Dear Sirs:
Will the madness ever stop?Will the editors and reporters at the Wall Street Journal ever critique monetary debasement honestly?The Japanese are thrilled that they have driven their yen to new lows against the dollar (Yen’s Tumble Brightens Earnings Prospects in Japan), and the European Central Bank is concerned about the euro’s strength (Threats Cloud Euro’s Flight).Both believe that prosperity lies in making exports cheap through monetary debasement. This is a horrible myth.No nation can make another pay for its own recovery.On the contrary, monetary debasement makes exports cheap through internal subsidies.The central bank gives more local currency to the foreign importer.The exporter benefits from buying replacement factors of production before the additional money raises the cost of living for all members of society. After the new money works it way through the economy, raising the cost of replacement resources, the exporter is right back in the same position; i.e., he can sell more goods only through another round of monetary debasement.The nation’s wealth has been transferred to the foreign importer, using the exporter as the intermediary.Monetary debasement to spur exports is no substitute for the hard job of lowering costs of production through productivity improvements (that are the result of savings and investment), reduced regulations, lower taxes, and better management. Patrick Barron
