On Jan 30, 2012, at 4:14 PM, brad quoted Dean Baker:
> President Obama failed to commit himself to restoring the
> competitiveness of dollar as part of his agenda for bringing back
> manufacturing jobs.
Devaluation is the strategy of the weak. Germany is an export powerhouse, and it doesn't need a cheaper currency. We need to make stuff that people want.
> The value of the dollar really has to be front and
> central in any effort to restore U.S. competitiveness since it is by
> far the most important factor determining the relative cost of U.S.
> goods compared with goods produced elsewhere.
Productivity and relative prices count for a lot too.
> If the dollar is 20 percent above its proper value then it is
> equivalent to putting a 20 percent tariff on all of our exports.
This is a little devious. Is Dean arguing that the dollar is 20% overvalued? Against what, if so? The euro? The eurozone is a mess. The yen? The renminbi? It's actually appreciated about 15% over the dollar since 2008. Chinese wages have been rising, but they're still less than 10% of U.S. wages - the currency could double and there'd still be a huge gap.
Or did he just throw this number out for illustrative purposes? If he did, it could leave the impression on the casual reader that it is 20%.
> Balanced trade would have a huge impact on U.S. labor markets. It
> would lead to more than 5 million new jobs in manufacturing.
Huh? Is this one of those static calculations, beloved of EPI, that just divides the trade deficit by the average manufacturing wage? Meaning that there are no gains at all to trade? That money saved on cheap manufactured imports isn't spent on other things, like services? That there's no cost to a cheaper dollar, like higher oil prices?
> In short, if we actually want to see results in the form of more
> manufacturing jobs, rather than just a good speech, we will have to
> press President Obama to challenge the 1 percent. A more competitive
> dollar must be at center of a serious manufacturing policy. Everything
> else on President Obama’s Built to Last agenda is just window
> dressing.
We need to invest in new industries. Cheapening the dollar is the lazy way out.
Doug