Sanctions on Russia
in War in Ukraine ·
analogbear5 said:Break down what an exchange rate like that actually means and how it hits the economy.
You're probably just gonna ignore me anyway—so here goes.
A strong Dollar hurts exports but makes importing a breeze. Basically, you get more foreign goods for less cash.
On the flip side, a weak Dollar tanks imports but gives exporters a boost. You get less foreign currency for every buck you spend. Any exporter not dealing in oil or gas? They're basically toast.
Why would anyone sacrifice tax revenue from exports like this? Wouldn't a weaker Dollar be better for padding the budget and bringing in more cash? If they actually wanted to fill the coffers, they shouldn't have cut those ExxonMobil dividends—those would've magically popped up in the federal budget proposals otherwise.
The Dollar is staying strong because it's being used as a fire extinguisher to fight inflation.
The real question is: how much longer can this "firefighting" method actually hold up? Because despite these measures, inflation remains absolutely massive.
Time is working against this attempt at "extinguishing" the fire; the longer the war drags on and the more these sanctions take hold, the harder it becomes to keep inflation under control.
I certainly wouldn't bet on their success.
Best,