Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.2 9/18/84; site sdcrdcf.UUCP Path: utzoo!lsuc!watmath!clyde!burl!ulysses!mhuxr!mhuxt!houxm!vax135!petsd!pesnta!hplabs!sdcrdcf!jonab From: jonab@sdcrdcf.UUCP (Jonathan Biggar) Newsgroups: net.politics Subject: Re: The dollar and the trade deficit Message-ID: <2446@sdcrdcf.UUCP> Date: Wed, 6-Nov-85 16:25:26 EST Article-I.D.: sdcrdcf.2446 Posted: Wed Nov 6 16:25:26 1985 Date-Received: Sat, 9-Nov-85 12:45:08 EST References: <445@drutx.UUCP> Reply-To: jonab@sdcrdcf.UUCP (Jonathan Biggar) Organization: System Development Corp. R+D, Santa Monica Lines: 28 Summary: In article <445@drutx.UUCP> dlo@drutx.UUCP (OlsonDL) writes: >Not true. Let's apply this to a different set of measurements. Length. >Suppose it was decided that the inch relative to the other length >measurements was overvalued. A decree is made that henceforth the inch >will be devalued to 15 inches to the foot. That means that the rate >will then also be 45 to a yard, 79200 to a mile, 0.4921 to a cm, etc. > >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. 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. 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. Jon Biggar {allegra,burdvax,cbosgd,hplabs,ihnp4,sdccsu3}!sdcrdcf!jonab