WASHINGTON POST: President Obama has declared the economic crisis over — and for the United States, maybe it seems that way. But for most other countries, not so much. Their recoveries are faltering. The obvious question is whether the global weakness will infect the U.S. expansion. This is a crucial footnote to Obama’s optimism…
Think now how this might imperil the U.S. recovery. One channel is weaker exports; other countries buy less of what we make. Another is reduced profits from foreign operations of U.S. multinationals. These represent about a third of total U.S. corporate profits. The danger is indirect. Weaker profits might depress stocks, leading to less consumer spending because shareholders feel poorer.
A stronger dollar compounds these threats: In the second half of 2014, the U.S. dollar rose 10 percent against major currencies. This makes our exports more expensive and our imports cheaper. It dampens foreign profits, because profits are reported in dollars and profits earned in foreign currencies (euros, yen) translate into fewer dollars. Finally, a stronger dollar makes it costlier for foreigners to visit the United States — and cheaper for Americans to go abroad… (more)
