On 2010-02-01, at 5:21 PM, brad bauerly wrote:
> What is the reason that the bourgeois press is talking about the inevitable
> decline of the US dollar? Because it helps capital and hurts labour.
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Corporate America and the bourgeois media are not monolithic but divided on this issue, as frequently happens, and a consensus on how far and how fast or even whether the dollar should decline is not so apparent. Garten, a former high-ranking official in a succession of Republican and Democratic administrations, represents one side of an ongoing debate.
I thought his commentary was interesting in that he is a well-connected and experienced insider whose views carry more weight than your average pundit or academic, and because he succinctly lays out the argument for a strong dollar, whose demise he clearly fears rather than favours. Rather than helping capital and hurting labour, he suggests a cheapening of the currency would have an opposite effect: it would relieve the pressure for an assault on working class standards, which Garten presumably sees as more consistent with US capital's long-term interest. He appears to be worried about an overwhelming temptation, especially among Democrats, to preside over a devaluation which shafts Chinese and other foreign creditors rather than a politically unpopular and perhaps impossible austerity program aimed at reining in the federal deficit and higher taxes through deep cuts to Social Security, Medicare, and other social spending. Garten may well be underestimating the arguably greater capacity of union-based parties like the DP and social democrats to impose an austerity program on their base with a minimum of social unrest, but I'd still propose a close rereading of his article with the above in mind.
Garten is in the same camp as the Wall Street Journal, which also supports a stronger rather than weaker dollar, and leading multinationals like Wal-Mart who have moved much of their their production overseas. They don't want to see currencies like the yuan rise against the dollar in those countries where they have set up their supply chains and export platforms. A stronger dollar also helps them restrain wages at home in the same manner as German capitalists have been able to blackmail their more highly organized workers into concessions by credibly threatening to relocate to Eastern Europe and other zones where labour costs and exchange rates are more favourable. US importers similarly don't want see their costs driven up by a devalued dollar.
On the other hand, depreciation would effectively represent a default by US government and corporate borrowers on the sizeable foreign debt, and US-based exporters would gain from improved access to foreign markets. The latter include many small and medium sized businesses and older industries with unionized workforces. If a dollar decline would indeed "hurt labour", organized labour is not acting that way. The unions support a fall in the dollar - expressed most openly and directly in "patriotic" attacks on China's refusal to precipitously revalue the yuan and the corresponding protectionist demand that China be penalized as a "currency manipulator". Banks, hedge funds, and other big institutional investors are also divided on the issue depending on their exposure to foreign stocks, bonds, and commodities inversely correlated to the dollar. The Chinese, Japanese, Europeans, and Gulf states support a very gradual and orderly depreciation of the USD, bowing to pressure to rebalance global trade and in hopes of forestalling a collapse which would have a much more deleterious impact on their huge hoardings of dollar assets.