Strong Currency

There is an automatic assumption that a strong currency (in particular against the USD) leads to a difficult exporting position because goods become ‘more expensive’ for other countries to buy, but – and certainly from an island perspective – our imports will generally get cheaper for dollar based commodities- so there are self balancing factors, borrowing also gets cheaper, although there is an asymmetry in Europe whereby only Germany seems to get that benefit.

Strong currency has often been the prevail of strong economies, buyers are naturally attracted to the currency and buy into it, for this reason the Venetian Ducat (a type of gold coin) was a standard in international markets for over 500 years from the late 13th century until the middle of the 19th century, this happened because the coin was never debased.

Debasement and re-minting were the metallurgical currency versions of monetarism today, if you wanted to increase the money supply you didn’t make a sanction to place more zero’s in somebody’s computer, instead you mixed lesser value metals with the coin of the realm.

The fact that the Euro is at $1.40 is not necessarily a sign of EU strength, it is rather showing that we are just not as profligate with the currency as the US is with the Dollar at present. The specific problem Ireland faces from an export perspective is getting cheap enough (bearing in mind that the powerhouses of export either have an artificially low exchange rate [China] or have managed to keep wages low[Germany]) to compete in areas where we can be strong.

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