I have been noticing an interesting trend lately played up a bit in the media and that is the idea that America people are strong willed people and with some effort even we can compete with the rest of the world for manufacturing jobs. While I generally agree with all these ideas and the train of thought gives hope to a country that is suffering through much financial distress, it is an interesting smoke screen being put up to obfuscate the real facts and causes of what is happening to our economy.
That is quite simple the US dollar has been dropping against other world currencies the following chart shows the drop in value over the last year.
|
1 year ago |
today |
change |
China |
6.825 |
6.50213 |
-4.73% |
Euro |
0.81 |
0.70551 |
-12.90% |
India |
46.882 |
44.826 |
-4.39% |
Mexico |
12.9703 |
11.6311 |
-10.33% |
Indonesia |
9397.5 |
8568.04 |
-8.83% |
As you can see against the 2 big behemoths China and India the dollar has lost value of nearly 5% and against others closer to 10%. The impact to this is very simple it makes their goods more expensive and our goods cheaper on the world market. So what happens, is if this trend continues, we automagically become a manufacturing center again and we can all go back to being ignorant of the true forces controlling our lives.
Now as I am sure many that read this diary are going to get upset at the idea the US dollar has WEAKENED against other currencies. Yes this is the terminology used which enlists a negative response, when in reality it is exactly what we need to improve our competitive position in the world. Those that find a shifting of trade back to the US a problem for themselves will not talk about trade at all, but that the US should have a STRONG dollar. That will create the emotional response they want, for which we need to on guard for.
So what is the point of bringing this issue up anyway. It is simple we need to be aware that in our internationally interconnected world of today our economic faith can ebb and flow from forces that the individual cannot control. Secondly we need to realize that the value of the US dollar needs to be effectively managed by our government. We should be striving for a policy designed to bring us to a trade deficit - neutral position. This would bring us back to prosperity and give us a healthy outlook for our children.