Help With Dropping Dollar Debate

[fireworks_god]

I've been in a debate online with someone over Bush's "impressive economic success". :rolleyes:

He hasn't touched my point that, no matter what, if we are in more debt, then there has been no economic success, but he is challenging my reference to the dropping dollar by referring to how it simply means that it will increase our exports, which will help the economy further.

I'm no expert, what to say to something like that? :cool:

[penxv]

I think that this CPI graph from 1800-2005 (http://www.economics-charts.com/cpi/cpi-1800-2005.html) illustrates the diminished value of the dollar and the true extent of inflation. People talk about low annual inflation... but that is a red herring. Inflation of 3% is like a 3% tax on the entire economy. That is a massive amount of value.

It is important to remember that inflation is a transfer of wealth from regular individuals to corporate and banking interests.

[Ragnar]

It is important to remember that inflation is a transfer of wealth from regular individuals to corporate and banking interests.

I've heard that statement before. But to be honest, I don't understand it. Could you elaborate or direct me to an essay that explains it in depth?

Thanks.

[Jason T]

Rate of inflation is understated because the cost of doing business is going down (mostly due to increased Chinese outsourcing and improved technologies.)

[DrZ]

One of the biggest economic lies perpetuated by the corporate/government elite and parroted by the media is that a lower dollar will be good for the economy because it increases exports. Just look at our trade imbalance now versus our trade imbalance when Bush took office. The dollar has lost 30%-60% of its value versus other currencies, but instead of this helping exports, our trade deficit has skyrocketed. So argument #1 is that it's simply not true. The hard data (just look up the numbers) says that devaluing your currency hurts your economy and in the U.S.'s case has greatly increased our trade deficit!

Argument #2: Devaluing your currency to increase exports? Who's supposed to benefit? Who among us is an exporter? Is the average citizen? No! The only exporters among us are multinational corporations. So our government is devaluing the savings and assets of every American citizen, declaring a "sale" on every asset that we own, and to benefit who? ...multinational corporate interests. This is a transfer of wealth, plain and simple, for the benefit of a few elites.

Argument #3. Devaluing the dollar leads to higher prices for U.S. citizens on imports, and each and every one of us is a regular consumer of imported goods. We import gasoline and energy, so it's higher prices at the pumps. We import just about every other consumer good as well; just check the tags next time you're at Walmart, Best Buy, etc. Lower dollar = higher inflation.

Argument #4. The reason that a lower dollar doesn't increase exports is that we're in a global economy. A lower dollar means U.S. manufacturers pay higher prices to manufacture their goods (because energy costs increase, raw material prices increase many of which have to be imported before the final product can be exported, etc) and so the cost of the final product has increased. The effect of the devalued dollar has been negated through higher manufacturing prices.

Hope this helps!

[klamath]

If the 10% loss of the dollars value this year alone against the EURO is so good for US exports, ask him to explain this.

"The first estimate for the euro area1 (EA13) trade balance with the rest of the world in September 2007 gave a 3.1 bn euro surplus, compared with +2.3 bn in September 2006."

Source: http://epp.eurostat.ec.europa.eu/pls/portal/docs/PAGE/PGP_PRD_CAT_PREREL/PGE_CAT_PREREL_YEAR_2007/PGE_CAT_PREREL_YEAR_2007_MONTH_11/6-16112007-EN-AP.PDF

[klamath]

Inflation is low over all. Inflation for necessities of life such as food, health care and fuel is sky rocketing but the flood of cheap imported consumer non essential junk is low or going down. When push comes to shove you can't live on a digital camera or a pile of plastic toys from China.

[sickmint79]

uh commodities are all going up. everything we buy is made in china. at best things will stay the same price, although they are more likely to go up. and what is the us going to export? wedding planning services? we don't make much anymore, the economy is hugely service based.

[Goldwater Conservative]

Inflation is low over all. Inflation for necessities of life such as food, health care and fuel is sky rocketing but the flood of cheap imported consumer non essential junk is low or going down. When push comes to shove you can't live on a digital camera or a pile of plastic toys from China.

Exactly. Regular, working class people are hurting. It's easy to make inflation look low when you're including things in that "basket of goods" that don't belong and which understate actual cost of living increases.

Whatever success we are having is at the expense of our children and grandchildren, considering Bush and Congress have effectively taken out $3.5 trillion in loans since 2001, increasing the national debt by 60%. Government spending has gone up by over 50% in nominal terms, which is close to 67% greater than under Clinton. This has made the eventual budget crises of Social Security and especially Medicare even more likely.

http://www.cbo.gov/ftpdoc.cfm?index=3521

Bush and Congress (both parties) have been fiscal disasters. Reducing income tax rates a little bit does not a conservative make.

[Cowlesy]

Many U.S. domestic companies that require foreign inputs as a component of production have to pay much higher prices due to the deterioration of the dollar. Plastic companies that need resin (oil based) to make products are paying record high prices that compress margins. At some point this will have upward pressure on prices (inflation), which can have the affect of slowing consumption. If we don't produce as much this will have upward pressure on unemployment as companies decrease work force size as the demand for products slows.

