# The Case for Reducing the Value of the Dollar **URL:** \ **Category:** Great Debates\ **Created:** [August 11, 2015, 9:55pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593 "2015-08-11T21:55:13Z")\ **Posts on this page:** 13\ **Page:** 3
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 13, 2015, 7:21pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/41 "2015-08-13T19:21:06Z")
> [@DrDeth](#): > > False. Low oil prices are hurting American OIL companies, low oil prices are a boon for every other sector of the economy. > > You still have not explained why you are missing some of the basic concepts of Econ 101. [Not as much as people were expecting.](http://money.cnn.com/2015/04/01/news/economy/cheap-gas-750-savings-america/) Meanwhile low gas prices hurt companies supplying oil companies, companies in areas with high oil employment, and companies dependent on taxes from oil funneled through the government. I agree that a reduction in conservation is a problem, but a longer term one. Don’t get me wrong, I’m all for low oil prices (suck it, Exxon!) but is isn’t as obvious a benefit as you make it. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 13, 2015, 7:23pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/42 "2015-08-13T19:23:55Z")
> [@LinusK](#): > > I’m not sure it’s an accounting identity. I’m not necessarily disagreeing with you. I’m asking for some clarification of what you mean. > > I disagree about point 4. I think the U.S. can influence the the exchange rate the same way China has always done it. Or, for that matter, the same way Switzerland did. The U.S. central bank can simply purchase whatever amount of yuan it takes (using dollars, of course) to change the rate. Exchange rates work the same way any market does: supply and demand. If the U.S. demands yuan and supplies dollars, the yuan will rise, and the dollar will fall. > > I disagree that 2 and 3 are purely theoretical. To the extent that there’s any such thing as empirical data in economics, the empirical data supports them. Besides the impact on imports, you also haven’t considered that other economies might further devalue their own currencies to keep them relatively stable compared to the dollar, and the psychological impact. The dollar being the global currency has definite advantages for us, screwing around with it might have a bigger impact than we can easily project today. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [August 13, 2015, 7:45pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/43 "2015-08-13T19:45:51Z")
> [@pool](#): > > I know just based off reading the news that China has been artificially manipulating their currency for years, keeping the value lower than it really is so the U.S. Will keep importing Chinese products at massive levels. Has this action been attributable to the problem the Chinese economy is having now or is it completely unrelated? I’m not going to pretend to be an expert on the Chinese economy, because I’m not. From what I’ve read, here are at least some problems going on in China: 1.) They’ve relied heavily on an export-driven economy. I’ve read, and tend to agree that, that’s an unsustainable model. In other words, it’s something that works well for a while, but doesn’t work indefinitely. 2.) There’s a lot of political corruption in China. I’ve read, and agree, that corruption is counterproductive, in terms of long-term economic growth. 3.) Their most recent problem is their stock market. It’s poorly regulated, highly overvalued, and tends to act more like a casino than a stock market. (Which doesn’t mean treating the stock market like a casino doesn’t happen in other countries too - just that the problem is even worse, there.) 4.) A related problem is the real estate market. Certain prestigious areas have unrealistic market values. 5.) While certain parts of China are doing very well, other large parts of the population continue to live in relative poverty. As a kind of general summary, the prosperity of China is somewhat overstated. They have made tremendous strides, in a relatively short time, but they still have some really big problems to work out, before China becomes a true 1st world country. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [August 13, 2015, 9:56pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/44 "2015-08-13T21:56:45Z")
> [@LinusK](#): > > I’m not sure what “winter mixes” are, but despite its widespread popularity, low gas prices have a definite downside. They don’t use the same fuel blend in the winter as they do in the summer. The summer blend is more expensive, which is one of the reasons why gas costs more in the summer than in the winter (there are other reasons as well). > [@](#): > > I’m not a peak oil person (in the sense I do it’s coming anytime soon) but oil is not a renewable resource, which means it will run out someday. It’s also a major contributor to pollution, and cheap oil tends to get in the way of some some extremely worthwhile projects - like affordable mass transit, for example, and the transition to renewable energy. It also tends to add to traffic congestion, which is a massive drain on US productivity - and wastes huge amounts of our time. To the extent that the cheapest oil tends to be concentrated in OPEC countries, it