Keynesian Mercantilism In Action?

LvMIC:

In the New York Times “Economix” blog, Binyamin Appelbaum writes (in reference to the U.S.):

Foreign buyers purchased more than $2 trillion in goods and services, the first time exports have topped that threshold. And those exports accounted for almost 14 percent of gross domestic product, the largest share since at least 1929.

Source: Bureau of Economic Analysis

The reason for this jump in exports?

The value of the dollar has declined, so that foreigners save money when they buy American. Businesses, struggling to find customers here, are focusing on foreign sales. And a boom in commodity prices, which has raised the price of life for most Americans, has produced a windfall for those who trade in commodities.

Now has the dollar really seen that much of a decline relative to other industrialized competitors which has in turn served as a boon to exporters?  Take a look at some dollar exchange ratios with major economic players such as Canada, Japan, the Eurozone, and Sweden:






From the above charts, it’s clear the Federal Reserve’s multiple engagements of quantitative easing and dollar debasement have succeeded in lowering the dollar’s value in terms of other major competitive currencies (China of course has an active currency peg whereas it keeps the yuan undervalued compared to the dollar).  With financial crisis hitting in late 2008, the dollar saw a boost in terms of investors looking for a save haven.  It has since seen a downward trajectory albeit few bumps along the road.



Orthodox Keynesiansim suggests that inflation is the correct remedy for downturns as it empowers exporters whose goods are cheaper in foreign markets.  As Paul Krugman wrote last May:

First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed.

But of course this came at the expense of a 3% annual increase in the Consumer Price Index, an almost 10% annual increase in gasoline prices, and a 4.7% increase in food prices according to the Bureau of Labor Statistics.  Funny how Krugman claims to care for the poor yet advocates for policies that disproportionately affect them on a negative basis.

But as Henry Hazlitt points out, inflation isn’t all that it’s cracked up to be:

An inflation is initiated or continued in the belief that it will benefit debtors at the expense of creditors, or exporters at the expense of importers, or workers at the expense of employers, or farmers at the expense of city dwellers, or the old at the expense of the young, or this generation at the expense of the next. But what is certain is that everybody cannot get rich at the expense of everybody else. There is no magic in paper money.

Inflation through government decree is nothing more than glorified mercantilism on the part of politicians looking to buy votes and campaign donations from bankers and favored industries.  Nothing better brings rounds of dimwitted applause from ignorant votes than speaking on the importance of “manufacturing” or “boosting exports.”  Inflation impoverishes the public which thinks it’s getting a free lunch.  Even the manufacturing worker who takes comfort in a briefly secure job potentially pays for it with every gallon of gas or loaf of bread he buys.

If John M. Keynes endeavored at duping the public into thinking that economic cures spring froth from the printing press, consider him a success.  Meanwhile, the dollar devaluation seen over the past three years will inevitably hit a cliff of no return where inflation will take off and lead to more misallocations of resources and distortions and thus paving the way for another bust.
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Also of note, had an article at the American Thinker today entitled "How China Transformed Its Economy."  It is a reiteration of a previous post of mine.