Most people understandably considered the dramatic drop in oil and gas prices as the biggest economic stunner last year. But NC State University economist Mike Walden says another price change at least belongs in the same stunner category.
“It’s the increase in the value of the U.S. dollar against foreign currency. It has surged 12 percent against a market basket of foreign currencies in the last year, and it’s now at its highest level since 2009.
“I think this is a sign of the strength of the U.S. economy against the economies of our major trading partners, particularly Europe and Japan. As you look around the world and you ask what economy seems to be doing the best, it is the U.S. economy. Also it is a result of foreign money flooding into the U.S., into our investments here, as there are some issues in other parts of the investment world.
“Now, this rise in the value of the dollar is a two-edged sword. If you are buying anything that is imported or, for example, if you are a foreign traveler, that’s going to make your travel or your imports less expensive. On the other hand, if you are an exporter and you are exporting U.S.-made products to foreign countries, that’s going to make your exports more expensive to foreign buyers and probably cut into your sales.
“But because the U.S. economy has a very low dependence on foreign sales, it looks like the higher-valued dollar is going to be a net plus for our economy.”