What would happen if the value of the dollar were lowered?
A new report by the Center for Economic and Policy Research (CEPR) demonstrates that a reduction of the value of the dollar could potentially correct America's large trade deficit in the United States.
“Any serious discussion of U.S. competitiveness has to begin with the value of the dollar,” said Dean Baker, author of the report and a co-director at CEPR. “This is the single most important factor in determining the relative cost of U.S. goods against goods produced elsewhere.”
Baker's report, “The Necessity of a Lower Dollar and the Route There,” illustrates what sectors of the economy would expand under a scenario in which the United States had a lower trade deficit.
The report also suggests ways to lower the dollar. Baker explains:
“A common assertion is that the United States cannot really affect the value of the dollar,” Baker continued. “However, the main obstacles keeping the U.S. government lowering the dollar are in fact, policy-based.”
In his report, Baker predicts that a lower dollar could lead to an increase in output by the U.S. manufacturing sector of more than 40 percent, resulting in the creation of millions of new manufacturing jobs.
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