In the last few months there has been a lot of discussion in the financial markets about the declining value of the US dollar compared to other world currencies. Yesterday there was a big story that made the rounds about how the US Dollar has hit a 26-year low against the British Pound. Many countries are starting to use their own and other currencies instead of ours because of the dollar’s declining value, and some financial analysts have negative outlooks for the US economy because of that fact. There’s a completely other side of the story that most of the financial media isn’t talking about though. There are actually plenty of benefits of having a weak dollar.

On a macroeconomic scale, American produced goods are essentially on-sale to the rest of the countries in the world. American companies receive the same amount of dollars for each good produced, but the people paying in foreign currencies are paying a lot less in their local currency for our products. Since our products are costing them a lot less than they used to, foreign consumers are more likely to purchase American produced goods. This mean that retail sales will increase for companies with a lot of foreign customers, and the amount of exports or nation has will increase as well, thus lessening the trade deficit.

There are benefits to those of us who do business with companies in other countries as well. For example, let’s say I have an advertiser based in Britain that’s paying me 100 GBP a month to run their advertisements. Right now I get about $210 in American Dollars for that 100 GBP they send me each month. When the dollar was much stronger, I might only receive $100 in American Dollars for each 100 GBP they send over, so as far as I as a business owner am concerned, I’m getting free money each month to reinvest in the business. This is true for just about anyone with customers overseas. Not only will their general volume of sales increase, but the conversion ratio will mean they get a lot more American Dollars than they would have before.

On a long term scale, having a dollar that’s worth dramatically less than other major world currencies will certainly have some very major negative effects for the American financial markets, but so far that just hasn’t happened yet. Those forecasting an extremely negative outlook on the economy are a bit hasty; so far the dollar has only been dropping for a few years, hardly a long-term macroeconomic trend. In fact, there are actually many benefits of having a weak dollar for a certain amount of time.