makes us vulnerable to extortion from those countries - like oil shocks that happened in the 1970s. Don’t get me wrong - I’m not some crazy anti-oil person. I just think that cheap oil as some important downsides, that some people don’t seem to recognize. It certainly has downsides for US oils and gas production. But as with many things, there are upsides and downsides, and certainly US consumers are getting a boon out of this, especially since oil is stilled tied to the dollar. I don’t think that Saudi and OPEC are keeping production steady despite reduced global demand to target the US btw…look more at Iran as a more likely target, though now that the US is working towards a deal with Iran that will allow Iran to sell their oil it’s probably going to drive down the price per barrel even further. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [August 15, 2015, 5:09pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/45 "2015-08-15T17:09:16Z")
> [@Voyager](#): > > Besides the impact on imports, you also haven’t considered that other economies might further devalue their own currencies to keep them relatively stable compared to the dollar, and the psychological impact. The dollar being the global currency has definite advantages for us, screwing around with it might have a bigger impact than we can easily project today. I agree that the dollar being the world’s reserve currency is a good thing for us. One of the reasons for the euro, I think, was the hope that it would compete with the dollar as a reserve currency. That hasn’t really happened though. One of the reasons - perhaps _the_ reason - is the poor economic performance of several euro countries. The reason for that poor performance, in turn, was the failure of the ECB to do what the Fed has done - create more currency. So, in this particular case, creating more dollars made the dollar more valuable, relative to the euro. That’s because a strong and growing economy is one of the things that’s necessary for a currency to achieve reserve status, which in turn creates a demand for that currency. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [August 16, 2015, 4:42am UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/46 "2015-08-16T04:42:33Z")
I don’t think it’s really possible for the US to devalue in the way the OP is proposing, because the US doesn’t really do the things that you need to do to fix an exchange rate that way. 1. Let’s take just generally, in normal times. Let’s say the US devalues. That makes imports more expensive and exports a bargain for foreigners. But it also makes US investments a bargain for foreigners as well. Which means that foreigners would want to buy land and stocks and bonds while the getting is cheap. And they need dollars to do that. So, that’s going to push up demand for dollars. And the price of dollars is going to settle at some equilibrium, which is going to be determined by the market here. 2. Now, generally, in normal times, the Fed could just say “Screw it! We’re going to keep printing dollars until the dollar reaches the level we want it.” Except nobody is going to believe that. Because we all know that once inflation gets too high, the Fed is going to start tightening the money supply. So, nobody is going to believe the Fed when they make their “Screw it!” announcement. So, the value of the dollar is going to settle at some equilibrium determined by the market and not by what the Fed wants. 3. But we’re not in normal times. The US is the safest place to store your money, and since the world economy is still weak, people want to store their money in the US. Which means that demand for dollars is high right now, and it’s going to be that way for a while. So, that makes the task of devaluation even more difficult. The Fed has done a lot of QE since 2008. And even so, we’ve got a pretty strong dollar. Why do you think more QE is going to make a difference? ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [August 16, 2015, 5:06am UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/47 "2015-08-16T05:06:31Z")
On this inflation discussion, inflation is not just dependent on the amount of currency printed, it’s also dependent on how fast the money is moving through the economy (its “velocity”). There are circumstances where you can print currency and see no corresponding increase in inflation. The US was definitely in such a circumstance after 2008, since the Feds did exactly that without a corresponding inflation increase. The US is probably not in that scenario now, though, and loosening the money supply would probably lead to inflation. On the other hand, the Fed can always stomp on inflation when it wants to, and because of that, I think the inflation fears in this thread are overblown. ---
**Author:** ![BrightNShiny](https://avatars.discourse-cdn.com/v4/letter/b/7bcc69/32.png) [@BrightNShiny](https://boards.straightdope.com/u/BrightNShiny)\ **Post date:** [August 16, 2015, 5:29am UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/48 "2015-08-16T05:29:56Z")
> [@pool](#): > > I know just based off reading the news that China has been artificially manipulating their currency for years, keeping the value lower than it really is so the U.S. Will keep importing Chinese products at massive levels. Has this action been attributable to the problem the Chinese economy is having now or is it completely unrelated? I think the consensus view now is that the Chinese currency is actually overvalued and needs to drop. They did used to undervalue their currency, but they started allowing it to rise a few years back. ---
