Posted on 01/27/2003 9:46:34 AM PST by Norm640
My opinion is that the US is in a position where it can't act in its own interests economically because of the political backlash from fat-cats around the world. Plus, and I hate to say it, CEOs of American companies couldn't care less if they send their jobs overseas--they still benefit. I fail to see how that benefits the American economy.
But I'm humble enough to realize I don't know everything about this--someone offer some intelligent commentary on how to save America's economy. Thanksa bunch.
It will settle at equilibrium. Besides the Euro has worse fundamental problems when peace breaks out it will sink like a Polish battleship.
I would start by establishing a dollar-euro exchange band, with international reserve status parity anchored by a dual OPEC transaction standard. Ideally, followed by a yen-yuan currency bloc benchmarked to the dollar-euro exchange rate and shifting to a fractional reserve global monetary system backed by a diversified commodities bundle...
Those pigs will fly whenever there's nowhere left to turn with the current fiat Ponzi scheme...
Those short term costs are trivial compared to the long term benefits.
A reduction in the dollar is good for the country. A strong dollar encourages the American manufacturing and tech industries to move offshore, taking American jobs with them.
Bottom line: if you like Americans having jobs, you like a lower US dollar.
"Bringing the dollar back" is a loaded proposition. The stronger the dollar is, the more expensive US goods are to the rest of the world, which is bad for the trade imbalance. The cheaper the dollar is, the more affordable American goods are to foreigners and the more motivated they are to buy our goods.
Other countries have restrictive import laws - but in the long run such laws are poison. The Soviet Union had the most restrictive import laws feasible - and compare their economy to ours at the end of their Communist experiment.
You also say that companies which produce goods abroad pay their workers squat - but this simply isn't true. $100 a week isn't much - but when rent at a liveable apartment is $20 a month, it's pretty darned good.
Squat by American standards is, for a Malaysian factory worker, literally four times better than his parents did.
The reason the dollar is tumbling is that the Fed is pushing too much liquidity into the market, far more than is being called for by market actors- banks and producers.
Keynesians and other obsessive tinkerers would understand this thinking but such understanding is not of real world economics. It is fantasy. Keynesians and other economic tinkerers understand nothing.
The rest of the world's currencies will come into line with the dollar at some point. Other countries are even more afflicted with tinkerers than US is. Producers go "offshore" because taxes are too high. As the dollar weakens against the other major currencies, the euro and the yen, for a time other countries will buy more here and sell less, for a short time.
At the same time foreign investment will dry up as the dollar is perceived as having decreasing stability and as thus imparting to the US economy greater risk for investment. As such investement ebbs there is less ability in the US to expand and to create employment. Because of the inefficiency of having to guess at inflation rates and changes, the losses from decreasing investment will exceed the gains from "cheaper goods". And the other governments equalize their currencies with the US faster than foreign investors adjust their investments so the damage will outlast the gain.
Utterly untrue. A system that maintains the dollar at an unvarying exchange rate with gold will suffer neither INflation nor DEflation. That is the essence and definition of stability.
While stability is easily attained it is not likely to BE attained because that takes from the government the power to inflate an economy out of debt, which is what US is doing right now. As the deficit rises in number of dollars it falls in percentage.
The fantasy is that the government can tinker constructively to increase wealth ond/or employment. It cannot. It can reduce wealth and employment by creating instability.
GWB is a market oriented conservative but his advisors have been "conservative" Keynesians. They want the right things for the economy but know not how to make those things happen. They know how to tinker. It is the carpenter whose only tool is a skilsaw and it is broken, but he uses it for every job anyway and the job he is to do consists of all preshaped cuts.
So, we will import less and manufacture more locally and (as neo-isolationist) I feel that this great.
It surely does make things easier for liberals when they can find a word that shifts them back into the slogan mode of argument. "Gold" is such a word sometimes. Capital is another. And "banks"... You can feel that the pressure is off for having to think rather than emote.
In an extreme scenario, if US has no restrictions on imports, no tariffs, and the rest of the world has high tariffs, The rest of the world's investment capital will flow to the US because that is where the highest rate of return will apply. Foreign industry will have greatly reduced sources of capital. Their prices will vlimb steeply and plant will not be improved. Most prodution will go to US so long as it can be made cheaply enough to be sold at all because the foreign consumers will not be able to afford it. The only better situation economically for US is for there to be no trade barriers at all. When all plant and capital, foreign and domestic, can be directed to production without the drain of capital to pay for government intervention, then all people will improve economically.
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