According to the Economic Policy Institute, a Washington think tank supported by organized labor, the answer to generating up to 6 million more jobs is as simple as ending global currency manipulation. But not in the sense of ramping USDJPY or AUDUSD at key market inflection points which mostly benefits such FX-rigging chatrooms as “the Cartel”, no: they are thinking more big picture, in the “central bank manipulation sense.”
The report says that “several foreign countries devalue their currencies to make their products cheaper, making it difficult for U.S. manufacturers to compete, the report said.” In essence what the group suggests is that the US currency is overvalued relative to the rest of the world, and that by “realigning exchange rates, U.S. trade deficits would be reduced by up to $500 billion per year by 2015. Such a move would increase U.S. gross domestic product by up to $720 billion per year and create up to 5.8 million jobs, the report said.” Said otherwise: stop foreign currency manipulation, but allow and encourage the US to keep pushing its own currency even lower.
This is all wonderful, however it appears the unions or their mouthpiece thinktank have never heard of the Fed, whose job over the past 5 years has been, among other things, to keep the dollar weaker than it would normally be. If anything, the rest of the world is merely mimicking the policies of the Fed, which have been adopted first by the Bank of England, next the Bank of Japan, and soon, maybe, the European Central Bank. We can’t wait to see how much screaming and yelling will ensue if and when Mario Draghi does indeed engage in unsterilized QE, and sends the Euro plunging (now that there is supposedly no fear of redenomination) and by implication, the USD soaring making exports of US goods and services to Europe even more prohibitive. And don’t tell labor unions about the recent collapse in the Chinese Yuan: that would really put their noses out of joint.
Because while superficially they are absolutely correct, a weaker dollar would on paper boost US exports and potentially generate a few million extra jobs (assuming there are no robots who can fill those positions at a fraction of the cost and none of the wages), the flip side is that it would crush all export-reliant emerging economies, resulting in many more millions of job losses in countries that unlike the US, have no welfare-state safety nets, and thus send the risk of global revolutions through the roof, which in turn would jeopardize the most precious thing of all: the global stock markets, currently at all time highs, courtesy of precisely the kind of currency manipulation that all the central banks – not just the Fed – are engaging in.
The story, as reported by the LA Times, continues as expected:
Realigning exchange rates could also prompt increased tax revenue and reduce federal budget deficits by up to $266 billion in 2015, the EPI said.
“Congress and the administration have a new focus on manufacturing because they understand its value to the American economy,” said Scott Paul, president of the Alliance for American Manufacturing. “But they are ignoring the most important job-creating opportunity for manufacturing: stopping currency manipulation. The key to an economic recovery, especially in California, is restoring manufacturing job growth. To shore up those jobs, Washington should launch a national manufacturing strategy that starts with passing bipartisan legislation to end currency manipulation.”
A bipartisan majority in the Senate and the House has signed letters urging the Obama administration to address “foreign currency manipulation” in the talks with Japan and the other nations.
And there has been an outcry in congressional and business circles, particularly the auto industry, over Japan’s weakened currency. The yen has fallen about 25% against the dollar in the last year, helping boost that country’s exports and profits by making its goods cheaper in foreign markets.
“Currency manipulation can negate or greatly reduce the benefits of a free-trade agreement and may have a devastating impact on American companies and workers,” said the Senate letter, signed by 60 members and led by Lindsey Graham (R-S.C.) and Debbie Stabenow (D-Mich.).
What was unsaid is that it was currency manipulation by others that is what is at stake here. As for the Fed: why, give us more. But just pray that the pent up inflation doesn’t finally crack the Fed’s dam door, and floor all these workers who are demanding more of the same, because then they will really see what the side effects of manipulated, artificial global markets truly is.
And finally, who cares about trade anyway? Recall what the latest IMF “forecast” (and its previous iterations) have to say about world trade (hint – not much):
A far better option for all the disgruntled workers engaging in such an old normal concept as actually creating exportable goods, is to get an E-trade account, request a few grand from Obama (call it populist bailout venture capital), and bet it all on Tesla. After all, there is just one “trickling down” wealth effect left in the room.