Monday, June 04, 2007
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Not buying it

I was sure I blogged about this earlier, but I googled it and I apparently haven't. But even if I had, I'm posting this one.

I'm not buying the concept that a lower foreign exchange rate will kill the exporters or hurt overseas-based workers. Call me a simpleton in economics, but I have this simple notion that a lower exchange rate will benefit everyone, just as a higher one hurts all of us.

It's like the law that says two objects cannot occupy the same space at the same time. One truth should yield to another (unless you believe in the second rule in the Cutthroat Manifesto, "Truth is relative, pick the one that works.").

When exporters say that a lower exchange rate hurts their profitability because the value of their goods decreases, they conveniently forget to mention that the cost of their production likewise decreases, as a benefit of the same exchange rate. So my theory is, everything balances out for these "suffering" exporters.

When overseas-based workers say a lower exchange rate hurts them because they get less pesos for their foreign currency, they also conveniently forget to mention the increased purchasing power of the peso they exchange their currency for. So my theory is, again, everything balances out for these "suffering" workers.

To me, it's as simple as that. Unless an economics person can explain it to me differently. Anyone?

Something to think about for the day.... hmmmmmm.

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