Wednesday, May 03, 2006

Dollar v. Trade

The President of an association of Manufacturers appeared in a Rueters article Today, stating the Dollar had to drop in Value for the Trade deficit to be eliminated. It sounds good, but actually the value of the Dollar has little impact upon Trade. A serious Explanation is beyond the arena of blogs--it would take several hundred if not thousands of Pages. Only a contestable Outline can be given, hiding as many of the elements of the Trade issue as it represents. This Author is still impelled to dispense some insight.

Devaluation of the Dollar cheapens American Goods in foreign markets, but also them more expensive in American markets. Business interests hope to peg Wages solidly in place; but without hope, because Employees need to live. It does lower the Standard of Living of Those on set Income, who must do with less. The Thrift of Yesteryear, in other words, is destroyed to promote the parasitic avarice of Business interests of the Present. This is the First Element of the Trade/Dollar devaluation problem.

Devaluation of the Dollar leads to pressure applied on Native manufacturers previously trading with the United States to either close their markets to American Goods, or to devalue their own Currency to maintain their Trading position. A mix of the Two is the most Common, because this action can be hidden and denied for a long time. Second Element.

Devaluation of the Dollar cuts into Domestic Sales because of the losses endured by Those on set Income, and forces Foreign manufacturers to technologically upgrade along with improvement of the offered foreign Products to both domestic and foreign markets--so as to operate with lowered Profit margins more effectively. American Manufacturers will find their Productive volume will not increase, their domestic Sales will decrease, and overall Profits will be static or decline. Third Element.

There are a vast array of elements to be examined in the Trade balance, but I have provided the three most impactive. It is falicious thinking to believe American Business Profits will increase with devaluation of the Dollar. Stabilization of the Dollar, on the other hand, maintains current markets, retains the value of Investments, and generally holds market share, both domestic and foreign. American Business that demands devaluation of the Dollar wish only to deny foreign competition, but will find this competition survives anyway. lgl

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