No, Mr. President-Elect, the Dollar Is Not 'Too Strong'

No, Mr. President-Elect, the Dollar Is Not 'Too Strong'
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Imagine a short person spending his days cursing the “strong” inch for it “robbing” him of impressive height? Better yet, please contemplate a compulsive eater who blames his substantial weight on a pound that is too “weak.” 

Wise minds would mock the unhinged individuals who would rage at the foot ruler, inch, pound, and scale for revealing reality.  Such people would logically be the object of our ridicule and scorn, or maybe just pity.  Scales, rulers, inches and pounds are measures.  Nothing else.  They don’t weaken or strengthen us.  They just are.

What’s important about them is that if the inch were “weakened” as it were to half its original length, and the pound were “strengthened” to double its present weight, neither would alter reality.  The person of diminutive stature would still be small even if a newly defined inch rendered this person 10 feet tall.  Just the same, a “strong” pound won’t suddenly loosen clothes that used to be tight. 

So while we would properly laugh at people inclined to curse reality, economists and politicians who blame economic performance on a “strong” dollar are viewed as wise.  Who cares that the economically prosperous U.S. had a strong, stable dollar for almost all of its first 200 years of existence; to believe the President-elect and most economists, devaluation is the sale-inducing path to prosperity.  Our new president says the dollar is “too strong,” that “Our companies can’t compete” because “our currency is too strong.” See above and laugh.  Or cry. 

Back to reality, the obvious problem with the much-beloved devaluation scenario is that when we individuals trade, it’s products for products.  That’s the sole reason we produce in the first place; to get what we don’t have.  To import. Money just facilitates our getting.  Nothing else.  Yet to our new president and countless economists, prosperity is all about “exporting” things.  No, prosperity is all about importing things. 

Think about it.  Do any of you readers get up and go to work each day just for dollars? Is your sole purpose to “export” your labor? Not by a mile.  You export so that you can import.  That’s the only reason you work.  Some of you might save the proceeds of your work for a later date, or to pass on to husbands, wives, children and grandchildren, but even then it remains the truth that you’re saving so that someone else can import, or get.  It’s all so basic, right?

Not to our incoming president, and all manner of economists on the left and right.  They cheer on dollar devaluation because it supposedly renders the goods and services we produce cheaper; thus easier to export.  Ok, but we earn dollars.  If the dollar is devalued as Trump et al desire, and we get back cheaper dollars in return for our toil, then the sole purpose of our work is taken from us.  It’s taxed away by devaluation.  We get cheapened dollars that buy less in return for our work.  Devaluation robs us.

Yet Trump thinks the dollar is “too strong.” Ok, but if it’s cheapened we have a reduced incentive to produce in the first place.  Why work for dollars that don’t buy very much? Also, if we’re not buying from others, how can they buy from us? These minor little details are never asked by a political class so intent on devaluing the money we earn.

Of course, that’s only part of the story. There are other realities to consider. 

It’s said that companies with an eye on exporting (meaning, they have an eye on importing) benefit from a weak currency.  But a weak dollar can’t alter reality any more than can a shrunken inch or expanded pound change what’s true.  “Money is a veil,” to quote the late, great Robert Bartley, longtime editorial page editor of the Wall Street Journal.

This is important because when companies produce goods for sale, they “import” inputs from across the street and around the world.  This matters simply because a devalued dollar logically drives up the price of everything necessary to produce marketable goods.  Does any mildly sentient being believe that Treasury can shrink the purchasing power of the dollar without those who produce for dollars asking for more of them in return for what they’re selling?  Only to economists and politicians untouched by reality does devaluation cheapen exports! What a laugh.    

What about shipping? Trump and his crowd are made giddy by the word “export,” export of goods “manufactured” in the states really makes them giddy despite the reality that rich countries generally design goods while enlisting poorer countries in the low-value work of manufacture.  But shipping costs a lot of money.  And it becomes quite a bit more expensive in dollars when the dollar is being weakened.  Figure that in the 70s and 00s the dollar was severely devalued, and the prices of oil, airplane fuel and all other transportation commodities soared. 

And then there’s labor.  Trump and his protectionist friends love labor-intensive industry, they in particular get frisky when the labor is based in the United States, but last this writer checked these workers earn dollars in return for their toil. And if Trump is to be believed, these dollar-earning everymen were his base of support in the most recent election.  Do these average people realize that Trump wants to devalue the dollars they work for each day? Where’s the media coverage of this? Trump, the alleged populist, is out to devalue the dollars earned by common people who frequently lack the hedging knowledge to mitigate government’s theft of their earnings.  Some would call it a scandal.

While the president-elect talks a good game about the importance of economic growth, talking down the dollar measure amounts to fakery.  To believe it works is as silly as a real estate developer believing he can command more for his properties by devaluing the square foot.  This is not the stuff of a serious country. 

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading ( He's the author of Who Needs the Fed? (Encounter Books, 2016), along with Popular Economics (Regnery, 2015).  His next book, set for release in May of 2018, is titled The End of Work (Regnery).  It chronicles the exciting explosion of remunerative jobs that don't feel at all like work.  

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