Also a lot of these companies have tremendous amounts of debt, and their free cashflow forecasts almost always are based on growth in their revenues. Well what if we have a slowdown in the economy and a slowdown or contraction in revenue growth? We could see a ballooning of corporate defaults as companies struggle to make debt payments.

Consumers and corporations, as well as the gov't, have borrowed themselves into a hole.

[gang]

I've heard that statement before. But to be honest, I don't understand it. Could you elaborate or direct me to an essay that explains it in depth?

Thanks.

Have a look at this: The Economic Effects of Inflation (http://www.mises.org/money/3s2.asp)

[angelatc]

Argument #2: Devaluing your currency to increase exports? Who's supposed to benefit? Who among us is an exporter? Is the average citizen? No! The only exporters among us are multinational corporations. So our government is devaluing the savings and assets of every American citizen, declaring a "sale" on every asset that we own, and to benefit who? ...multinational corporate interests. This is a transfer of wealth, plain and simple, for the benefit of a few elites.



This might have been important if we had not stopped producing things in this country. While average citizens are not exporters, people who worked in factories were employed by industries making goods for export.

Here are the 2006 stats (in $ thousands) of what we exported:

Total 1,037,142,973
84--NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS 182,034,125
85--ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP; PTS 145,832,282
87--VEHICLES, EXCEPT RAILWAY OR TRAMWAY, AND PARTS ETC 92,702,820
88--AIRCRAFT, SPACECRAFT, AND PARTS THEREOF 66,753,299
90--OPTIC, PHOTO ETC, MEDIC OR SURGICAL INSTRMENTS ETC 61,891,052
39--PLASTICS AND ARTICLES THEREOF 42,712,143
27--MINERAL FUEL, OIL ETC.; BITUMIN SUBST; MINERAL WAX 34,940,264
29--ORGANIC CHEMICALS 33,654,324
71--NAT ETC PEARLS, PREC ETC STONES, PR MET ETC; COIN 31,541,395
98--SPECIAL CLASSIFICATION PROVISIONS, NESOI 29,305,260
30--PHARMACEUTICAL PRODUCTS 25,236,280
38--MISCELLANEOUS CHEMICAL PRODUCTS 15,637,575
10--CEREALS 13,525,652
73--ARTICLES OF IRON OR STEEL 13,490,562
48--PAPER & PAPERBOARD & ARTICLES (INC PAPR PULP ARTL) 13,216,633
72--IRON AND STEEL 12,621,402
76--ALUMINUM AND ARTICLES THEREOF 10,100,968
28--INORG CHEM; PREC & RARE-EARTH MET & RADIOACT COMPD 10,047,804
40--RUBBER AND ARTICLES THEREOF 9,646,197
12--OIL SEEDS ETC.; MISC GRAIN, SEED, FRUIT, PLANT ETC 9,119,053
94--FURNITURE; BEDDING ETC; LAMPS NESOI ETC; PREFAB BD 7,559,253
08--EDIBLE FRUIT & NUTS; CITRUS FRUIT OR MELON PEEL 6,839,403
33--ESSENTIAL OILS ETC; PERFUMERY, COSMETIC ETC PREPS 6,717,631
74--COPPER AND ARTICLES THEREOF 6,597,591
02--MEAT AND EDIBLE MEAT OFFAL 6,593,168
44--WOOD AND ARTICLES OF WOOD; WOOD CHARCOAL 6,537,370
52--COTTON, INCLUDING YARN AND WOVEN FABRIC THEREOF 6,465,585
47--WOOD PULP ETC; RECOVD (WASTE & SCRAP) PPR & PPRBD 5,861,108
97--WORKS OF ART, COLLECTORS' PIECES AND ANTIQUES 5,570,748
32--TANNING & DYE EXT ETC; DYE, PAINT, PUTTY ETC; INKS 5,535,777
95--TOYS, GAMES & SPORT EQUIPMENT; PARTS & ACCESSORIES 5,524,863
49--PRINTED BOOKS, NEWSPAPERS ETC; MANUSCRIPTS ETC 5,494,045
26--ORES, SLAG AND ASH 4,781,275
70--GLASS AND GLASSWARE 4,445,368
21--MISCELLANEOUS EDIBLE PREPARATIONS 4,308,322
23--FOOD INDUSTRY RESIDUES & WASTE; PREP ANIMAL FEED 4,141,677
