Well, it has a lot to do with your job -- whether you have one, and how much you get paid for it. Do I have your attention?
The value of the dollar, relative to other currencies, determines whether or not American workers can be competitive in global production, without sacrificing their wage rates.
Forget all the hocus-pocus you read -- there's no law of nature or economics why American workers can't play the global trade game and still have premium wages.
How is this accomplished, you may be asking.
Simple: our elected representatives force the Fed to start buying treasury bonds and notes on the open market. Convert a big chunk of the national debt into cold, circulating cash -- "monetize" it, as the wonks say.
Anytime it chooses, Congress has the power to remake the dollar, from the present weapon of mass job destruction, to a tool of mass job creation -- just by ordering its creature, the Federal Reserve Bank, to lower the dollar till we're at full employment.
The Federal Reserve Bank works for us -- not the other way around, though if you read the business pages you wouldn't think so. As the sovereigns of the Fed, we just have to use its powerful offices to lower the exchange rate of the dollar in the interests of American workers.
What? Run the Fed for the benefit of ordinary working people, not the American transnational corporations? What a concept.
The corporations want a "strong" dollar -- that is, an overvalued dollar -- because that allows them to buy foreign resources and labor on the cheap and shoot products back at us here in the States at a low price and a high profit. Quite a trick, huh?
Trouble is, the trick's on us. The result is that they export our jobs, cut our wages, and -- not least by any means -- undercut our bargaining power.
In one industry after another, over the last 35 years, the overvalued dollar has proven fatal to domestic production -- and to domestic wage levels and employment opportunities at the same time.
Caution: the full employment dollar can't be worked out between us, the Euros and the Japanese. The really serious problem is the systematic fault line that sets all the "advanced" economies -- call them the "North" -- at one level, and all the "emerging" economies -- the "South", of course -- at another, far lower level. It's not just the dollar: there's a huge overvaluation of all the North's currencies.
But if you look at the headlines you'd blame some single emerging, "Southern" currencies instead. Look at all the op-edniks screaming
Raise the yuan!
Raise the yuan!
Raise the yuan!
-- as if the yuan were too low, not the dollar too high.
Of course if it were just a matter of these two currencies, there's no problem; it's just semantics -- too high, too low, the relation is purely relative. But when you step back and look at the whole system, you see the North pack up here, and way down below, the South pack.
Now every once in a while, like Milton's Satan, a currency will make the chaotic flight up to join the Northerners. Most Satan-like in its dreadful majesty was the Japanese yen's flight up between 1970 and 1995. It took some swoops and soars, but the yen is no longer emerging; it done emerged. If you have a long memory, you'll recall the headlines screaming raise the yen, raise the yen, just as they're screaming about the Chinese yuan nowadays -- because the Japanese were doing then what the Chinese are doing now, namely building their export economy at the expense of American workers, with the very enthusiastic help of American multinational corporations.
And the yuan's turn will come; but then the rupee will take its place as the great menace. These one-at-a-time promotions to the first-class currency club won't make any difference, as long as there's a dungeon full of grossly undervalued currencies to keep those labor and commodity costs down, so Wal-Mart can sell you a TV really cheap and still make a walloping profit. Which might sound good until you realize it means cutting your wages, benefits and job opportunities too.
--Wang