Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.1 6/24/83; site mmintl.UUCP
Path: utzoo!lsuc!watmath!clyde!cbosgd!ihnp4!qantel!lll-crg!seismo!cmcl2!philabs!pwa-b!mmintl!franka
From: franka@mmintl.UUCP (Frank Adams)
Newsgroups: net.politics
Subject: Re: The dollar and the trade deficit
Message-ID: <791@mmintl.UUCP>
Date: Thu, 14-Nov-85 21:51:51 EST
Article-I.D.: mmintl.791
Posted: Thu Nov 14 21:51:51 1985
Date-Received: Sun, 17-Nov-85 13:04:16 EST
References: <445@drutx.UUCP>
Reply-To: franka@mmintl.UUCP (Frank Adams)
Organization: Multimate International, E. Hartford, CT
Lines: 30


In article <445@drutx.UUCP> dlo@drutx.UUCP (OlsonDL) writes:
>From: franka@mmintl.UUCP (Frank Adams)
>>In article <368@drutx.UUCP> dlo@drutx.UUCP (OlsonDL) writes:
>>No.  The reason people say the dollar is overvalued is precisely because
>>the ratio of the prices of goods in the U.S. and in other countries does
>>not match the exchange rates.  Devaluing the dollar means changing the
>>exchange rates, not changing its value against everything.
>
>Not true.  Let's apply this to a different set of measurements.  Length.
>[Long analogy deleted]

Devaluing the dollar *means* changing it's exchange rate *against other
currencies*.  It does not mean changing it's value against other goods.
As long as we are only looking at dollars and yen, it is exactly as accurate
to talk about decreasing the value of the dollar and increasing the value
of the yen.  When you note that you also have to increase the value of
the pound, the franc, the mark, ..., relative to the dollar, it becomes
much easier to simply talk of devaluing the dollar.

As for being overvalued -- this is where your analogy with length breaks
down.  The cost of a Toyota in Japan, in yen, times the exchange rate
between dollars and yen, does not equal the cost of the Toyota in the
U.S.  (Even after you take shipping costs and tariffs into account.)
This sort of thing can't happen with lengths; it can with monetary value,
because there are barriers to trade.

Frank Adams                           ihpn4!philabs!pwa-b!mmintl!franka
Multimate International    52 Oakland Ave North    E. Hartford, CT 06108