This article pertains mainly to the effects of the global
market and how the strengthening of the U.S. dollar is shedding light on the
global economy. The article starts out using Levi as an example stating “As a
result, Levi’s has raised prices in places like Mexico and Russia to cover the
extra cost, a tactic that protects profit margins but might turn off customers.
In addition, foreign tourists find their native currencies are worth much less
in U.S. dollars and therefore do not visit America as much — or spend as much
here if they do. Levi’s saw traffic “drop dramatically” last year in places
like New York and Florida, said Chief Financial Officer Harmit Singh.” However,
Levi is not singular in this issue Apple was another example of dealing with
the strengthening dollar. Unlike Levi though, Apple did not raise prices, but
said that for every hundred dollars earned in global markets this year, was
equivalent to eight five dollars of value the prior year. Economist are worried. A few expect that the U.S will not go back to
pre-Great recession spending habits (for every one dollar made one and ten
cents were spent). Meaning, that the global economy may not be able to turn to
the U.S. consumer for much longer. The article leads into a conclusion with “John
Williams, president of the Federal Reserve Bank of San Francisco, recently said
the United States should expect to see 3 to 3.5 percent growth in the 2020s,
instead of the 4 to 4.5 percent the country enjoyed in the 1990s.” The question
that this article poses is who/where/what will be the engine in making up for
the lost strength of the global economy?
I found it quite interesting that the emergence of a strengthening US Dollar has exposed some of the delicacies of the current global market. The worry that the US might not return to pre-recession consumer spending levels could become an issue as the American consumer has for so long been a driver of global trends based on the amount that we choose to spend. As of right now, I think many people are wondering how the global market will cope with the loss of the abundance of dollars flowing from the American consumer, and I don't think we will see a solution any time soon.
ReplyDeleteI am not sure how increasing prices abroad will help cover extra costs. It seems that it will likely turn away customers and decrease exports. It is worrisome that our currency is becoming so much stronger than others. If our currency continues to appreciate we may face more problems with net exports. Trade is extremely important for a healthy economy. If Americans can get foreign products cheaper due to our appreciated currency, we may begin to lose business.
ReplyDeleteWell in the case of Levi they need to adjust their prices to compensate for how much the U.S. dollar appreciated (otherwise they would be incurring huge losses). Yet companies like Apple just took it for the time being. Furthermore, the issue at hand is that our exports will clearly go down, but is this an valid indicator of a global recession is on the rise?
DeleteThis seems like this is a struggle for domestic exports, but for imports we may be getting a really good deal. I suppose the sweet-spot is some sort of balance where are dollar is strong but we also aren't hurting our domestic businesses exports too much. I am curious to see how are investment/savings is impacted by this and if we may have our neck stuck out too far.
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