Tuesday, November 10, 2009

Dollar, Euro, Exports

Dean Baker criticizes The Wall Street Journal in his blog, The American Prospect here for its “economic incompetence” in discussing the Obama administration’s effort to boost the economy with increased exports and never once mention the value of the dollar as a determining factor.

“The value of the dollar is the main determinant of the price of U.S. exports in other countries. If the dollar falls in value, the price of U.S. exports declines measured in the currency of other countries.”

Since Baker suggests that the WSJ be nominated for a “Pulitzer for journalistic incompetence” due to that omission, I suggest that most European economists and all of the European political class share this Pulitzer award for never mentioning that the value of the Euro vis-à-vis the dollar, and the implicit value of the “notional” French Franc, Lira, and Peseta vis-à-vis the notional Deutsche Mark are responsible for substantial export difficulties and for the resulting contraction in activity.

Congratulations to the laureates.

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