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What does a Strong Dollar Policy Mean?

What does a Strong Dollar Policy Mean?
by Alex Merced

 We always hear that the US has a "Strong Dollar Policy" yet all we see from the federal reserve is constant pump priming and quantitative easing. The purpose of the devaluation of currencies by different nations is to increase exports by leveraging the relative purchasing power of foreign consumers from the devaluation. The fundamental problem with this is that the increase in exports will cause the currency to appreciate again meaning more devaluation must occur. What's going on here is not one country selling another country goods it wants or needs but instead selling what they have by discounting those goods via currency devaluation. It might as well be a liquidation sale but to discount these goods they are also marking up all goods for people domestically which erases any gains from those exports and if probably even makes things worse.

 The way to a strong dollar is not to have policy based on a strong dollar but to focus on what anyone should focus on, producing value for others through enterprise and innovation. A country's people and currency prospers from the demand for it's production through exports and consumption from imports (the latter is only sustainable if the former exists). Because of mal-investment in education and housing as I've discussed before we're seeing drop in the skills necessary to bring back the innovation needed to restore demand for our production. Due to the industrialization of other countries who's moved further in the process of capital accumulation, their citizenry are now consuming global goods more and more reducing the demand for our consumption especially since we produce little they want. Little by little we are bringing ourselves to irrelevance in the global economy and until we understand that the creative forces needed to correct this can only be achieved through Liberty and a Free Market which Market prices we are doomed become an afterthought.


Posted Sep 30 2010, 11:33 PM by Alex Merced