How a strong dollar has weakened us

Philadelphia Inquirer ^ | 11/28/04 | Mark Weisbrot

[paudio]

Since 2000 we have lost almost three million manufacturing jobs, and the No. 1 cause is the overvaluation of the U.S. dollar. If the dollar is overvalued by 30 percent, this is equivalent to giving a 30 percent subsidy to imports entering our markets. It is the same as having U.S. companies face a 30 percent tariff on everything they export.

It is an understatement to call this a huge disadvantage for U.S. manufacturers. And because wages in the manufacturing sector have historically been higher and have often driven wages in other sectors, the loss of these jobs is one of the causes of increasing income inequality in the United States.

[woofie]

I didnt read
all this but it makes sense to me ....I read an article a while ago about how we were trying to get a weak dollar ...

[nanak]

not strong dollar, but paper dollar

FIAT CURRENCY = TULIP MANIA of NETHERLANDS

[Pio]

weak dollar = massive profits for my company and more jobs for us. My corporation has a plant in France...that plant's profitability will be wiped out if the current trend continues...they'll move those jobs right back to the midwest.

European sales have been keeping my division in the black for 24 months now.

[Last Dakotan]

The decline in the dollar is a natural cycle in a working market. The problem for this country is that China and various other Asian exporting countries have pegged their currencies to the dollar, thus the market cannot naturally correct.

More unfortunate is the mechanism of currency manipulation is the buying of US Treasury Bonds which the government is all too willing to keep a ready market for.

[T'wit]

Strong dollar means buying all the neat stuff from the world in return for wads of paper. This, for reasons known only to the worldly wise, is called a trade "deficit."

Weak dollar means letting the world buy all of our neat stuff in return for their wads of paper that won't buy week-old sushi. The worldly wise call this a trade "surplus."

I trust this makes everything clear? :-)

[firefighter302]

There are two sides to the value of the dollar. And advantages and disadvantages to both positions.

As typical, the old media represents a tiny fraction of an entire truth.

RJ

[woofie]

Maybe it is simply a matter of balance?

[Mike1973]

Well, that article is not right. It claims that the weak dollar costs us jobs here at home, when the opposite is true. The weak dollar means that other countries can buy our goods cheaper. Which means more jobs here. Although not right away.

Also tourism, is a factor as well. Other people come to our country and can buy more goods with their currency. Meanwhile, their goods are more expensive to us.

[shrinkermd]

What percentage of employment is represented by manufacturing? I have been told it is 15% but I am not able to give a reference on that number. Anyone have one?

[FreedomCalls]

It claims that the weak dollar costs us jobs here at home, when the opposite is true.

Headline: "How a strong dollar has weakened us"

Did you read the article?

[ThreePuttinDude]

Contrary to popular thinking, it is the purchasing power parity, and not the state of the trade account, that sets the exchange rate between any two monies. The latest fall in the US$ is not so much a crisis of the US currency in response to the trade deficit as it is a crisis of the present floating exchange rate system, which permits unchecked loose monetary policies by central banks. These unchecked policies create the conditions for severe distortions.

In the floating exchange rate framework by means of monetary policies coordination, central banks can create the illusion of currency stability. But this approach can undermine real economies over a prolonged period of time.

The longer the current floating exchange rate regime is allowed to function, the more damage is inflicted on wealth producers. The only way out of this mess is to seal off all loopholes to monetary pumping

[FreedomCalls]

What percentage of employment is represented by manufacturing? I have been told it is 15% but I am not able to give a reference on that number. Anyone have one?

Look here.

http://www.bls.gov/

[ThreePuttinDude]

 American Dollar

click on values to see graphs	1 USD	in USD
Australian Dollar	1.26534	0.790301
Brazilian Real	2.7277	0.366609
British Pound	0.527287	1.8965
Canadian Dollar	1.1775	0.849257
Chinese Yuan	8.2765	0.120824
Danish Krone	5.5901	0.178888
Euro	0.752559	1.3288
Hong Kong Dollar	7.7734	0.128644
Indian Rupee	44.94	0.0222519
Japanese Yen	102.58	0.00974849
Malaysian Ringgit	3.8	0.263158
Mexican Peso	11.243	0.0889442
New Zealand Dollar	1.39101	0.718902
Norwegian Kroner	6.1007	0.163916
Singapore Dollar	1.638	0.610501
South African Rand	5.83	0.171527
South Korean Won	1046	0.000956023
Sri Lanka Rupee	104.97	0.00952653
Swedish Krona	6.7119	0.148989
Swiss Franc	1.1389	0.87804
Taiwan Dollar	32.2	0.0310559
Thai Baht	39.37	0.0254001
Venezuelan Bolivar	1915.2	0.000522139

using values from Friday, November 26, 2004

click on values to see the historical graphs.

