Dollar devaluation and the working class

[Hannah Bell]

There are growing signs of a major shift in world currency alignments. Since March, the US dollar has steadily declined, depreciating by 13.3 percent on a trade-weighted basis. Last week the decline accelerated...Rather than warning of the implications of this erosion in the value of the world’s major trading and reserve currency, prominent financial publications and economic commentators are arguing that the trend should be welcomed...

These and similar commentaries evade the immense risks that would inevitably accompany a permanent devaluation of the dollar and dilution of its reserve currency status....What is certain is that the loss of the dollar’s status as the unchallenged world reserve currency has devastating implications for the American working class...

To allow the dollar to continue to fall is to acknowledge the reality of America’s decline and the necessity for world capitalism to find a new basis for growth. At the heart of such a global economic “rebalancing” is a fundamental restructuring of class relations within the United States.

The Bretton Woods framework gave the American bourgeoisie a huge advantage in managing social relations within the US. The US ruling class could utilize deficit spending and inflationary policies to make concessions to the demands of the working class because the world accepted the dollar regardless. Without that advantage, the US must adhere to onerous fiscal and monetary restraints, the burden of which is to be placed on the working class.

This process is already well underway. In the name of global economic rebalancing and reform at home, the Obama administration is seeking to cut the consumption of the working class, slash production costs and drive up US exports.

This amounts to subjecting American workers to the type of economic “shock therapy” that the US-dominated International Monetary Fund has prescribed for a host of indebted Third World countries over the past quarter century. Currency devaluation, accompanied by cuts in state expenditure for social services and the use of mass unemployment to drive down wages and increase exploitation—these are the methods that are now being employed against the American working class.

The process by which the US closed down its manufacturing facilities and farmed out production to cheap labor havens around the world—which produced the unsustainable reliance of the US on infusions of credit from surplus nations such as China and Japan—is to be reversed. Industry in the US is to be revived, but on the basis of the destruction of the wages, working conditions and living standards of the working class.

The US is to become a low-cost producer of goods for the world market. The American working class is to experience levels of exploitation which it hasn’t faced in a century. Its wages and living standards are to be brought more closely in line with those faced by the super-exploited workers of Asia...

http://www.wsws.org/articles/2009/oct2009/pers-o13.shtml

[paulsby]

1. many stock brokerages

fwiw, allow you to keep your account holdings in EURO vs. the dollar.

my brokerage does. this is a nice way to hedge your savings against dollar weakness.

i prefer to just trade forex, but it's an option.

and yes, plenty of working class people do have stock accounts.

[vadawg]

16. personally im not sure either way, i benefit from a low dollar in as much as my revenue stream from

outside the US gives me more dollars, but my wages here are less when compared to my foreign revenues, not sure which benefits me the most...

[Doremus]

21. "and yes, plenty of working class people do have stock accounts."

This reminded me of an interesting statistic I read last year:

The top 20% own 90% of all stocks.

The 10% the rest of us own are mostly in 401ks and retirement plans, I'd imagine.

[truedelphi]

2. When you realize that the NAFTA and other trade agreements were

Essentially a way to devalue American workers and exploit the average worker in developing nations to the tune of 2 billion dollars a year! then you realize this was inevitable.

Sooner or later the chickens come home to roost. Who is responsible for this? Well, obviously the Big Players at the top. But we tolerated the Clinton's NAFTA bill, even though we as workers should not have.

We allowed ourselves if protected by a rung or two up the ladder from worse off people, to console ourselves with the notion that at least we had a college education, and/or we knew how to program computers, or we were in an industry that could not be outsourced. (Or so we thought.)

But every twenty four months or so, a new group of workers was affected. If Americans had rallied back in the mid-eighties this would not have happened.

But as Pastor Niemoeller once wrote, "First they came for the Union leaders, but I was not a Union leader, and then they came for the Jews but I was not a Jew, and then they came for the dissidents but I was not a dissident, and then they came for the Catholics... etc

That could be re-written - First they outsourced the textile worker's jobs, but I was not a textile worker, then they came for the autoworkers' jobs, but I was not an auto worker, then they came for the customer service phone bank jobs et cetera.

[WVRICK13]

9. The Sad Facts

indicate we are a country that strives to serve only the wealthy and industrial concerns. The party doesn't make any difference, all politicians are shills for the industrial complex. The problem with this approach is that it is short sighted. When Bush gave the tax cuts I said if I was a CEO of a large industrial concern I would be alarmed since raiding the till at the expense of the majority of consumers will do two things. It will insure rapid immediate gains of wealth for the rich and a certain decline since working people will not have the cash to purchase goods in the long term. I was right. The same thing with allowing the fuel prices to spike before the evil duo left office. The end run may have won the 4th down but it lost the game. We somehow need to instill the importance of looking beyond the end of their noses to those in power. Forget what happens tomorrow, be concerned about what happens a year later and further into the future.

[truedelphi]

14. Yep and there have been some CEO types, like Bill Gates' dad and

Warren Buffett who have decried the tax cuts for the rich for the exact reasons that you state.

Throughout history, there have only been democracies in those parts of the world where there is a middle class.

[Selatius]

3. Well, the supremacy of the US Dollar could not last forever. Nothing lasts as far as empires.

The world is entering a multi-polar state once again, a world divided among several large world powers. The days where the US alone could claim to be the unchallenged leader are numbered, and they are rapidly running out.

