Let me conclude that while I agree with Dean that lowering the value of the dollar may will certainly tend to increase the quantity of exports and lower the quantity of imports as well as tend therefore to increase employment somewhat, this does not mean that I necessarily support a "talking down the dollar" policy. One obvious problem, mentioned by Summers, is that a too obvious and aggressive such nationalist policy is likely to call forth retaliation from other nations, just as an aggressively protectionist policy is likely to do. They will start talking down their currencies and perhaps engage in more direct policies to lower their values, which can easily end up in a "beggar thy neighbor" war as described by Joan Robinson in 1937. More often than not a wiser policy for a TeasSec is not to push either a strong or weak currency policy and just keep quiet, just as such a policy is often best for central bankers as well, even though the TreasSec is "in charge" of the dollar. Sometimes asserting that authority is nothing more than a pointless macho exercise.Econospeak
Is Treasury Secretary Mnuchin Right About The Impact Of The Dollar On US Trade?
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University
2 comments:
How foreign exchange works with these people is the same as their “inflation”... ie they don’t understand it....
No one does or there would be deterministic functions that explain them in terms of data. That is what causal explanation entails.
Otherwise it is correlation of factors of different probabilities, and that is not causal explanation.
Correlation is not causation.
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