar Melt Up

Seeking Alpha also writes that
a continuing dollar melt up is bad for
stocks.

But they also not the huge amount of
outstanding debt in the world that is
denominated in US dollars.

This is largely due to the amount of US
dollar-denominated debt that
emerging market economies have
taken on.

Emerging markets have $2.7 trillion in
dollar denominated bonds and loans
maturing by 2025.

The loans have to be paid off or
refinanced, which may become more
difficult with higher interest rates.

And, because a debt crisis will disrupt
economies across the globe, it will hurt
exports from the USA because nobody
will be able to buy anything!

Eventually, the end result of all this will
be that the Fed ceases to raise interest
rates or even lets them slide back a bit.

But, that is probably a couple of years
in the future and, right now the strong
dollar is hurting US business.

Trade War Blues

The continuing US negative balance of
payments is not sustainable.

As such, the Trump administration is
right to work towards a more equitable
trade situation with China.

And, to the degree that the Chinese
need to be pushed into a better deal,
so be it.

But, along the way, Chinese production
will suffer and their currency will
weaken.

Even if the US gets better access to
Chinese markets, the dollar may be so
strong as to make US products un-
affordable.

And, along the way, US agriculture and
other exporters (like Boeing) will take
hits as noted in an article on our sister
site, Profitable Investing Tips. (Trade
War Damages Investments in
Agriculture)

In the last 20 years North Dakota
farmers have increased acreage
devoted to planting soybeans from
450,000 to 6,400,000.

Along with this increase in production
has come the construction of millions of
dollars-worth of grain elevators (huge
buildings for storage), more loading
facilities, more hundred-car-trains to
carry the soybeans, and more farm
implements used plant and harvest
soybeans.

All of this investment is at risk because
China, the major buyer of North Dakota
soybeans, is going to buy their
soybeans elsewhere!

Strong Dollar Is Hurting US Business

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Strong Dollar Is Hurting US Business