The US would benefit from a weaker dollar as it would protect what remains of our manufacturing base and also act as an export subsidy. Currency valuation, and in particular currency manipulation, is equivalent to a tariff or an export subsidy depending on which side of it you are on. Yes people like to pretend that if something goes up in cost 20 percent because of currency change that is somehow normal but slap a 10 percent tariff on something and that is completely different.
tw8f969ae5b6f4|5 years ago
At equilibrium, a weaker or stronger dollar doesn't affect exports, it's just an exchange rate. What can affect exports is a weakening dollar.
In an inflationary disequilibrium, exports increase only insofar as foreign consumers are able to purchase domestic goods before those goods' prices have adjusted to inflation. In other words, exporters are unwittingly selling their goods for a lower price.
Absent inflation, exporters could have chosen to increase exports by intentionally lowering their prices. That they didn't suggests something about their marginal costs.
With inflation, the exporter has a similar benefit over its suppliers as the foreign consumer has over the exporter, namely buying goods with new money before prices have adjusted. As such, the exporter's suppliers are also unwittingly selling their goods for a lower price.
Whether this is beneficial depends on where one is positioned as new money propagates through the economy. Banks get it first, then to their borrowers, other financial institutions, and so on. The losers are those at the tail-end, who face higher costs but have not yet had their own prices bid up with new money: wage workers, those on a fixed income, etc.
The net effect of all this price manipulation is a wealth transfer from those who receive the new money later to those who receive it earlier.
> currency manipulation, is equivalent to a tariff or an export subsidy
While an export subsidy can also increase the quantity of exports, the larger economic impact of intentionally weakening the currency through inflation is very different.