The Cobden Centre’s Jamie Whyte writes an excellent piece in this morning’s Wall Street Journal on the alleged economic merits of currency devaluation; he succinctly smashes the argument that currency devaluation is good for us. Here’s a quote:
When sterling devalues, British exporters benefit. They either receive more pounds in return for sales denominated in foreign currencies, or the foreign-currency price of their goods falls and they sell more. But this gain to those who sell to foreigners is offset by the loss to those who buy from foreigners, who must now pay higher prices. Currency devaluations effectively provide a subsidy for exporters funded by a tax on importers.
The Germans, under the Deutschmark, did not get rich by devaluing their currency, and neither did the Swiss with their Franc (in the happy days before the cantons started to let their federal government try to bounce them into the EU, by hook or by crook).
As Mr Whyte lays out, all of us working harder for no net general gain is a cost rather than a benefit. Unless of course, you happen to live on the export side of the equation, rather than the import side.
To read more, click here, which may get you one free view.
(Alas, any paywall problems require imagination or Google.)