Posted on 01/18/2017 5:19:10 AM PST by expat_panama
Imagine a short person spending his days cursing the strong inch for it robbing him of impressive height? Better yet, please contemplate a compulsive eater who blames his substantial weight on a pound that is too weak.
Wise minds would mock the unhinged individuals who would rage at the foot ruler, inch, pound, and scale for revealing reality. Such people would logically be the object of our ridicule and scorn, or maybe just pity. Scales, rulers, inches and pounds are measures. Nothing else. They dont weaken or strengthen us. They just are.
Whats important about them is that if the inch were weakened as it were to half its original length, and the pound were strengthened to double its present weight, neither would alter reality. The person of diminutive stature would still be small even if a newly defined inch rendered this person 10 feet tall. Just the same, a strong pound wont suddenly loosen clothes that used to be tight.
So while we would properly laugh at people inclined to curse reality, economists and politicians who blame economic performance on a strong dollar are viewed as wise. Who cares that the economically prosperous U.S. had a strong, stable dollar for almost all of its first 200 years of existence; to believe the President-elect and most economists, devaluation is the sale-inducing path to prosperity according to modern thinkers operating free of reason. Our new president says the dollar is too strong, that Our companies cant compete because our currency is too strong. See above and laugh. Or cry.
Back to reality, the obvious problem with the much-beloved devaluation scenario is that when we individuals trade, its products for products. Thats the sole reason we produce in the first place; to get what we dont have. To import. Money just facilitates our getting. Nothing else. Yet to our new president and countless economists, prosperity is all about exporting things. No, prosperity is all about importing things.
Think about it. Do any of you readers get up and go to work each day just for dollars? Is your sole purpose to export your labor? Not by a mile. You export so that you can import. Thats the only reason you work. Some of you might save the proceeds of your work for a later date, or to pass on to husbands, wives, children and grandchildren, but even then it remains the truth that youre saving so that someone else can import, or get. Its all so basic, right?
Not to our incoming president, and all manner of economists on the left and right. They cheer on dollar devaluation because it supposedly renders the goods and services we produce cheaper; thus easier to export. Ok, but we earn dollars. If the dollar is devalued as Trump et al desire, and we get back cheaper dollars in return for our toil, then the sole purpose of our work is taken from us. Its taxed away by devaluation. We get cheapened dollars that buy less in return for our work. Devaluation robs us.
Yet Trump thinks the dollar is too strong. Ok, but if its cheapened we have a reduced incentive to produce in the first place. Why work for dollars that dont buy very much? Also, if were not buying from others, how can they buy from us? These minor little details are never asked by a political class so intent on devaluing the money we earn.
Of course, thats only part of the story. There are other realities to consider.
Its said that companies with an eye on exporting (meaning, they have an eye on importing) benefit from a weak currency. But a weak dollar cant alter reality any more than can a shrunken inch or expanded pound change whats true. Money is a veil, to quote the late, great Robert Bartley, longtime editorial page editor of the Wall Street Journal.
This is important because when companies produce goods for sale, they import inputs from across the street and around the world. This matters simply because a devalued dollar logically drives up the price of everything necessary to produce marketable goods. Indeed, does any mildly sentient being believe that Treasury can shrink the purchasing power of the dollar without those who produce for dollars asking for more of them in return for what theyre selling? Only to economists and politicians untouched by reality does devaluation cheapen exports! What a laugh.
What about shipping? Trump and his crowd are made giddy by the word export, export of goods manufactured in the states really makes them giddy despite the reality that rich countries generally design goods while enlisting poorer countries in the low-value work of manufacture. But shipping costs a lot of money. And it becomes quite a bit more expensive in dollars when the dollar is being weakened. Figure that in the 70s and 00s the dollar was severely devalued, and the prices of oil, airplane fuel and all other transportation commodities soared.
And then theres labor. Trump and his protectionist friends love labor-intensive industry, they in particular get frisky when the labor is based in the United States, but last this writer checked these workers earn dollars in return for their toil. And if Trump is to be believed, these dollar-earning everymen were his base of support in the most recent election. Do these average people realize that Trump wants to devalue the dollars they work for each day? Wheres the media coverage of this? Trump, the alleged populist, is out to devalue the dollars earned by common people who frequently lack the hedging knowledge to mitigate governments theft of their earnings. Some would call it a scandal.
