The above Sinking Currency, Sinking Country is a recent article of Mr. Buchanan; a respectful experienced political pundit with conservative inclinations who has championed and popularized an economic theme with sensitive political implications. His theme is that trade agreements such as NAFTA, WTO, and favorite nation status hurt domestic labor and manufacturing interest; that the selling of U.S. debt instruments jeopardize America’s sovereignty endangering our nation’s children with insolvency and that in the present the plunging value of U.S. dollars to foreign currencies will encourage other than American investors to purchase the vital infrastructure of this nation on the cheap.
A Global Market
By William Robert Barber
Also, please read my recent related postingbelow:
China as a Trading Partner
I take the position that the ratio of the U.S. dollar to other currencies is of insignificant material interest to the vital economic welfare of the United States.
Mr. Buchanan’s comment that the dollar has plummeted in value because America has been living beyond her means by borrowing $2 billion a day from foreign nations to sustain the American Imperium is a bold face misunderstanding of the ‘real world.’ The debtor-creditor relationship that America enjoys is for three pragmatic reasons: Firstly, America’s military is not only the world’s most efficient but the only superpower military that has world-wide distribution providing surety and direct protection of international assets. Secondly, America is the only nation on earth where the rule of law applies fairly and evenly; in other words, foreign investors (including nation states) will have vigorous in their interest proficient legal representation. Thirdly, America is the largest most voluminous consumer purchasing nation that has ever existed; all manufacturing nations want to export their goods to the American market.
Just name a few, China, Japan, Korea, and Mexico export their goods to the United States; they will always be paid in U.S. dollars; they in turn, instead of banking in their local currency bank their money into U.S. debt, equity, and infrastructure; they understand the sensibility of investing in their largest consumer’s facilities.
Mr. Buchanan continues his misunderstanding of inter-nation relationship by sighting the “massive trade deficits” within the last couple of decades; such an analysis is another glowing instance of just plain wrong headed thinking. The so called current account deficit or trade imbalance has strong meritorious benefits; for example, because of its purchasing power and intense enterprising competition the American consumer enjoys the world’s lowest retail prices; in fact, the American reseller of foreign made products makes more money on resell than the original manufacturer. The reseller makes additional money on parts, service, financing and insuring the foreign made products; plus, for public traded resellers that earn a profit such is reflected in dividends and or share price appreciation. By the way this profit making is taxable income in America.
My view is that China, Japan, Korea and Mexico are in practical terms the manufacturing industrial park sector of Los Angeles; the exception is that, America does not absorb the pollution and other collateral liabilities of production. Nevertheless, America enjoys the benefit of taxing the goods as they travel down the chain of distribution all the while the consumer receives the lowest possible retail price.
Mr. Buchanan continues his message by noting that in 2006, U.S. trade deficit hit $764 billion; the net outflow of cash from foreign investments within the US which he includes foreign aid (for some reason) hit $857 billion equaling 6.5 percent of GNP; thereby, demonstrating that such deficits are unsustainable and will lead to a continuum of dollar decline.
This perspective is just nonsensical; a throw back to William Jennings Bryan of the 1890’s or to the isolationists of post WWI. The market is global. American companies while benefiting the shareholders of their native country, operate as domestic companies in foreign lands, contributing to the GNP of their host country is a tangible guarantee of world wide distribution; trade is no longer national but global in scope.
Mr. Buchanan is concerned about U.S. security and sovereignty interest. A cheap dollar to market encourages purchase of American tangibles and such is a security issue in the sense that if foreign interest purchases U.S. property and other assets America might be at strategic risk. Well, let walk though that gauntlet of risk to America and Americans; if China or Russia purchased a large section of U.S. infrastructure and in any real fashion militarily threatened U.S. interest America would nationalize their assets and confiscate all real or personal property. I say having China or Russia invested in America is an excellent surety bond; a sort of continuing guarantee of civility.
Mr. Buchanan does lament the woes of U.S. tourist and Americans serving abroad; but, I would rather not respond to such an incidental concern besides American troops have PX and commissary benefits abroad and where none exist there is cash supplemental.
I do believe America has real issues and concerns; all of America’s financial woes are rectified by decrease federal spending and satisfying the portentous loom of Social Security and Medicare benefits. The answer to all governmental providence issues are less taxes, less governance, and start billing nation states for the stationing of our armed forces and the guaranteeing of their assets.