If the US Dollar is no longer the world currency, the Dollar would be far less capable of absorbing deficit spending than in the past. The government would either have to raise taxes to pay for things, or it would have to cut spending on social programs to fall more in line with what the Dollar can tolerate as far as deficit spending. The most politically expedient solution would likely be some sort of middle-ground that represents a half-solution at best that won't address problems but also won't enrage the wealthy who dominate the discussion.

One thing is for sure: If any other country was as reckless with its spending as the US government has been over the last eight years, that country's economy would suffer heavy inflation.

We are entering a time when we, as a nation, must learn to live with less. If we cannot do that, we will end, and the US will disintegrate like the Soviet Union, bankrupted by its foolish foreign military adventures and gross mismanagement of its domestic economy.

[Greyhound]

4. Watch for proposals to split the USD into international and domestic

currencies to come up again. That is the ideal (if you are of the parasite class).

[Liberal_in_LA]

5. scary

[AdHocSolver]

6. The goal of devaluing the dollar to increase exports to reduce the trade deficit is stupid.

The goal should be to reduce cheap imports through tariffs and import quotas so that the majority of the goods that Americans purchase are made in America by other Americans.

The corporate ruling class is hell bent on reducing the American middle class into a class of serfs. Their actions will turn the world's economies into a twelfth century feudalism.

A global economy based on mass production of cheap, shoddy, throw-away-goods will use up finite, valuable resources and cause massive pollution of the planet. With destruction of the world's middle class, democratic societies will be reduced to autocratic banana republics consisting of a small, super rich upper class and a mass of suppressed working poor.

Eventually, an equilibrium will be reached. As resources are used up and supplies dwindle, the cost of everything will rise steeply, in spite of cheap labor costs, imposing a kind of conservation. Working people, who have long not been able to afford health care, will not be able to afford food. Famine and disease epidemics will occur as governments have lost the ability to raise revenue so that services such as providing safe, unpolluted water, and public health services to control diseases are eliminated.

All this economic chaos will come to pass so long as people subscribe to the total fiction embodied in the totally fabricated and meaningless terms such as "global economy" (it doesn't exist), "free trade" (it doesn't exist), and the fantasy that if we "save the stock market", the real economy will recover and prosperity will return (a nonsensical version of supply-side economics, trickle-down economics).

[HamdenRice]

7. WSWS is hardly a reliable source on currency

As you know, WSWS is a "front" organization of a corporate ceo of a printing/p.r. firm that services many of America's largest corporations.

Former members have said that it is a cult and that the "articles" are basically made up.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=6560399&mesg_id=6561071

[Name removed]

8. Deleted sub-thread

Sub-thread removed by moderator. Click here to review the message board rules.

[TexasObserver]

18. Indeed. It's a completely unreliable source, and I unrecommend any thread citing it.

Are you really surprised? Consider the source.

[Hubert Flottz]

10. The Plan, The Plan, Boss

Welcome To The "New World Order" Ein Volk, ein Reich, ein Fuhrer

[SpiralHawk]

12. "Too bad about you little people. Smirk." - Republicon Homelander Fatcats

"You noisy proles can just sit down and STFU. Have a nice day. Smirk. Sneer."

- Republicon Homelander FatCats

[Orwellian_Ghost]

11. K&R

[Blue Meany]

13. I don't agree with this analysis...

There are some who benefit from the inflated dollar and some who lose from it, but the working class has certainly not been benefiting from it. On the contrary, the the inflated dollar is one of the things that has made American labor, among the most productive in the world, uncompetitive in the global market. OTOH, a high dollar value has served to continue its use as a reserve currency, which makes it easy for the federal govt. to engage in deficit spending using overseas credit; this, in turn, frees up and pushes down the cost of credit for businesses and makes available credit for consumer spending.

If the dollar deflates, it makes foreign goods more expensive, thus encouraging the growth of American industries for both domestic and foreign consumption. Employment should then go up and, with fewer unemployed, there could be competition for labor. On the other hand, credit is likely to become much more tight, both for businesses and consumers, which would tend to curtail economic growth.

To me this issue boils down to this: would you rather be in an economy where you are likely to be employed but prices for consumer goods are higher or you would you rather be in an economy where you are likely to be unemployed buth the prices for consumer goods are low?

[AllentownJake]

17. You are leaving a critical piece out of your analysis

Oil.

When world production returns to normal levels, and America has a weakened dollar, the cost of fuel will sky rocket. This is awful on the working class for two reasons

1) Poor public transportation infrastructure
2) It eats away at your it will be cheaper to make things in America argument since we are an importer of the commodity.

[TexasObserver]

19. Well said. Your closing paragraph is dead on.

You wrote:

"To me this issue boils down to this: would you rather be in an economy where you are likely to be employed but prices for consumer goods are higher or you would you rather be in an economy where you are likely to be unemployed buth the prices for consumer goods are low?"

Workers need jobs.

The devalued dollar makes JOBS more likely.

[Orwellian_Ghost]

15. Bump

[Tierra_y_Libertad]

20. It's a way to compete. We will now have cheap labor to compete with their cheap labor.

It's a catch-22 for workers. Jobs with lower wages and benefits or no job.

And, it's already happening. With a vast labor pool of unemployed who are willing to work for less, corporations can pay less.

In effect, they're "leveling the playing field" by cutting the wages of American workers by doing so and introducing inflation that effectively cuts wages.

A brilliant plan! Alas, for the fall of American living standards.