While the president-elect talks a good game about the importance of economic growth, talking down the dollar measure amounts to fakery. To believe it works is as silly as a real estate developer believing he can command more for his properties by devaluing the square foot. This is not the stuff of a serious country.
John Tamny is editor of RealClearMarkets, Political Economy editor at Forbes, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He's the author of Who Needs the Fed?: What Taylor Swift, Uber and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank (Encounter Books, 2016), along with Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You About Economics (Regnery, 2015).
I answered your question directly and succinctly. I suppose you believe that you asked some other, hidden question that I dodged for nefarious reasons?
There was a question in my comment #31. Hint: look for the QUESTION mark.
You’ve asked me no question other than the one that I answered. You appear to be confusing me with some other FReeper. Cosmic questions shaking your fist at the sky shouting “why WHY???!!!!” don’t really accomplish much, you’ll discover.
Let’s back up a little. Do you see a question mark in comment #31?
When international-trade signals to international-currency markets a lowering in value of a currency, that is one thing.
To intentionally want to, and take action to lower the value of your own currency is most usually in error. It is an attempt to game the markets into a value the markets have not determined. If it works, you might get more exports, but you are unlikely to get fewer imports and most likely to get more inflation, as even some lower level of imports will come in at higher-unit costs, in dollars, than before, and those costs will pass on to everyone, even to exporters via domestic inflation. Bad idea.
I see you demanding an answer from me for a question you never asked me, then a lot of self-pitying prattle following thereafter.
Would you care to break down just how your question regarding how your own advocacy has helped reduce your compensation leads into taxation?
What sort of convoluted thought process is this? I’ve not discussed taxation, I’ve not mentioned it at all. You have me confused with some other FReeper, as I’ve mentioned before.
“If” our currency is, relative to other currencies, over-valued than that disturbs the economic equilibrium and creates pressures towards returning to the equilibrium. Either under-valued currencies increase or over-valued currencies decrease but homeostasis will rule the day...
Ok, so the first guy couldn’t answer my first question, and you couldn’t answer my second. At least he bailed on it without playing stupid. In my comment #31, I asked you a question regarding your notion of “labor arbitrage,” and how the federal government should address it.
RegulatorCountry You cannot possibly be attempting to claim that exchange rates have no effect upon trade.
This is the problem w/ this conversation, that I say something and other folks will not only refuse to think they won't even believe I said what I said.
So on the one hand we got folks on the FR that just love to believe what they want and there's the rest of us who're busy feeding our families and we prefer to believe what is. It's always like that, we listen to people and we tell them to stop talking and---
Show me US exchange rates along with the trade balance, and then lets see how one always controls the other.
I like protectionism only when it comes to military technology.
Let’s just continue on with the Chinese dollar peg since it has no effect, according to you, lol? Please.
I would rather get my middle class manufacturing full time job back, than working in 2 part time jobs with no health insurance and no retirement benefits.
I would love to have my grandfather's lifetime employment at a major U.S. manufacturer, but I would never want to have his standard of living.
But to you the company not moving is a bad thing. All of those thousands of US workers keeping their jobs means nothing. You went on record as not caring about "displaced" working class Americans. You are a threat to the USA. You are an embarrassment and an unwitting Marxist tool.
How do you transport and sell the things you manufacture? Do auto manufacturers sell their cars at roadside stands right outside their plants?
It's amazing how many people on this site seem to think we can employ millions of Americans simply by outlawing this sort of thing:
Speaking of “tool,” how will your vaunted 10% tariff affect the jobs at those domestic U.S. manufacturers that rely upon imported materials?
I try and think long-term. In the long-term trading blocs will develop such that they consist of the countries with the lowest trade barriers with each other. These blocs will thrive while those with more trade barriers will be relatively less prosperous.
I guarantee that a more protectionist US will lead to most of the world’s nations looking to make trade deals with the EU (which will be Muslim in a few generations). Then EU goes up in power and America goes down in power. Note that China will look to the EU more as well.
Actually my list is wrong actually. My list was supposed to be things that CREATE wealth. Marketing, transportation, warehousing and retailing do not create wealth at all, only transfer it. These are "middlemen" processes that are actually adding to cost of the product. A necessary but expensive detriment.
Don’t be silly. Transport drivers and retailers don’t create wealth. They all should get jobs at plants making stuff that can’t be transported or sold.
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