[Congressional Record Volume 149, Number 89 (Tuesday, June 17, 2003)]
[House]
[Page H5448]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page H5448]]
                            A WEAKER DOLLAR

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Michigan (Mr. Smith) is recognized for 5 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, I would like to make some 
comments on the weakening dollar. A weak dollar that is too weak has 
certain dangers but a weak dollar sounds worse than it is. The dollar 
is strong when the dollar purchases more foreign currency than it had 
previously, but as there are many other currencies, it is quite 
possible for the dollar to be getting stronger against some currencies 
and weaker against others.
  For example, looking at the Canadian dollar, the Japanese yen and the 
European euro over the last 2\1/2\ years, it is clear that the dollar 
has weakened against two of these currencies and strengthened against 
the other. At the beginning of 2001, the U.S. dollar bought 1.05 euros, 
1.49 Canadians dollars and 14.75 Japanese yen. On June 11 of this year, 
the U.S. dollar bought. 849 euros, down 19 percent; 1.35 Canadian 
dollars, down 10.4 percent; and 117.68 Japanese yen, up about 2.5 
percent.
  I present these facts on the dollar simply to say that in some cases, 
depending on the other foreign countries, the dollar goes up in value 
and sometimes it goes down.
  The dollar becomes strong when the demand for the dollar increases 
relative to the supply of dollars, a supply-and-demand situation. There 
are several ways for this to happen. For example, and it looks like it 
has happened, if Japan wished to make its exports cheaper, its Central 
Bank could buy U.S. dollars, strengthening the dollar against the yen, 
or if the Federal Reserve increases the U.S. money supply, there will 
be more dollars relative to other currencies, and the value of the 
dollar is going to decline. Also, the lowering of interest rates by the 
Feds tends to push down the value of the dollar.
  What happens when all of this occurs, because the question is whether 
a strong dollar is good or bad for the U.S. economy?
  In reality, it is that a strong dollar is good for some Americans and 
bad for others. I think it is important that we learn about what is 
happening to the value of the dollar because it affects our lives. 
Suppose that one is an auto maker in Michigan. Their company sells cars 
in the U.S. and exports to Europe and Japan. Japanese companies and 
European companies also sell cars to the U.S. and Japan and Europe. If 
the U.S. dollar weakens against the yen and the euro, then the U.S. 
cars will be less expensive for Japanese and European consumers, and 
the Japanese and European cars will be more expensive for U.S. 
customers. This will result in more profit and higher employment in the 
U.S. auto industry.
  In other words, as the dollar weakens, it is easier to export our 
products because in relative terms, to other countries' currencies, 
those products become less expensive.
  On the other hand, if one buys foreign made products, the weaker 
dollar means that they have to pay more or suppose that they work for a 
company that uses German and Japanese steel to produce, let us say, 
washing machines. A weaker dollar will make foreign steel more costly, 
thus making their company's product more expensive, and this is going 
to result in fewer jobs and probably less employment.
  In the last 2 years, we have seen an increase in the U.S. money 
supply, a lowering of U.S. interest rates in a U.S. economy that is now 
outperforming the European Canadian Japanese economies. However, 
inflation is a risk with an increasing money supply, and foreign 
investors have less interest in leaving their money in U.S. stocks, and 
all of these things are consistent with a weaker dollar.
  So we are not totally on safe ground as it becomes easier to export.
  Economists have long been divided over how much the money supply 
could be increased which would influence the strength of the U.S. 
dollar.
  In conclusion, in practice, the dollar is likely to gain strength 
against some currencies and lose strength against others. The effect on 
the U.S. economy will depend on which countries we are importing from 
and which countries we are exporting to and a myriad of other factors, 
including the strength of the foreign economies relative to ours. The 
current weaker U.S. dollar means that consumers will tend to pay a 
little more, but it will be good for producers and, therefore, better 
for job growth than otherwise.
  The danger is in concerning our balance of trade. If we are importing 
so much more than we export, that means other countries will have extra 
dollars to spend, and they are going to continue to use those dollars 
to buy our equities.

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