Implications of a Strong Dollar

A strong dollar has three, so-called, important implications for the U.S. economy, financial markets, and policy makers, mainly the FED:
    1.    Deflation just as the FED is trying to raise the core-inflation rate to 2%. (Core inflation excludes food and energy, which is great if you don't eat and drive. We all know that price inflation is all around us, especially if one has recently visited a grocery store. And, what is really wrong with deflation? Don't we all love a good bargain?
    2.    It hurts exports and thus GDP growth. Exports count for approximately 13% of GDP. Not a major negative impact on GDP growth, which could be offset by a reduction in falling dollar oil prices on the import side.
    3.    Demand for domestic financial assets, stock and bond prices, could exasperate the current bubbles in these assets. (EURO weakness causes investors to flee the EURO to the Dollar denominated assets.)  This impact on financial assets of a strong dollar is the one that I consider to be the most important going forward.