We will probably never know whether President Donald Trump really did phone his National Security adviser at 3am to ask whether a strong or weak dollar was good for the economy, but it is a very good question. A few years ago, when unemployment was high and inflation uncomfortably low, we would have said a weaker dollar was needed to boost aggregate demand via stronger exports. With the economy now close to full employment, however, an equally valid case could be made that a stronger dollar, which would improve real living standards, is more desirable. More than anything else, a relatively stable currency would probably be most helpful over the next couple of years.
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