**Author:** ![WillFarnaby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/willfarnaby/32/514_2.png) [@WillFarnaby](https://boards.straightdope.com/u/WillFarnaby)\ **Post date:** [August 17, 2015, 1:39am UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/49 "2015-08-17T01:39:08Z")
At no time is having a trade deficit a bad thing. It is stuff for politicians to demagogue over (see Trump). In the long run exports will equal imports. Nothing to worry about. The real reason politicians get all juiced up about trade deficits, is because they want to goose exports for their favored constituencies. Boeing happens to have more access in the beltway than General Consumer, so General Consumer must pay higher prices while Boeing reaps rewards. It’s really a shined up mercantilism. For US monetary authorities to go tit for tat with a consistently mercantilist nation like China would be an utter embarrassment. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [August 17, 2015, 1:53am UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/50 "2015-08-17T01:53:12Z")
Well, of course reducing the value of the dollar would result in inflation. That’s the very definition of inflation. The question isn’t whether it causes inflation; it’s whether inflation is something we want. And the answer to that is usually “yes, but only in very small amounts”. ---
**Author:** ![Stringbean](https://avatars.discourse-cdn.com/v4/letter/s/d6d6ee/32.png) [@Stringbean](https://boards.straightdope.com/u/Stringbean)\ **Post date:** [August 17, 2015, 4:55am UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/51 "2015-08-17T04:55:31Z")
The reason Chinese investors buy American assets is because their own government has devalued its currency, leading people to avoid long-term investments that will inevitably be devalued once the gig is up. Emulating what has been a poor monetary policy in China makes little sense. In fact, the Chinese were letting up on their currency-pegging just before the recent downturn forced them to start 'er up again. Put simply, the American economy is no longer served by dependence on exporting manufactured goods. Crafting our monetary policy based on a sector comprising only 13% of our economy is foolish and short-sighted. The consequences of distorting market valuation are not worth any benefits. The dollar is strong because international agents _want_ American dollars, both in the short- and long-term. They want American dollars because the value of the dollar has historically been untarnished by foolish government manipulation. Even with historically-low (see: 0%) interest rates, the global community trusts the dollar more than any other currency as a long-term investment. Until even the Chinese are willing to invest in the Yuan, we shouldn’t find ourselves emulating its current fate. ---
**Author:** ![Learjeff](https://avatars.discourse-cdn.com/v4/letter/l/94ad74/32.png) [@Learjeff](https://boards.straightdope.com/u/Learjeff)\ **Post date:** [August 17, 2015, 12:24pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/52 "2015-08-17T12:24:36Z")
Inflation hurts creditors, who get paid back less valuable dollars than the ones loaned. So, Big Money will be against it. Those on fixed incomes would be hurt by inflation, so don’t look for much support in the AARP demographic. All the stuff we middle- lass people buy would get more expensive, so don’t expect much middle-class support. I’ve lived in tomes of high inflation. It sucked, and oddly enough it didn’t seem to reduce the flight of manufacturing overseas. I remember my sister getting a “great” mortgage rate of 9%. It was very hard on people trying to buy or sell a house. Given that China pegs their currency to US, inflation here wouldn’t affect the trade balance with China. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [August 17, 2015, 2:10pm UTC](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593/53 "2015-08-17T14:10:56Z")
> [@WillFarnaby](#): > > At no time is having a trade deficit a bad thing. It is stuff for politicians to demagogue over (see Trump). In the long run exports will equal imports. Nothing to worry about. It may not be a problem for the reasons politicians complain about it, but it’s still a problem. For one thing, China’s manufacturing dominance is a security issue. What happens if we have to go to war in some dimly imagined future and suddenly have no electronics to buy and no domestic manufacturing base? For another, it cuts into our foreign exchange reserves. That’s not really a problem for the US but we are _sui generis_ in that regard since we’ve made our currency a viable export. Third, our trade deficit with China is artificial. It largely exists because of the Chinese government’s currency controls, which will hurt both countries in the long run. If we were simply being out-competed by China, it would be different. [Previous page](https://boards.straightdope.com/t/the-case-for-reducing-the-value-of-the-dollar/727593.md?page=2)