The Dollar Diet

The Obama administration has jumped into the never-ending debate between parents, children, and eyes that are too big for tummies. It is clear we are a nation of over-eaters. It begins in childhood, which is why the President wants to limit advertising of unhealthy foods to kids, putting at risk the job security of many an animated cereal mascot.

We live in an age of cut backs. Drive less, spend less, and now, with luck, our kids will eat less too.

To anyone following the debate over kids and food advertising, the discussion about the value of the dollar will sound familiar. For decades, our economic eyes have been too big for our collective tummies. Our trade deficits over the last 18 years total an obscene $7 trillion dollars.

What this means is that we have been living way beyond our means, buying from the rest of the world far more than we can afford. Just as those sugary cereal bowls adds up, so do the debts we have accumulated overseas.

Since things that can't go on forever stop, this too has to stop. But how? One way to stop our foreign buying binge is through protectionism. We can stop trading with the rest of the world. That's not in the cards considering how global markets are now, though polls show Americans are not eager to expand free trade deals. Another way to stop buying more than we can afford is to let our currency depreciate.

A weak dollar acts like a spending diet. The price of consuming foreign goods goes up. An instant economic diet. No advertising censorship needed. That's what is happening now.

The Federal Reserve gets a lot of heat for keeping interest rates low, a policy which discourages investment in the U.S. and weakens the dollar. But the latest readings on the economy show that we are not growing strongly enough now to tolerate higher rates.

The only choice is to go on a dollar diet. We have to live within our means again. That applies to cereal and sugar snacks as well as foreign vacations and fancy imports.

Source: http://www.pbs.org/nbr/blog/2011/04/the_dollar_diet.html

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