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The Status of TARP
by
Craig G. Ferguson
Pennies Foolish,
and Pound Wise?
Sounds
Backward ~ Well It Is
deLyn Alumbaugh,
Cocalico Democrats President
For generations Great Britain has had a stronger currency than the
United States. Many Americans traveling to parts of Great Britain,
including myself, have asked ourselves how could a much smaller
economy in a much smaller country have such a overwhelmingly stronger
money value? When converting dollars into pounds, while the rates have
varied greatly over the years, you get very few pounds for your
dollars.
Here are some reasons why.
There are a number of elements that affect the foreign exchange rate,
the first one, and most important, is the demand and supply of
currency. A strong currency is not connected to the size of an
economy or the size of the country. A strong currency grows from how
much a country imports and exports.
The government of a country can manipulate the exchange rate in favor
of their country quite easily. By controlling imports and exports,
using tariff restrictions, having trade agreements that favor their
country, quotas and other tax reductions or subsides countries can
have a favorable exchange rate and a strong economy. In other words,
the Dollar could be strong.
America imports much more than it exports which means that Americans
require more foreign currency to buy goods from abroad. Therefore
demand for foreign currency rises and the price of other currencies
increases compared to the dollar. This is the main factor that weakens
the dollar compared to the British pound.
It just so happens that historically, wealthier nations were able to
export more than poorer nations so they had stronger currencies.
However, due to ever-increasing globalization, the relationship
between a strong economy and a strong currency has disappeared.
In summary, GDP is a misleading figure if you are looking to explain
exchange rates. In reality, a huge number of factors affect exchange
rates like imports, exports, interest rates, economic stability,
foreign investment, economic growth, and inflation.
Great Britain’s government, as well as other nations, supported their
steel industry while ours was failing to compete on the world market.
Taxes on imports were made high to make U.S. steel less attractive.
China controls how much is imported and at what tariffs. Other
countries cannot compete without a level playing field. China’s
monetary system is therefore manipulated by the Chinese in such a way
as to defy the logical outcomes of a high value on their currency
based on their strong export economy. In America we call it “Cooking
the books”.
Their currency should go higher as the British pound has by the
correlation between their imports and exports. But, the Chinese
government manipulates their currency, purposely keeping it down to
make the cost of their products more attractive than America’s and
other nations.
I have always been in favor of a global economy with free trade
between nations. That is not what has developed in the last forty
years. And it has gotten much worse in the last five years.
Therefore I propose a new strategy for the American government and the
American corporations that I spent the last forty years against. I
propose government-supported assistance to corporations competing on
the global market. I support the American government giving the
greatest amount of monies to the corporations that compete, or are
willing to compete with the countries in the world who are the worst
offenders of an open, fair trade market. This corporate support could
include subsidized wages for employees of those corporations to lower
the amount of the company’s payroll costs as well as tax incentives
and tax breaks. Give the corporations money to pay the employees
directly and hire more employees as production and sale increase.
China is the number one offender so America needs to tax their imports
the most. They have been doing the same to us for years.
Sadly, we have allowed China to own most of our debt. This gives China
a terrible amount of leverage over what I have proposed. Serious
consequences could befall America if the collective economists,
academia, and bipartisanship politics did not take place. This
reversal of our economic philosophy in America would probably become
the greatest attempted endeavor in American history. This project
would take years to develop and mold.
I can only hope that the plans have already stated by our government
in secret, but I very much doubt it. One of the key factors with any
revolutionary strategically political change is bipartisanship and we
don’t have it.
Argue with my idea. Shoot holes in it from an economic standpoint.
But, I would be hard pressed to find a person in America right now
that argue that bipartisanship exists in America at this time.
Do we need to change our governmental structure to a democracy based
on a coalition government like the one Great Britain has? I don’t
know. What I do know is that their political parties in power do have
to compromise and work together in order to get anything done. Great
Britain is still very much a democracy. And little Great Britain has a
much stronger economy than we do.
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