Letter to the Editor - September 22, 2016
First U.S. Congressional District Candidate Cherny responds to letter writer
Six years ago I would have agreed with what Dr. Kraemer wrote in his letter to the editor of September 8th in response to my opinion piece entitled “Don’t believe scare tactics on National Debt”, which I wrote in response to Congressman Sanford’s “Penny Plan”. However, five years ago I started studying economics and found the growing number of modern monetary theorists coming out of the economics department at the University of Missouri, Kansas City, who are able to predict economic downturns and more importantly, are accurately explaining why everything happens in the economy.
Today, five years into my studies, I agree with Dr. Kraemer that it “seems” like we can use countries like Cuba, or even more scary examples like Venezuela, as case studies of what can happen when sovereign currencies are, as Dr. Kraemer said, “debased and devalued into oblivion.” However, a currency’s devaluation is an effect of poor economic mismanagement, not a cause of economic collapse.
Cuba suffered and Venezuela is suffering even worse today not because of currency devaluation but because of their limited national resources - farmable, extractable, human, and industrial resources. Without adequate national resources, both raw materials and products desired by citizens must be purchased from other countries. If you were selling a product or service to Venezuela, would you take Venezuelan Bolivars as payment or would you require payment in US dollars? Where do you suppose the Venezuelans buying your product would get those US dollars with which to pay you?
Fortunately for Venezuela, for the past few decades their oil exports have been sold in exchange for more than enough US dollars. Those US dollars have found their way into every level of the Venezuelan economy to pay for the foreign made products Venezuelans have increasingly wanted over the past few decades. Unfortunately for Venezuela, the recent collapse in the price of oil has greatly decreased the number of US dollars coming into the country. Even more unfortunately for the average Venezuelan, poor government economic management over the past few decades has made the entire country too dependent on imports for their daily survival. As happens with so many politicians, even in America, the focus was on winning the next election by giving people what they want NOW, not protecting the future for Venezuelan kids and grandkids. With an economy dependent on foreign goods for daily survival, but too little of the only currency accepted for payment for those goods - US dollars - people without that currency are struggling to survive today. To summarize, the value of the Venezuelan Bolivar has dropped not because too many Bolivars are in circulation, but because the weakness in the Venezuelan economy and government has been revealed and no one trusts the currency of a country with bad economic fundamentals.
Contrast all that with our position in America. The US has been in the enviable position of having nearly every resource we need to produce nearly every product we need and want, making our economy the strongest in the world. That economic strength, and some historic reasons, makes the US dollar the preferred international trading currency around the world as well as here in America. However, short-sighted American government economic policies, also driven by short sighted concerns about winning the next election by giving people what they want NOW and not protecting the future for our kids and grandkids, are bringing America dangerously close to Venezuela’s situation where we are relying too much on foreign imports for our daily lives since we’ve offshored so many of the jobs that used to make the products we all want. As with any country going through economic woes, the first effects are seen among the growing number of people barely surviving - the three quarters of us living paycheck-to-paycheck.
Money is the lubricant of the economic engine. Human needs are the fuel. Without enough money in the hands of the people with needs, the engine stops turning and the fuel lights off a populist fire like what we’ve seen this year. The French revolution and the guillotine illustrate how far a lack of economic lubricant can go.
America’s only problem is elected representatives who don’t understand sovereign currencies and therefore try to run our country like a short-term profit-making venture - elected representatives who think US dollars are the output, not the lubricant of the economic engine.
Dimitri Cherny
Candidate for SC 1st Congressional District
Democrat, Working Families and Green Party Candidate