I prefer a strong dollar for eternity, but right now I feel about the dollar what St. Augustine felt about chastity. To paraphrase his notorious prayer, "Lord, make our dollar strong, but not just yet." - Bob McTeer, former President of Dallas Federal Reserve Bank
Do you want a stronger dollar, or a weaker dollar?
If you ask that question to the next three people you see, chances are they’ll say (perhaps emphatically,) "Stronger." After all, it’s the Greenback, and we instinctively equate a strong dollar with a strong nation.
And mostly, over the long haul, a strong dollar is a good thing. It helps keep interest rates low, is a sign of a strong economy, and something worth rooting for.
But right now, a weaker dollar may be just the thing that helps lead us out of the real estate wilderness, and is probably what you should be rooting for.
That’s because a weak dollar helps manufacturing and other industries that export goods and services by making the cost of their goods cheaper, relatively, than those of foreign competitors.
In other words, a weak dollar drives up foreign demand for our products and services, so it’s a boon to exports.
You might remember last weeks post on the Beige Book, which higlighted manufacturing as of the few bright spots in our local economy. This was driven by, you guessed it:
"Business is booming due to exports," commented a Minnesota metal fabricator.
So when the dollar falls, Minnesota based exporters get a boost – hopefully large enough to make up for or exceed sputtering domestic demand, and cause them to add jobs and expand operations. All sorts of good things flow from that.
Why this Matters to our local real estate market:
The recovery of our real estate market, and more importantly, it’s long term health, is about not about ARM’s adjusting, foreclosures, or the legacy of subprime and the real estate boom.
It is about jobs and the local economy. The stonger our local economy and job market, the quicker the recovery.
To elaborate, we point you to a piece from Yesterday’s Wall Street Journal on the impact of exports on local economies. See also the cool interactive graphic (screenshot above):
Export-driven growth marks a dramatic shift in an economy that has relied heavily on consumer spending. That has slowed in recent months as Americans, nervous about job losses, teetering banks, falling home values, and rising gasoline and food prices, have tightened spending. Against that background, exports have emerged as a powerful motor…
It’s a badly needed tonic for the beleaguered U.S. economy.
To be sure, Minnesota is far from the largest "net exporter," so we’ll need more than just weak-dollar driven exports to pave the road to recovery, but for now, we’ll take any help we can get.