Exchange rates do not affect the trade deficit

Discussion in 'Economics & Trade' started by expatpanama, Feb 21, 2017.

  1. expatpanama

    expatpanama Active Member

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    Money isn’t wealth as much as it’s a measure, or a lubricant, that enables exchange of wealth. But when money floats around such that it’s deprived of its singular purpose as a medium of exchange, that which is which mutually beneficial – trade (my bread for the wine of the vintner who takes my money and buys the butcher’s meat) – becomes uneven...

    ...Adam Smith got it right long ago. The “sole use of money is to circulate consumable goods.”...

    ...despite a surge in the value of the yen versus the dollar, Japan hardly lost competitiveness...

    ...the worst effect of currency devaluation; one that will place a bull’s eye on the very exporting capability that devaluation proponents like Trump seek. Specifically, investment is the true driver of production advances that bring down the price of everything; falling prices goosing the sales of goods and services domestically and globally...

    ...The negative effects of devaluation are near instantaneous such that the cost of production rises alongside reduced investment in the production enhancements that invariably drive true competitiveness. There are quite simply no “ifs” when it comes to devaluation and export advantage. There’s no such thing.


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    [from There Are No 'Ifs' About It, Currency Devaluation Doesn't Confer An Export Advantage http://www.forbes.com/sites/johntam...esnt-confer-an-export-advantage/#164df30d1e38 ]

    Most people have decided that exchange rates affect the trade balance. It doesn't and this is so hard for people to reconcile w/ their fondly held beliefs that most will ignore the facts. Some of us know that we first have to accept things are what they are and if we can understand them its fine and our failure to understand changes nothing.

    fwiw, if any one wants to see what the history of echange rates and trade is, click on http://ungb.org/econ/tradexchgrts.png and a simple explanation of this is at http://ungb.org/freepix/tradecartoon.png.
     
  2. waltky

    waltky Well-Known Member

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    Could cause the loss of American freedom and prosperity...
    [​IMG]
    US trade deficits are a threat to national security: Navarro
    Tuesday 7th March, 2017 | WASHINGTON: The Trump administration's top trade advisor said on Monday (Mar 6) US trade deficits are a threat to national security that could cause the loss of American freedom and prosperity.
     
  3. Baff

    Baff Well-Known Member

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    My Mrs is Japanese. When the Yen is low, I don't see her. She doesn't come here for work.
    When it is high, she does and I get all the contracts she brings.
     

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