Strong Dollar

Everything’s relative. Like…if you waved a dollar bill at a hotel owner in Russia in the early 1990s, just after Gorbachev tore down that wall, that dollar would have bought you a night in the fanciest hotel in Moscow. Hugely strong dollar relative to the Russian ruble back then.

A dollar that took an average worker in the U.S. five minutes to earn...bought an entire night at a swanky hotel. Why?

Well, at the time, Russia’s entire political system was shaky. Unstable. Its population didn’t trust its own very soft currency. Would it be devalued? Like…more or less made worthless the next morning by the government as it issued a new currency? Or would the government print a whole forest worth of paper, diluting the value of any one unit of its own ruble? Could happen. Has happened with other countries in the past. Brazil, we’re looking at you.

Could that happen in the U.S.? Well, pretty much…no. The world trusts U.S. currency, which is like saying that they trust the U.S. to not screw over people who rely on its banking system and its currency. So what does that trust...do? Well, it makes for a highly prized, or strong, U.S. dollar. Meaning that people will pay a lot of their own country’s mistrusted currency in order to buy the certainty, or reliability, of our awesome currency. This dynamic makes U.S. goods relatively more expensive and foreign goods cheaper in the U.S.

And yes, it also makes it inexpensive for those holding highly prized US dollars to pay for hotel rooms in France, and of course…Somalia.

At least for now, the U.S. dollar is relatively strong. To keep going with the Russia metaphor, it’s, uh, Rocky-versus-Ivan-Drago strong.