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Thursday, April 2, 2015

Wal-Mart says it is looking at product sourcing to lower prices


Notice how Wal-Mart is not lobbying foreign governments to devalue their currencies in order to get lower prices for their imported inventory items.

They are putting price pressure on vendor firms rather than governments.

So it is not correct to say "a nation can always devalue its currency to become more competitive...", as we almost never see that happening.  Domestic firms lower (or raise) the price of their products in foreign currency terms.


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9 comments:

  1. NeilWApril 2, 2015 at 8:39 AM

    And you'll also note that the suppliers to Walmart are not rushing elsewhere in the world to sell their goods and services.

    Because exporters need to export and there isn't a sea of demand elsewhere that is short of supply.

    Which is why those who are doing the net importing have the whip hand - contrary to popular belief.

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  2. Matt FrankoApril 2, 2015 at 8:56 AM

    Right now yes Neil agree... I'd have to think this reverses when there is less austerity out there...

    then the vendors get the upper hand and can raise prices a bit.... its gets so "good" that vendors can put customers on "allocation" or "back order" at some points...

    Then the currency of the exporters can be seen to strengthen as the export inventories are increasing in price... leading to "excess capital" in the system of the importing nation which has to be rebalanced, etc...

    rsp,

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  3. mike normanApril 2, 2015 at 10:25 AM

    Central banks have largely been out of that game for decades. Large firms are the price setters these days. It's still about price not quantity; it's just that we've ceded exchange rate setting to the private sector like we did with just about everything else.

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  4. Dan LynchApril 2, 2015 at 12:20 PM

    Nothing new about Walmart using its monopolistic power to force supplier prices down. But that's not a good thing.

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  5. GregApril 2, 2015 at 4:45 PM

    Exactly what I was thinking Dan.

    These "innovative" capitalists only know one way to make things cheaper(and increase profits)..... cut wages! Either of their suppliers or of their own workers.

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  6. Peter PanApril 2, 2015 at 5:21 PM

    Thanks for the link, Dan.

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  7. Dan LynchApril 2, 2015 at 5:35 PM

    You're welcome, Bob.

    I remembered that article because I happen to be a pickle lover, so the subject is near and dear to my heart. Or stomach. :-)

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  8. UnknownApril 2, 2015 at 7:15 PM

    So it is not correct to say "a nation can always devalue its currency to become more competitive...", as we almost never see that happening.

    Not a logical statement. Almost never seeing something does not mean it is incorrect to say that thing can be done.

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  9. Tom HickeyApril 2, 2015 at 7:23 PM

    Technically, I believe it is correct to say that under the existing floating rate system a country cannot devalue. "Devalue" means changing a fixed rate.

    A nation can intentionally attempt to weaken ("depreciate" relatively) or strengthen its currency (cause it to "appreciate" relatively) in the fx market, or this can take place owing to other factors. But a nation cannot revalue its currency in the absence of a fixed rate.

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