I can’t really pass judgment on the policy if it in fact really exists. All I know is that debasing your currency is a very dicey matter that requires the utmost in caution. I am reminded of the mental patient holding a gun to his head and waring the staff, “Come close and I’ll shoot.” However, on the other hand, the must still have some value. If we do the McDonald’s comparison test of how much a big mac costs in the US and the EU, we find that for the same burger the cost is over double in the EU. Therefore the disparity in values indicates that the dollar is trading at way too depressed a level vis a vis the Euro. Next, the weak dollar is absolutely killing manufacturing in the EU. BMW is shifting major production over here and you can expect many other Euro manufacturers to follow their lead. Airbust is really screwed since all of their planes are sold in dollars.
bump
All of this is a problem... how?
1: IMHO, the dollar has been overvalued since the 90s.
2: The European industries sold arms to our enemies in the ME. Why should I feel sad for them getting the shaft? As far as I am concerned, those that sold arms to Iraq after Desert Storm (French and German companies) need to go bankrupt.
3: Remember all that foreign outsourcing people were complaining about? Well, it no longer makes sense, so the jobs are coming back.
The trouble for the next administration is abundantly clear. I will concede we are on Category 6 rapids and none of the candidates have experience as river guides.
We are headed into a very inflationary period. We know how to stop it thanks to Paul Volker. However, who will have the same visionary leadership as Ronald Reagan to encourage the Fed to slam on the breaks and take the recessionary hit and then come out stronger on the other side with lower taxes and more incentives?
We may be doomed!
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