On Nov 6, 2007, at 12:33 PM, Wojtek Sokolowski wrote:
> But the falling USD creates favorable condition for domestic
> producers
> of export goods, no? That means a realignment of forces rather than
> outright decline - Finanzkapital losing some of its influence in
> favor of
> the manufacturing sector. That is not necessarily a bad thing, and
> may
> create a movement toward the policies that Doug is talking about, no?
I doubt it. If you need a devaluation to make your economy competitive, you've probably got serious longer-term problems, and cheapening the currency is only a short-term fix. (See Italy in the 1970s and 1980s.) Shaikh has demonstrated convincingly that the long- term determinant of exchange rates is differential growth in productivity (higher productivity => higher currency). So the devaluation is actually a symptom of fundamental deterioration and not its cure.
Doug