Hooray for a Strong Dollar

by Don Boudreaux on February 14, 2007

Here’s the first installment in a series of op-eds that I’m writing on the alleged problem of strong domestic currency (or, alternatively, of allegedly "undervalued" foreign currencies).

I conclude this essay with this paragraph:

But at the end of the day, when we examine the reasons for — and
consequences of — government intervention to manipulate currency
values, we’ll find that the best course of action is [for Americans] to applaud a high
and rising purchasing power of the dollar just as joyfully as we
applaud technological improvements.

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Ashish Hanwadikar

"If yesterday one dollar bought 100 yen, and today one dollar buys 120 yen, each dollar today buys 20 percent more Japanese goods than it bought yesterday."

Really! So, presumably, this 20% more japanese products came out of nowhere in a day?

Or you mean to say that purchasing power has shifted from holders of Japanese Yen to holders of US dollars. But how can we conclude that merely from the fact that exchange ratio between dollars and Yen has changed.

If say, Japanese govt. has printed more Yen. It will simply inflate the prices of all products in Yen. US dollars will also appreciate compared to Yen but (may) not appreciate compared to Japanese products.

So, why would US dollars be able to buy more Japanese products?

If amount of US dollars and Japanese products in the market haven't changed in a day, why would their ratio (prices) change?