Obama is talking a talk that sounds great on the surface but can ultimately lead to a massive loss of jobs in America rather than creating jobs. Bernanke is helping to speed along this economically devastating Administrative policy with equally rash monetary policy. I understand where Obama is coming from. He wants to create jobs in America. The thinking by the Fed is that by the Fed devaluing the USD (US Dollar), American goods will become more affordable to China and other nations. Sounds great! On paper…
However, it is a clear indication that Obama and Bernanke don’t understand the United States’ position in the world economy. An import economy does create jobs, contrary to what the Obama Administration makes it sound like. Yes, manufacturing jobs have been lost in America. However, importing still creates jobs. A lot of jobs for that matter, and higher paying jobs! The major key to being a strong importing nation is having a strong currency. The stronger the USD, the greater the ability to import products from other countries.
The Federal Reserve, under Bernanke, has weakened the USD significantly over the least several years. The Obama administration is trying to create more manufacturing jobs in America on the backs of the import industry. Yes, import jobs will be lost as the USD continues to decline, but the result isn’t going to be layoffs, it’s going to be import businesses going bankrupt.
Now, this isn’t a too big to fail claim about the import industry. This is a claim that America doesn’t have the ability to produce all the same products that China does. What has taken decades to build in China is not going to happen overnight in America. Additionally, the typical Chinese worker makes a fraction of what an American worker would make for the same product. So, either American’s are going to have to take lower paying jobs or the cost of products are going to skyrocket!
Some argue that China is manipulating the RMB (Renminbi/Yuan) so that it’s export business continues to thrive at the detriment of America. There may be some validity to the claim the claim of currency manipulation, but it isn’t much unlike Bernanke’s QE and QE2, which are just fancy terms for devaluing the dollar. That is what Bernanke has done. He was devalued the USD. You can call it Quantitative Easing all you want, but a rose by any other name…
There is a large trade deficit between America and China, but it’s not across the board. For instance, where are Chinese airliners getting their planes? Where are they getting their MRI equipment? The advanced technology comes from America. A weaker dollar will lead to lower real profits by Boeing, GE, and other leading American businesses. Here’s the reality of a weaker dollar. So what if your widget sells for $500 when that $500 is only the equivalent to $300 from just 10 years ago!
A weak currency policy is a terrible monetary policy for America. An Administrative policy supporting exports is a good one when the focus is on exports that those other countries can’t make. Is the US really going to compete with the Chinese with making knock off MP3 players and cell phones that get thrown away every 2 years? Those will only be high paying jobs because the value of the USD will have declined to much to make America competitive with China that we’ll have gotten to the status of a 3rd world economy.
I’m being dramatic for a reason. The world economy has been centered on a strong America and strong USD for decades. The result of a devalued USD and trade restrictions with countries we’ve been importing from for decades is not what anyone in America is going to want. Enormous amounts of wealth has made its way to other nations like China, Mexico, and others. Those countries are seeing improvements in their quality of life. The US should continue to lead the world economy with a strong USD position and strong import position. The whole idea behind imports and exports is that countries export what they do/make best and import what other countries do/make best. The US still does and makes many products, services, and technology better than any other country.
The Solution: The Obama Administration should focus on leading technology industries (instead of rehashing dying industries in America) and creating greater tax incentives to grow those industries (just like Clinton did with the Internet)! Congress should act as well to impeach Bernanke. It is fully within the power of Congress to do so. Further, the Obama Administration can take action in the Treasury Department by not selling bonds to The Federal Reserve. These actions would send a sound message to the world economy that the United States is standing for a strong USD, strong US consumption, and leading the world economy out of this depression with swift action. These actions would take about 9 months to catapult the US economy and world economy out of this depression. The message to the rest of the world is that America wants to continue to *lead* the global economy rather than play a reactive role in the global economy.