34--SOAP ETC; WAXES, POLISH ETC; CANDLES; DENTAL PREPS 4,008,063
82--TOOLS, CUTLERY ETC. OF BASE METAL & PARTS THEREOF 3,864,732
03--FISH, CRUSTACEANS & AQUATIC INVERTEBRATES 3,840,243
83--MISCELLANEOUS ARTICLES OF BASE METAL 3,751,760
31--FERTILIZERS 3,169,654
37--PHOTOGRAPHIC OR CINEMATOGRAPHIC GOODS 3,028,531
93--ARMS AND AMMUNITION; PARTS AND ACCESSORIES THEREOF 2,946,085
41--RAW HIDES AND SKINS (NO FURSKINS) AND LEATHER 2,875,167
86--RAILWAY OR TRAMWAY STOCK ETC; TRAFFIC SIGNAL EQUIP 2,713,587
20--PREP VEGETABLES, FRUIT, NUTS OR OTHER PLANT PARTS 2,710,446
89--SHIPS, BOATS AND FLOATING STRUCTURES 2,699,957
22--BEVERAGES, SPIRITS AND VINEGAR 2,696,847
07--EDIBLE VEGETABLES & CERTAIN ROOTS & TUBERS 2,680,588
81--BASE METALS NESOI; CERMETS; ARTICLES THEREOF 2,573,201
61--APPAREL ARTICLES AND ACCESSORIES, KNIT OR CROCHET 2,508,838
24--TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES 2,507,539
68--ART OF STONE, PLASTER, CEMENT, ASBESTOS, MICA ETC. 2,394,058
15--ANIMAL OR VEGETABLE FATS, OILS ETC. & WAXES 2,114,103
19--PREP CEREAL, FLOUR, STARCH OR MILK; BAKERS WARES 2,060,772
35--ALBUMINOIDAL SUBST; MODIFIED STARCH; GLUE; ENZYMES 1,983,492
25--SALT; SULFUR; EARTH & STONE; LIME & CEMENT PLASTER 1,939,168
55--MANMADE STAPLE FIBERS, INCL YARNS & WOVEN FABRICS 1,894,490
56--WADDING, FELT ETC; SP YARN; TWINE, ROPES ETC. 1,881,402
54--MANMADE FILAMENTS, INCLUDING YARNS & WOVEN FABRICS 1,790,127
62--APPAREL ARTICLES AND ACCESSORIES, NOT KNIT ETC. 1,735,831
60--KNITTED OR CROCHETED FABRICS 1,638,458
04--DAIRY PRODS; BIRDS EGGS; HONEY; ED ANIMAL PR NESOI 1,525,090
59--IMPREGNATED ETC TEXT FABRICS; TEX ART FOR INDUSTRY 1,486,424
75--NICKEL AND ARTICLES THEREOF 1,405,477
96--MISCELLANEOUS MANUFACTURED ARTICLES 1,337,886
63--TEXTILE ART NESOI; NEEDLECRAFT SETS; WORN TEXT ART 1,292,122
69--CERAMIC PRODUCTS 1,162,208
16--EDIBLE PREPARATIONS OF MEAT, FISH, CRUSTACEANS ETC 1,161,637
42--LEATHER ART; SADDLERY ETC; HANDBAGS ETC; GUT ART 1,150,081
17--SUGARS AND SUGAR CONFECTIONARY 1,042,843
57--CARPETS AND OTHER TEXTILE FLOOR COVERINGS 1,010,919
11--MILLING PRODUCTS; MALT; STARCH; INULIN; WHT GLUTEN 929,699
18--COCOA AND COCOA PREPARATIONS 895,676
64--FOOTWEAR, GAITERS ETC. AND PARTS THEREOF 829,360
58--SPEC WOV FABRICS; TUFTED FAB; LACE; TAPESTRIES ETC 791,521
01--LIVE ANIMALS 754,874
05--PRODUCTS OF ANIMAL ORIGIN, NESOI 744,320
91--CLOCKS AND WATCHES AND PARTS THEREOF 672,959
92--MUSICAL INSTRUMENTS; PARTS AND ACCESSORIES THEREOF 629,598
09--COFFEE, TEA, MATE & SPICES 600,485
36--EXPLOSIVES; PYROTECHNICS; MATCHES; PYRO ALLOYS ETC 571,051
06--LIVE TREES, PLANTS, BULBS ETC.; CUT FLOWERS ETC. 387,790
13--LAC; GUMS, RESINS & OTHER VEGETABLE SAP & EXTRACT 368,124
43--FURSKINS AND ARTIFICIAL FUR; MANUFACTURES THEREOF 286,560
79--ZINC AND ARTICLES THEREOF 277,380
65--HEADGEAR AND PARTS THEREOF 154,486
78--LEAD AND ARTICLES THEREOF 143,827
51--WOOL & ANIMAL HAIR, INCLUDING YARN & WOVEN FABRIC 124,516
80--TIN AND ARTICLES THEREOF 123,553
45--CORK AND ARTICLES OF CORK 70,103
67--PREP FEATHERS, DOWN ETC; ARTIF FLOWERS; H HAIR ART 62,932
50--SILK, INCLUDING YARNS AND WOVEN FABRIC THEREOF 56,487
46--MFR OF STRAW, ESPARTO ETC.; BASKETWARE & WICKERWRK 39,543
14--VEGETABLE PLAITING MATERIALS & PRODUCTS NESOI 25,597
53--VEG TEXT FIB NESOI; VEG FIB & PAPER YNS & WOV FAB 21,006
66--UMBRELLAS, WALKING-STICKS, RIDING-CROPS ETC, PARTS 17,428