Debunking the "weaker currency = more exports" myth in 2 seconds...

[Mr Khan]

SamuelRSmith said:

thetonestarr said:

Your graphs (1) aren't aligned, (2) ignore a plethora of more important information, and (3) suck for using on this topic.

You do not understand economics. Don't talk about it.

 

When people talk about "weaker currency" in regards to exporting, it has absolutely zero relevancy to what you just posted. Zero. None. Nada. Nunco. Not a single bit. It has to do with said currency's comparison to other nations' currency. What you posted was in regards to inflation; in international trade economics, it has to do with exchange rate (which IS affected by inflation, but it has to do with inflation for BOTH countries, of which we have absolutely zero information in this thread, which therefore makes this thread entirely null and void. It also has to do with the economic strength of the nations in general, which is a lot more complicated).

Here's the problem with your argument: if you were to go above-and-beyond the debasing of other countries, and thus force your currency to lower relative to other countries, all you're doing is increasing prices at home, even more so than those abroad. People in France may be able to buy more US dollars, but they won't be able to buy as many things WITH those dollars.

Of course, there is a time delay between the initial printing and the actual price increases, but that time delay is dependant on how quickly the newly-printed bills enter circulation. So, if exports increase rapidly (or, imports fall, and people buy more domestic goods), and this creates the economic activity wanted, all that happens is prices increase faster, and the sugar-high from the cheap money hits its lull much sooner.

Now don't get me wrong. I am not tying the the debasement to increasing trade deficits, I'm just saying that it doesn't stand to decrease trade deficits. Increasing trade deficits have a lot to do with other areas of policy - taxation, regulation, deficit spending - which turns producers into consumers.

Somebody did report him, yes.

Anyway, now it sounds like you're confusing arbitrage, export competitiveness, and inflation vs depreciation. The issue is once you have sufficiently depreciated and your exports are *so* super-competitive that they're the only thing anyone's buying, that will bite back into currency appreciation and leave you forced to inflate again if you want to depreciate, but levels of competitiveness are sustainable over time if you manage to hold constant vis-a-vis the currency you want to maintain competitiveness with, which assumes relative stability in all markets, and so long as it doesn't lead to overwhelming demand for your currency abroad.