A Strong US dollar was traditionally the back bone of US macro-economic thinking. The idea was that if we controlled and monitored the currency ensuring that trading on international markets only took place in the dollar denominations the dollar would stay strong, oil would flow and we would be in a position to enforce our will politically speaking on our allies and enemies alike.
The flaw in all of this occurred in 1971 when at the Bretton Woods summit we decoupled the dollar from the gold standard and allowed it to "float" on a currency market. With this float came a transition from a production economy to a service and later to an information economy. The conventional thinking was that this would boost the dollar, ensure our standing in the world, control our enemies and could be used to manage "affairs" from domestic to foreign in a uniform way.
Manifestations of this theory are present in enterprise resource software packages that grind out inefficiencies in the market place and bear things down to the essentials. But what are the essentials? These have been coupled with another movement toward increased regulation and increased control and centralized planning of monetary policy.
Of course critics argue that the fallacy in this is that it does not match the needs of the real economy. That is the human or household micro-economy; the current system merely replicates a system popular on Wall Street that resembles something like Amway.
In my discussion that the decline in the dollar is not good for our nation I meet with this argument:
In general, lowering barriers to free trade is important to protecting domestic manufacturing and our economic health. While many fear that free trade leads to a loss of U.S. manufacturing jobs, global trade may be an important protection for domestic manufacturers from current national economic woes. For example, a growing number of U.S. manufacturers today are making up for a slump in domestic sales by expanding sales overseas, and some forecasters predict that the export boom will allow the United States to cut its huge trade deficit, a deficit that must be reduced and soon.
And while I agree with all of this in principle, I also know that needs of the human economy at home cannot be met through expanding markets abroad, they are met as they always have been through local domestic production. This productive capacity is an important component of local economies though it contradicts the current trend. If we look at at from a historical vantage point it was the system I am discussing that allowed the Roman Republic to last for 500 years. It was the Chicago school system that installed Pinochet. Which one would you prefer?
Later I will provide examples from the developing world to show how this micro-economic development occurs, relying on the trends from Chile and Argentina which experienced a similar set of conditions and deregulations to ours and contrast them with the case of the EU where domestic manufacturing, finance and trade are used to leverage the national interest of individual countries in a "global marketplace" no country in the EU has been more successful in this effort than France and as Steve has pointed out as a consequence of this economic strategy, the French have been able to wield power in political affairs that far outstrips their modest economic standing.
Americans could choose that option. Of course, there is also an alternative, that is increase methods and means of production, and markets at home and abroad combining what was best in France and linking it to a uniquely American system of commerce that relies on local manufacture and strict limits on government involvement in private affairs except to protect workers and ensure parity in global market place where the WTO has often weighted rules in our favor creating resentment and outright hostility toward the dollar.
Nash's system of economy is similar to the local capitalism one sees at work in China and works for community interest on one level, national interest on another and projects global influence on a third level. But we would only be able to achieve this methodology once we get rid of current and dogmatically trained batch of economic planners who have very little understanding of "economy" outside of how the stock market preforms. One need not have a strong dollar to do so, one needs controls on the liquidity of the dollar to do so, but it helps to have a strong dollar tied to our control of commodities and it makes us a denomination driven asset power more formidable than the EU. It also integrates Americans from Tierra Del Fuego to Newfoundland without so much violence and eventually integrates this system into and with the rest of the world. To achieve this our foreign policies must reflect ones that are non-violent and yet global, engaged and not removed the from the reality of a global marketplace of currency, commodities and ideas.
This system is one that ensures we will survive and thrive in the next century. Alvin Toffler once called this the Third Wave. It is here now. Will we adapt to it in time?