The dollar in your pocket isn't being devalued!

I wonder if Gordon Brown is nervously watching the financial news from across the pond. The demise of MG Rover is small beer compared with the relegation of Ford and General Motors to junk bond status. I can think of several explanations for these events and they apply to the UK as much as to the US:

(1) The widespread trashing of the education system by politicians that has resulted in pinko-victimological-media studies being considered superior to engineering.

(2) Runaway legislation that has made it almost impossible to actually run a business unless you enjoy dressing in a striped uniform.

(3) Agreeing to pension and benefit packages that are unsustainable in the long run (especially when such schemes are mugged by the aforementioned G Brown and his ilk).

How many of you remember the 1970s? Back then you may recall that the Heath/Wilson/Callaghan regimes hit on the brilliant ploy of devaluing the pound to increase exports and reduce imports. (Of course, the pound in your pocket wasn't being devalued!) The boring old Swiss and Germans kept their currencies strong and, er, prospered. You see, cutting one's prices isn't usually a satisfactory policy. What is needed is to address points (1), (2) and (3) above.

All of these thoughts went through my head when I read this in the FT at lunchtime today:

US carmakers are using growing congressional anger over the weak Chinese renminbi to boost pressure on Japan and South Korea to revalue their currencies as well, a move they hope could ease competitive pressures on the beleaguered US industry.

Forty-seven members of Congress, including 35 Republicans, told President George W. Bush in a letter on Friday that the administration should target China and Japan, complaining that “Japan continues to verbally intervene in the market”. Representative Mike Rogers, a Republican from the car-producing state of Michigan, spearheaded the letter.

Good grief: why not just bring back Jimmy Carter?

The congressmen are dancing to the tune of the wonderfully named Coalition for a Sound Dollar.

These guys don't mean sound as in gold-backed. No, they mean sound as in weak. The idea is that this sound (weak) dollar would benefit US manufacturers, and it might, but at the expense of importers. Think of Wal-Mart prices going up overnight by 20%, not to mention the contents of the tanks of all those inefficient gas-guzzlers from Detroit.

This policy didn't work in the seventies and it won't work now. And the "Coalition for a Sound Dollar" would be a worthy creation of Orwell himself.