All Bow Before The Almighty US Dollar

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In an odd way, the dollar was also my problem. In 1971, I was the 24-year-old minesweeping and supply officer on the USS Pivot. In light of the dollar crisis, the Nixon administration decided to give Pivot and several other US Navy minesweepers to Spain as payment for base rights there in lieu of dollars.

In preparation, the Pivot's captain tasked me with teaching our crew Spanish – a language that I didn't know and that the crew turned out to be uninterested in learning. I made a desperate call to the Pentagon and found someone there who helped me put together a long list of minesweeper terms with Spanish translations. The crews overcame the language barrier – sort of – by pointing at their mimeographed copies of the list.

These days a strong dollar is, in many ways, everybody's problem. It's especially problematic for foreign countries.

International Monetary Fund research last year concluded that for emerging-market economies,“a 10% U.S. dollar appreciation, linked to global financial market forces, decreases economic output by 1.9% after one year, and this drag lingers for two and a half years.” Worst hit are developing countries that have borrowed in dollars: Their local-currency principal and interest obligations balloon.

if one of the reasons for a stronger dollar is higher interest rates, then it's also a potential problem for the Federal Reserve Board and Fed Chair Jerome Powell. President-elect Donald Trump wants low rates and a weak dollar – and more control over the Federal Reserve. But if – as many economists and investors predict – his policies prove inflationary, the Fed will be keeping rates high, which will tend to keep the dollar strong. In such a case, Powell would find himself in Trump's crosshairs again.

A stronger dollar would be no fun for US exporting industries, very much including agriculture. It's hard enough to compete with Brazil and other ag-exporting countries without the dollar further dulling American competitiveness.

The dollar seems headed toward being stronger yet. The US Dollar Index has been in strong territory – above 100 – since April 2022 and has been rising since late September. The betting on Wall Street is that it will rise further in a Trump administration despite the president's preferences.