By John Tamny
Politicians and economists incapable of understanding how very simple economic growth is frequently call for devalued money as an expression of their eternal confusion. Full of the cruelly incorrect belief that a devalued currency is the path to easy exports, they regularly cheer for a falling dollar.
Never explained by two professions that seemingly compete to see which can do the most damage to our well being is why they don’t recommend that struggling businesses simply lower their prices. Indeed, if high prices are truly the source of weak sales for some, it would make a lot more sense for the rest of us if sagging corporations would just cut their prices.
It would because an economy is merely a collection of individuals. This cannot be stressed enough. And as individuals we seek dollars in return for our toil. Never explained by economists or politicians is why every individual in the economy must suffer reduced earnings as a way of allegedly propping up the few who would supposedly benefit from dollar earnings that can be exchanged for fewer things.
Worse is how the rest of us suffer in a bigger, yet at the same time micro sense. Readers of this column can probably recite this on their own so much has it been written over the years, but there are no companies and no jobs without investment first. Investment is the certain driver of prosperous economic advances, and investors are buying dollars in the future when they commit their dollars of the present to new and existing ideas.
The obvious problem with devaluation allegedly meant to aid the few is that it eviscerates the paychecks of everyone, while at the same time serving as a barrier to higher pay in the future. Higher pay springs from productivity enhancements that are always and everywhere the result of investment. So when investment logically slows down thanks to devaluation, the economic prospects of everyone dim.