Sunday, 16 November 2014
The biggest and most widespread myth in economics today.
The myth ? That a devalued currency is good for exports. It is all the rage these days. It is a Keynesian tenet so that should tell you something. Everything about mainstream Keynesianism is complete and total nonsense.
Here are a few reasons why it is a fallacy.
- A low value currency makes raw commodity imports more expensive
- A low value currency makes the acquisition of capital goods like plants and machinery more expensive
- A low value currency makes it more expensive to maintain modern plants and machinery.
- A low value currency makes it more expensive to hire and retain technically savvy employees to manage and maintain plants and machinery. (brain drain)
Can a Keynesian please explain to me what is happening in this chart ?
Shouldn't German exports be collapsing as the Euro rockets from .85 to 1.50 in less then 10 years ?
What about the USD ?
And what was happening to the USD as the trade deficit got bigger and bigger ? Dollar must have been rising according to the Keynesians.