Opening Skirmishes of the Currency Wars
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  • Jim Luebke

    So how’s gold doing these days?

    • Andrew Allison

      Four times as costly, in dollar terms, than 10 years ago.

      • Jim Luebke

        Arbitrage means it’s meaningless to ask how it’s doing in terms of other currencies, right?

        • Andrew Allison

          Not exactly, but looking at other currencies vis-a-vis gold would illustrate how the US is doing in the competitive devaluation race to the bottom :<(

          • Why should we trust gold for gauging the value of currencies?

          • Jim Luebke

            We could also use food, energy, housing, or other commodities whose prices have gone up significantly and remained up in the last decade.

            Ignore what your economics professors are trying to put into your head, and try to balance a household budget for 10 years. It’s a much more reality-based way to figure out what’s going on than a textbook.

          • Andrew Allison

            Because it really is “the gold standard” of convertibility. But oil prices make the point equally well. BTW, much to my regret, I don’t own any.

  • Professor Mead, you’re confusing nominal depreciation with real depreciation. Policies that depreciate the real exchange rate generally involve higher rates of government saving (surpluses). Devaluing the nominal exchange rate doesn’t do anything if consumption doesn’t also decrease (remember that the trade balance is the same as the gap between domestic savings and domestic investment). Wages and prices simply adjust (which is what Japan wants).

    • Andrew Allison

      With respect, I fear it is you who are confused. Where are the surpluses which have caused the dollar to depreciate 75% (well, after today, maybe 70%) in the past ten years?

      • The dollar’s barely moved at all if you look at the past *twenty* years.

        We still have a current account deficit, don’t we? We’re a little more competitive, but not much, no? How can the dollar devalue without massively increasing our competitiveness?

        Keep in mind that that foreign demand for dollars spiked after the late-90s Asian financial crisis, and the dollar was coming down from a high base.

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