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As noted by Last Dakotan before: The hourly average wage increase over a decade, in your chart, after deducting the CPI, is a paltry 60 cents/hr? And for that sum, that pocketful of coins, you have sacrificed the livelihoods of millions of your fellow Americans on the altar of your economic dogmatism? You would do well to consider the sayings in Proverb s 21:10-13.

That asserted 60-cent wage increase is easily overwhelmed by the drop in the dollar against the major currencies of the last 4 years. And, anticipating your lame argument, the EU's recent dip (which likely will not persist) is not shared by the other major currencies...hence not significant.

Wake up and small the coffee Todd. You have lost the argument on the trade deficit. US Dollar Debauchment is not a fair trade for letting you guys destroy America's industrial base, which was never desireable in the first place. All for ephemeral short-run savings at Walmart and Target?!

It destroys all of your theories.

All of your "facts".

All of your reasonings. All brought to nought.

Now with the cinders of your wage studies crashed down around your ears, let's take a look at your inquiry about PPP, purchasing power parity.. I'm not particularly doctrinnaire on this (which perhaps you are, since it is you asking), but in general, it is widely understood by economists that Purchasing power parity means that the domestic currencies in different nations have the same ability to obtain goods in the different nations' markets.

The formula for PPP is P = EPf where P = the domestic price of a good, E = the exchange rate and Pf = the foreign price of the good.

This means that the domestic price of a good equals the foreign price times the exchange rate when PPP holds. Hence, PPPs as inter-country deflators are preferable to the exchange rate based comparisons on both conceptual and empirical grounds.

There of course can be wide variances as between actual measures of the purchasing power, just as there are disputes over the U.S. CPI. It depends on what "baskets" you measure, i.e., how they are weighted. It would be interesting to know what sources "Li333" was alluding to.

Chinese Communists such as "Li333" clearly believe they are winning a trade war, and are going to be calling shots in all things. They envy and hate the power and wealth of the U.S....and wish to displace us as the pre-eminent super-power. And the quickest way to accomplish that is to take away our manufacturing industries directly. Strengthens them. Weakens us. And all you do is work for the other side, by stubbornly denying it is happening.

The hourly average wage increase over a decade, in your chart, after deducting the CPI, is a paltry 60 cents/hr? And for that sum, that pocketful of coins, you have sacrificed the livelihoods of millions of your fellow Americans on the altar of your economic dogmatism?

I thought you said wages were dropping? And which millions have been sacrificed? The 20,000,000 who have jobs who didn't before NAFTA? Be specific.

That asserted 60-cent wage increase is easily overwhelmed by the drop in the dollar against the major currencies of the last 4 years.

Yeah, if we lived in Europe and had dollars to spend you'd be right. Otherwise, it's irrelevant.

Wake up and small the coffee Todd. You have lost the argument on the trade deficit.

So the deficit destroys jobs? How many jobs does each $1 billion increase in the deficit destroy?

Purchasing power parity means that the domestic currencies in different nations have the same ability to obtain goods in the different nations' markets.

Finally, an answer. So, if the hourly wage in China is 20 cents and a Big Mac in China is 10 cents and the hourly wage in the US is $9.00 and a Big Mac is $4.50 PPP would say our economies are equal?

The hourly average wage increase over a decade, in your chart, after deducting the CPI, is a paltry 60 cents/hr?

From Mase's post #337:
a pre-NAFTA comparison is in order. From 1984-1994, hourly wages for all workers rose 33.5%, while the CPI rose 42.2%, indicating a fall in real wages. The same happened for manufacturing jobs with hourly wages rising only 33%, well under the rise in prices. So it looks like workers did better in the years after NAFTA went into effect than before.

Even you should agree that a 60 cent increase is better than a 60 cent decrease?

I just want to say again what a cute chart this is.

Now, see where it says (Mar73=100)? Now look at the period between 2000 and 2003. The dollar is above 100. Was the 2000-2003 deficit less than the 1973 deficit? Why not, if the relationship is as you claim?

Stop the presses. Oh Paul, this is even funnier than when you quote EPI and other left wing sources.

The larger lesson is that the dollar has no obvious relationship with the trade deficit. The exchange rate rose and fell from 1990 to 2005 on a trade-weighted basis, while the trade balance simply fell and fell further. By calling for the yuan to float, some voices are actually calling for the dollar to fall further, but there is scant evidence this will bring balance to the trade accounts.

That's rich, the chart you've been citing proves the opposite of what you've been saying. I'm just sorry it took me until now to really look at the numbers and then find the source.

The Biggest Paul Ross Error Yet (and that's saying a lot)

"That asserted 60-cent wage increase is easily overwhelmed by the drop in the dollar against the major currencies of the last 4 years."

No, that's paying for the same ground twice to think that way. Inflation is *already* factored in from *all* sources, and corrected, when someone says "CPI adjusted."

Propping up the Dollar to absurd levels, by the way, is HOW foreign nations get away with stealth industrial subsidies.

The *reason* that the Chinese are hoarding far more than $600 Billion in U.S. Dollars, that India is hoarding more than $80 Billion, that Japan is hoarding hundreds of Billion$ more, the EU even more, yes the key reason for that hoarding is to prop up the Dollar so that the American consumer can buy more foreign goods at cheaper prices.

The higher the Dollar, the less foreign goods cost.

In 2004, China blew $180 Billion propping up the U.S. Dollar on foreign exchanges. They did this so that we'd buy so many Chinese products...to the tune of some $110 Billion.

Clearly they can't keep up this game forever, but as long as they continue this charade, they get to build their industry.

In contrast, American manufacturers are hamstrung because the over-valued U.S. Dollar makes our exports more pricey than they would be in a free market.

Thus, we get cut in two ways (cheap imports, expensive exports) by the Asian and European hoarding of Dollars.

Interestingly, to invest those Dollars without impacting the currency markets, many nations are buying U.S. Treasury investments...driving down interest rates below what the free market would fairly set here.

Thus, the strategy being pursued by export nations (i.e. the tactic of propping up the U.S. Dollar via direct government intervention) has one enormous negative impact on us: our domestic industrial base is getting hammered...and three positive impacts: cheaper goods, currency trading profits, and lower interest rates.

NOTE: this is NOT to say that the Dollar has or hasn't fallen, or that interest rates are below some previous level. This *does* mean, however, that the Dollar is above its Free Market value and that our interest rates are lower than their natural Free Market level.