Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 (Denver Mods 7/26/84) 6/24/83; site drutx.UUCP Path: utzoo!lsuc!watmath!clyde!cbosgd!ihnp4!drutx!dlo From: dlo@drutx.UUCP (OlsonDL) Newsgroups: net.politics Subject: Re: The dollar and the trade deficit. Message-ID: <533@drutx.UUCP> Date: Mon, 11-Nov-85 17:00:26 EST Article-I.D.: drutx.533 Posted: Mon Nov 11 17:00:26 1985 Date-Received: Tue, 12-Nov-85 21:03:40 EST Organization: AT&T Information Systems Laboratories, Denver Lines: 65 [] In article <2446@sdcrdcf.UUCP> jonab@sdcrdcf.UUCP (Jonathan Biggar) writes: >In article <445@drutx.UUCP> dlo@drutx.UUCP (OlsonDL) writes: >>The same is true for the dollar. If the dollar is not the desired value >>against, say, the Yen, but it is desired that Japanese goods be made >>more expensive without making domestic goods more expensive, it is the >>Yen that must be increased in value. >There is a big difference here. An inch is an inch all around the world >whether you chose to call it that or not. If you decide to change the length >of an inch, you have not in any way changed the actual distance between >two points. The length denoted by the inch has a basis in reality and fact. My point exactly! The dollar is the same dollar all around the world wherever it is spent, and reguardless of what it purchases. If it is devalued, *no matter what it purchases* will require more of them than what it did before. >A dollar is not based on any real standard. Nowhere does it say that a dollar >can be redeemed for X amount of gold or anything else. The dollars value is >entirely based on the faith that people put in it (the likelyhood that it will >retain its value.) Thus, the dollar can change simply by a consensus that it >be so. The value of the inch is also by consensus. You said so yourself when you said that it is the same around the world. I believe the basis for the inch was something line 500,000,000 to the pole-to-pole length of the earth. So what? There is nothing said that it cannot be changed to 750,000,000 or any other value. And, there is nothing to keep people from using any other standard or no standard at all. The inch currently measures about |<------>| (at least on my terminal :-)); there is nothing that says it cannot measure |<->| or |<---------------------------->|; nothing EXCEPT consensus. And no matter what it measures (whether with or without a standard), if it is worth less now than what it was before, it now requires more of them to cover the same length than it did before. >If everyone in America chooses to keep exchanging dollars for goods >at the same rate here, but changes the exchange rate between dollars and yen, >then local prices do not vary directly, but imported goods become more or less >expensive. This would be true only if the value of the yen was increased and the value of the dollar remained the same. The dollar's value can be controlled here, but you cannot make its value in the US *different* than its value in some other country. If its value is made higher here, it is made higher everywhere else also. Lower elsewhere, means lower here too. The dollar's value against the yen in the US is the same as the dollar's value against the yen in Japan. It is the same dollar. The dollar that purchases foreign goods is no different than the dollar that purchases domestic goods. A devalued dollar makes *both* proportionally more expensive. Look at it this way. Suppose someone from the US traveled to Japan with some US dollars. Why should those dollars decrease in value merely because he crossed the US border? It would be like if he brought a ruler with him and all of a sudden it shrunk! >Jon Biggar My opinions are my own, and do not necessarily reflect those of my employer. David Olson ..!ihnp4!drutx!dlo