Race to the Bottom

Major world economies are devaluing their currencies by printing and creating money in an attempt to stimulate their economies. Whether right or wrong, this “race to the bottom” has major implications for the world economy and our future. What is this race about? It’s about the value of our currency versus the rest of the […]

January 25, 2010

Major world economies are devaluing their currencies by printing and creating money in an attempt to stimulate their economies. Whether right or wrong, this “race to the bottom” has major implications for the world economy and our future. What is this race about? It’s about the value of our currency versus the rest of the world’s currencies and our government’s belief that the first one to the bottom wins. Why? Because if our currency is cheaper, then other countries can buy more of our exports which helps our economy, and the ensuing inflation caused by all this new money should also allow us to repay our debtors with less valuable dollars in the future.

How did we get here? Ten years ago, we, the American people, owed ourselves and the rest of the world about $5.7 trillion dollars. This is money we borrowed to finance a standard of living that was not possible based solely on what assets we had accumulated over 200 years. In the past ten years that number has grown 136% to over $13.5 trillion dollars. That’s around $44,000 per every man, woman, and child in this country. However, if you just count the taxpayers (and if you are reading this you are probably one in that lucky group), that number is more than $153,000 per tax-paying citizen. So how does one who owes so much reduce the real burden without paying it back? Simple – make what you owe worth less or worthless. If you could pay fifty cents on the dollar for what you owe simply by turning on a machine (in this case the U.S. Treasury printing press), wouldn’t you?

“Ten years ago, we, the American people, owed ourselves and the rest of the world about $5.7 trillion dollars.”

Well, that is exactly what our government has been doing. Not that we were alone; most countries have been content to slowly devalue their currencies as well.  However, Europe and other developed debtor countries have recently begun austerity programs that will slow the growth of their deficits while strengthening their currencies. Also China, after decades of keeping their currency below its market value, has now begun to strengthen the Yuan. So it looks like we may win the race to the bottom.

What are our options now? We could try to live within our means and have wages and products based on market conditions and economic reality. Or, we can continue to pour more dollars into the economy while at the same time raising taxes and taking incentives away from individuals and private companies trying to create jobs and grow their own wealth. Over the past 10 years, this strategy has resulted in the near elimination of private job creation, created unfunded pension and medical benefits, and inefficient government jobs that the free market cannot sustain.  In contrast, during the 80’s and 90’s we were able to create an average of 1.8 million jobs per year, never having two consecutive negative years of job creation. The stark difference in the past decade is negative job creation, resulting in fewer jobs today than we had in the year 2000.

“During the 80’s and 90’s we were able to create an average of 1.8 million jobs per year, never having two consecutive negative years of job creation.”

The good news is that this is not the end of the story. The strength and greatness of the United States of America lies not in its elected politicians nor its Wall Street executives, but in the hardworking, innovative minds and caring hearts of everyday Americans. Until we remember and refocus on what made this country the destination of the world’s hopeful and hardworking people, we will forever be searching for a path back to the freedom that created the greatest prosperity the world has ever known. I believe America’s exceptionalism will once again unleash the creative power of the individual, propelling our free market economy forward to shared prosperity and better days.

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