Global trade’s dependence on dollars lessens its benefits

CRASHING CURRENCIES hurt. They make imports more expensive, cutting into household budgets and raising businesses’ costs. But economics has long held that this pain brings with it its own salve. More expensive imports should drive new demand for home-made replacements and thus for the workers who make them, geeing up the economy. What is more, a devalued currency means exports are suddenly cheaper to buyers abroad. That, too, should boost demand. When the value of the Colombian peso collapsed in the summer of 2014, it was on the basis of these assumptions that the country’s finance minister greeted the fall as “a blessing in disguise”.