Why the dollar dropping sucks even more than it normally would

A couple basic Econ concepts, just to set the table:

  • When something is cheaper, you can buy more of it, and people tend to.
  • If your money > their money, then your work is > their work

Thanks to the US basically lucking into global financial dominance after obtaining global military dominance, for a long time everyone wanted dollars.  Over time, via national policy we squeezed as much advantage out of this as we possibly could by promoting consumption as what it meant to be an American.  Big cars, a new one every year or so; big houses with a huge perfectly manicured lawn; suburbanization and the assumption that it was distasteful to not have to commute to work; an association of damn near achieving orgasm off of Stuff.

Now, this was, at least on paper, just fine with a perpetually big dollar.  We send green pieces of paper with dead white guys on the front, the rest of the world sends us trinkets.  Quite the racket.  A large dollar inherently meant we made less stuff, but we kicked it into overdrive — remember, this is not true free trade involving a mere drop of protections and “have at it, folks” I’m talking about.  As a result, we took what would’ve been a normal ebb & flow process — when we’re doing good we buy stuff, when we’re doing relatively bad we sell stuff — and broke the switch.

Fast forward.  The “rust belt” collapses, the federal government racks up debt so big ten clones of Bill Gates wouldn’t be able to pay it off, and oil companies are king makers.  Oh yeah, and we’ve royally pissed off a chunk of the world where much of the oil is.  Gradually, the rest of the world is calling bullshit on the value of our money.  Fair enough, we have a fiat currency, they can do that and by all indications should.  Problem is, we’ve spent so much time not only in “buy” mode but in an inflated, Jose Canseco-esque version of it, that there ain’t much to sell.  In fact, we’ve largely forgotten how to sell stuff, and due to the previous strong-arming, the drop necessary to bring it all into balance would feel like sitting on one of these.

When statist-progressives complain about low-wage jobs, and when Dobbs and his band of nativists blame everything on “free trade”, they’re talking about this.  They’re screaming at the symptoms and completely missing the real cause.  As for a solution, I don’t have one, as I believe this (and many other things commonly causing screaming) is not something that can be “solved” in the sense people assume.  Most that we can do is hope that the slide is relatively slow, & that conditions elsewhere cushion the impact, then take this as a learning experience.  After all, in nation years we’re basically going through puberty.


About b-psycho

Left-libertarian blogger & occasional musician.
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