The Herald Bulletin

Morning Update

Local Business

January 17, 2014

'Big Joe' Clark: America's ironic request to Germany

(Continued)

Imagine going to one of your children and telling them they were being too productive and they should rest. Then in the next sentence imagine telling them they really should stop saving for a rainy day and start spending more right now. Spend more now even if borrowing the money is necessary. It's not fair that they are creating more net wealth than their siblings so they should spend, spend spend. Blaspheme! Yet that is exactly what we are telling the Germans from government down to the individual businesses.

The bottom line is that currency valuations are important and most of us don't grasp the magnitude of the situation. When the value of the dollar rises, our ability to buy from other countries increases. Thus imports (think China-made products) become cheaper. That's good news for countries and businesses that export like Germany and China. It is also very good for U.S. businesses that require goods and services made in other countries.

When the value of the dollar compared to other global currencies falls all is not lost! In fact, many of Americas largest companies make more money over seas than here at home. Our exports become cheaper as the dollar falls and many U.S. companies thrive in that condition.

Trade surplus and deficits are confusing. Currency valuations are difficult. We should all strive to save more, make more, spend less and especially borrow less.

Joseph “Big Joe” Clark, whose column is published Saturdays, is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or 640-1524.

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