A currency war is in progress. Central banks are inflating. This lowers the value of their currency.
Then other central banks inflate. “We will win the war of currency debasement!”
Who wins? Exporters.
Who loses? Consumers.
When a nation’s currency increases in value compared to others, its consumers can buy foreign goods cheaper. This is maybe 20% of all goods. Maybe less.
This creates losses for a few inefficient domestic producers. They call for bailouts. Tariffs are bailouts. Import quotas are bailouts. A debased currency is a bailout.
The central bank does not have to inflate, but it usually does. This reduces the international value of the currency. Exporters then sell more goods abroad, taking them away from domestic consumers, who lose out.
If you want foreigners to buy the goods you want to buy, then call for a currency war. Tell Obama to tell the Federal Reserve to inflate. “I want fewer goods and more expensive goods! Tell Bernanke to crank up the printing presses!”
All over the world, exporters are crying for central bank inflation. They don’t like a strong currency.
How many votes do exporters have? In Congress, lots. That’s what PACs are all about. Votes.
Do you trust the free market? Or do you trust Congress?
Do you trust the free market? Or do you Trust Bernanke?
If you favor tariffs, you trust Congress. If you favor a weaker dollar, you trust Bernanke.
If you favor tariffs but oppose dollar debasement, you are confused. Lots of people are confused.