 Download this data to Excel

[shrinkermd]

Many thanks. See below. Seems much lower than all the posts on outsourcing, globalizationand so forth would suggest.

In the economy as a whole, manufacturing represents almost 12 percent of all employment, yet less than 5 percent of all establishments (Bureau of Labor Statistics)

[M 91 u2 K]

All our factories are overseas, and all our goods are imported. A weaken dollars means higher prices here and still no jobs for Americans. The old 50's economic model is obsolete in today's free trade global world where China is the new economic power.

[ex-snook]

Obviously we should keep doubling our trade deficit and our government debt and soon happy days will be here again. Who would have thunk it?

[Dalite]

"he decline in the dollar is a natural cycle in a working market. The problem for this country is that China and various other Asian exporting countries have pegged their currencies to the dollar, thus the market cannot naturally correct."

What if we are successful in getting China to unpeg it's currency from the dollar, and they retaliate by purchasing OPEC's entire output for a few years with their excess US debt?

I wonder if this subtle action would cause any change in the way we approach monetary policy...

[Gritty]

Since 2000 we have lost almost three million manufacturing jobs, and the No. 1 cause is the overvaluation of the U.S. dollar.

This is a dishonest statement. We have been losing them for a lot longer.

We have been losing our manufacturing base for decades.

In fact, the tumble started about the time we started the "guns AND butter" policies in Vietnam, the Great Society giveaways and Medicare - all thanks to LBJ and the Dems who controlled both houses of Congress after the total GOP collapse in 1964. Those were also the glory days when politicians decided to use the Social Security reserves for off-budget cash to trade for Treasury paper to run these programs. Of course, Nixon et al continued to play the game. Only Reagan made any attempt to stop the out-of-control Federal Gravy Train Express - but alas, to no avail.

As a gentle reminder, in 1968,...

$1 = 360.00 Yen
$1 = 4.20 Deutsche Marks
$1 = 3.25 Swiss Franc
$2.75 = 1.00 British Pound
1 oz gold = $33.00 (I know, I know, it was "pegged" to the $, but today it is more accurately "pegged" to the Euro which didn't even exist at the time)

Note what they are today:

$1 = 102.75 Yen
$1 = 1.47 Deutsche Marks
$1 = 1.14 Swiss Franc
$1.89 = 1.00 British Pound
1 oz gold = $450.00

Now, was the Dollar "overvalued" when we were king of the world in 1968 when it was worth way more than it is today - or has something else changed besides the Dollar collapsing in all those years (as it continues to do)?**

(**hint... check the soaring US Federal budget deficits, the ever-increasing and immense amounts of imported oil (and adverse BOP), the ballooning Federal budget, and the stunning devaluation of the US Dollar over those years instead of just since 2000, coincidentally, the year Bush was elected)

[WilliamofCarmichael]

Weak dollar more jobs here?

Not to worry. The Congress and the President just started the process to create those high-paying new jobs we've heard so much about.

So what does the American Jobs Creation Act of 2004 do? First the small stuff.

Well it gives Silicon Valley something it's been after for years. (As an added bonus it includes other industries as well.)

There is an offshore pool of earnings eligible for repatriation estimated to be well over $400bn. The American Jobs Creation Act gives companies a tax holiday on that money!

It's going to be quite a job dividing the money among company executives and some (all?) shareholders. Well, it is capitalism.

With the good news comes the bad news for capitalism. The Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) provisions are going away (result of WTO complaints). Yes, the hated government interference in the free enterprise, pure capitalist system rears its ugly head.

Yes, needy companies like Boeing, Honeywell, Caterpillar, General Electric, Microsoft, and Intel will no longer be getting the FSC/ETI subsidy You see, providing the subsidy was good government for free enterprise, pure capitalism. Taking the subsidy away is bad, ugly government interference. That's "free trader" talk. Oh well, there's still OPIC, Ex-Im Bank, and a myriad of tax-payer backed programs to help needy capitalists.

But it's a jobs creation bill. Enough already of paying unemployment insurance to lazy bums. Tax-payer money is for capitialists not lazy bums. So how many new jobs?

Now for meat of the Bill -- the job creation!

Uh, Congress there's a problem. To wit,

Expect minimal impact on hiring. Although the purpose of the bill is to boost job growth, none of the respondents indicated that the companies under their coverage intend to use the repatriated earnings for hiring. Share buybacks and dividend payouts were the most popular responses, although it remains unclear whether such activities will be permissible.

Oh well, it is capitalism. Fine. But why did the political hacks call it a jobs bill? This is why I loathe both Parties.

http://www.morganstanley.com/GEFdata/digests/20041125-thu.html