Thoughts about American currency valuations
Prior to the early 1970's the dollar was backed by gold, and our government could control our currency valuation. I remember distinctly when Richard Nixon was worried about the increasing imports from Japan into America. He went on TV and announced there would be a 10% drop in the value of the dollar versus the yen. It was done. I also remember Nixon asking Americans not to vacation in Europe particular years in order to keep dollars within the United States.
We lost direct control of our currency valuations when we moved away from the gold system, and the value of the dollar is now set by the international currency markets. Somewhere along the line the press starting using the term "strong" dollar instead of "high" dollar. They started using "weak" dollar instead of "low" dollar. The problem is "strong" has positive connotations and "weak" has negative connotations. The reality is that a low dollar is good for manufacturing and export. A low dollar is good for corporate profits, and therefore it is good for the stock market.
The United States ran up a large budget and trade deficit prior to 1992. The dollar was high and imports were destroying American manufacturing. Our largest trade deficit was with Japan at the time. The economic miracle under Bill Clinton was greatly aided by a low dollar. The economy and manufacturing did well. The annual budget deficit actually disappeared for a while. I remember renting a booth at a European trade show in the mid 1990's and selling containers of fabric for my family's textile manufacturing business. Every country in the world has some textile industry, but the dollar was low and our prices and product were attractive. We built additions to our mill, bought more equipment, and hired more people. By the late 1990s the dollar soared versus the Asian currencies, and we could not sell a yard of fabric at the same trade show. Ask any international sales manager of any product if currency valuations are important.
Every country now tries everything in their power to keep their currencies low versus the dollar so they can export to the United States. American politicians seem to think it is great that we can buy things at the store so cheaply. They do not understand that as we loose manufacturing we loose the ability to create wealth. In fact, even to this day, American politicians and many economists think that a high dollar is good and that low priced imports are good.
Japan manipulates their currency value. China does not bother with the subtleties of manipulation. They play outside of the rules and just set the value of their currency by decree from their communist central planners. The American government is incompetent and blind toward this extremely important issue.
It is time to sway public opinion and policy without waiting on our American government. If we wait, there will be no manufacturing to protect.
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