regarding my intended post on incentivized deflation..
the subject turned out to be more involved than i had thought. after a while i came to realize that what i was thinking about is really just a strong dollar policy.
in the process of sorting things out i got to thinking about valuation and wrote this post on ahhaha's board in hopes that he might comment on it, which he did.
Message 25941792
the reason i'm posting this now is to debunk what most of the 'economists' on tv are saying. most are saying that the increased value of a currency restricts its ability to export. therefore they believe that a strong dollar is counter productive to an economy and want a devalued dollar to make exports cheaper. i now believe that sentiment is wrong. i believe that the stronger dollars received will be reduced, but since their value has increased, the value of what is received for the product remains the same.
it might be true if a currency rose against just one or two currencies for some reason. a better way of saying it is that is would be true for the weaker currency if it was losing value against a basket of currencies, because it would indicate a flaw in that currency.
but if a currency rises against a basket of currencies, it is obviously just getting stronger. so while the exporter will see less dollars for his product, those dollars will buy more 'things' because the value of the currency has increased. and while there may be some short term swings in valuation of compensation, long term it will attain equilibrium. so even if one exports less because one's currency has gotten stronger it will even out in terms of the value of the dollars received. less dollars, but the value of those less dollars remains the same. so what really counts is not the number of dollars but their value, what they will buy.
a strong currency policy is good for every citizen that uses that currency, and at worst is neutral for exporters. all a weaker currency does is make life more expensive for its people.
any comments are welcome. |
