economy : Why is the dollar strengthening even after a stagnant/weakening American economy and excessive printing? What am I missing here?
Answer by Balaji Viswanathan:
US economy is among the most analyzed and criticized in business media. It is the most criticized because the expectations are so high. This doesn't mean it is performing poorer than other countries. While US economy might be performing worse than its own past, it is doing quite well relative to almost other economies, including all the developed nations.
Why is dollar going up?
- There is a great oil boom in the US: US is experiencing one of the greatest energy booms in history. Gas and oil are gushing like never before. For the world's biggest consumer of oil, this is an extraordinary boon. As US reduces energy imports, dollar will move up. All the other major economies – from Europe to Japan to China – are desperate for such a bountiful source of domestic energy.
- Economic growth: The energy boom has been revitalizing US industry and bringing back manufacturing jobs. In the past two quarters, US economy grew at an annualized rate close to 4%. This is out of the world in the present world scenario. In contrast, Europe is growing at 0.2%, while Japan is growing negative.and . In absolute value of dollars added to GDP per year, US is not far from China, although its bigger base would show the percentage growth lower.
- Overall healthy business climate: Most major US corporations are quite healthy relative to their peers elsewhere. Tech and Energy is growing like there is no tomorrow. Finance has fully recovered from the Great Recession. Housing and Manufacturing have got a second life. Retail is making cautious steps.
US is not as healthy as it could be, but more healthy than most.
US is in such a position that even a war in the Middle East might not affect it a lot. A war there would push the price of oil and that would in turn help the US energy and defense sector. The only thing that can screw US is itself – if a major war involves its own military.