Currency Value is an Economic Weapon

Currency is a potent weapon for trade and economic combat.  For decades many (maybe all?) so-called emerging markets have used the value of their currency as a tool to help them develop export industries.  An economist such as a Friedmanite would say, fine, they are subsidizing American consumers and we benefit.  That is wrong.  That simplistic conclusion applies static economics to a dynamic system and gets the wrong answer. 

The reality is that the American consumer only initially benefits, but over time loses as jobs and production move to those nations.  Too many American consumers eventually lose his/her jobs and become impoverished.

There are many ways to keep the value of a currency unnaturally low.  Why do we care what is the reason?  Let's just measure the result and determine if a nation's currency is unnaturally low.  Purchasing power parity is a fair, long term relative value for currencies.  Everyone can understand it. 

Example:  I know prices in New York City.  When I have travelled travel to Europe and stayed in major cities such as Rome, London and Amsterdam and Dublin, I see that the value of the Euro or pound is close enough to prices in NYC to know that the euro is roughly fairly value versus the US dollar.  Same for the Canadian Dollar.  I have not traveled to Beijing, but good friends have.  They tell me prices are half of NYC.  That's far, far from a range of fair value.  And we know China controls the value of its currency.

The professional statisticians can measure purchasing power parity - they have the techniques and resources.  The American people need some reasonable defense against predator nations that wants to grab industries from America using currency as a tool.

Here is my plan to solve this problem objectively and evenhandedly, as published in my pamphlet in the Jobs section.

"Use objective purchasing power parity tests to identify foreign nations that keep their currency values down in order to grab American business and jobs. For a currency that averages 20% below parity for a year, impose a countervailing tariff on goods and services to adjust the currency to parity.  Keep this tariff in place until the currency’s average value is within the 20% bound for a year.  Nations that force or keep their currency values low are simply engaging in international predatory pricing that hurts American workers’ jobs and pay levels."

Let's do this this way - China is not singled out, and we should not fear if other nations apply the same principal.

Word of the Day

"Salubrious" - adjective [$10]
Salubrious means favorable to or promoting health or well-being.
Sentence:  Some re-balancing of currency values for trade via a tariff bumpers as Bunkerman proposes would be economically salubrious for the common people in America.