July 31, 2017

The Threat of U.S. Dollar Overvaluation:
How to Calculate True Exchange Rate Misalignment
     and How to Fix It

Cross-posted from:

This memo explains (1) the dollar overvaluation problem, (2) how to accurately calculate the dollar’s misalignment against trading partner currencies, and (3) how the Market Access Charge (MAC) that CPA and others favor would fix this serious threat to America’s future.

The foreign exchange value of the national currency should play the pivotal role in bringing excessive trade deficits (or surpluses) back into balance.
Unfortunately, however, exchange rates have lost their link with trade balancing equilibrium pricing. The graph below shows very problematic over and undervaluation of the currencies of the United States and its major trading partners.

We propose a new policy tool, the Market Access Charge (MAC), to move the dollar back to a competitive, trade-balancing exchange rate.

For remainder of the original article, click here.

For full data set showing derivation of exchange rate adjustments required for true-zero current account balances, click here.

America Needs a Competitive Dollar - Now!

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