Saturday, May 13, 2017

Wall Street Journal - Volatile Money Hurts Growth & Trade

In a new article published in the Wall Street Journal. James Kemp and Sean Rushton of the Kemp Foundation ask why there is not more concern by policy makers about volatile currency exchange rates. They point to the recent Kemp Foundation forum on this very topic (which we covered here) as evidence that the issue needs more attention. Below are some excerpts from the article and then a few added comments.

 "It’s the most important price in the world: How many U.S. dollars does it take to buy one euro? The exchange rate between the two largest world currencies affects profits and financial conditions around the globe—and it has been dangerously unstable for more than a decade. Since 2007, the dollar-euro rate has swung up or down by about 20% no fewer than eight times. Exchange rates that gyrate this much produce crisis and weak economic growth, while undermining the case for free trade.

Yet virtually no one in Washington—not the big think tanks or the business lobby or the tea party or the International Monetary Fund—is talking about it. That’s crazy. The seesawing dollar-euro rate disrupts trade, reduces investment, and damages the bread-and-butter interests of working people on both sides of the Atlantic."

. . . . . 

"A stable dollar-euro rate would provide the world with a strong economic anchor. The end goal should be a unified international currency system that is consistent with the principles of free trade and would facilitate optimal capital flows.

For supporters of limited government, this is essential. Exchange rate swings are an enormous source of financial volatility, which leads to calls for greater regulation, bailouts and bigger government. Steve Hanke, a professor at Johns Hopkins University and co-chairman of the forum, put it well when he called financial volatility “the Achilles’ heel of capitalism.” Mr. Hanke’s research shows that all of the 100 largest American corporations cited volatility in exchange rates as a challenge in their 2016 annual reports."

. . . . . 

My added comments: I understand the statement in the article above "Yet virtually no one in Washington -- is talking about it". When you spend as much time as we do here trying to research these issues and the prospects for major monetary system change, one conclusion jumps out at you over time. It is very hard to get most people to understand why these issues matter to the average person and why we all need to learn more about them. Unfortunately, it seems to take a major crisis to get people to focus on these issues and problems. Sadly, by the time something like that does happen, it is likely too late to become educated on the problems or on ideas to try and solve the problems.

We are doing our best here to try and help encourage people to learn more and to understand that these issues are important and can directly impact their daily lives even if they are somewhat complex for the average person sometimes. We will continue to try and provide the best information we can here from the best sources we can find in an effort to try and assist anyone who is interested in these issues. Reader questions are welcome any time at:

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