Nonetheless, regardless of what is happening in the world, the economy is still the engine that drives wealth. Employment maintains individuals’ ability to earn money allowing them the purchasing power to buy goods and services that make the saying, ‘ money makes the world go around, the reality of the lives we lead.

Is an economy solely measured by the strength of a nation’s currency or is it a detriment to its continued success? If we look at the largest economy in the world, the United States of America as an example, the USD is the benchmark of global trade.

In times of strength, the currency’s dominance provides greater purchasing power. If a product from another country is comparable to the function required, then the currency’s strength can be a benefit. An individual can purchase the imported product for less money than it would cost if produced locally.

A great example is vehicles. In the late 1980s and early 1990s, Japanese car manufacturers rose significantly in economic stature. The American car manufacturers provided massive employment and tax revenue yet market share eroded at an accelerated rate. Much of the ingenuity in the production of vehicles was taken without compensation from the Americans and perfected by the Japanese. A weaker Japanese Yen allowed Japan to export and flood the market with cheaper vehicles. These vehicles included many more features that were built-in rather than charged as extras. Dependability combined with perceived value made these vehicles a better alternative for price-sensitive consumers.

Tariffs became a useful tool to try and level the playing field yet it wasn’t enough. The USD strength vs the Japanese Yen (¥) still made the imports much more attractive. In late 1990 the Federal Reserve with guidance provided by the Administration forced the Japanese to open their markets to American vehicles by manipulating the valuation of the USD/JPY relationship from roughly 130¥/$ to below 70¥/$ (indications only for the example). It was like putting a flame underneath one’s foot and waiting for their reaction. Finally, there was capitulation and an agreement was reached.

Even though the American Economy is still considered number one in the world, The Chinese have grabbed the spotlight recently as the new kid on the block.  The currency manipulation and suppression of the Chinese Yuan have allowed the export of Chinese manufactured goods to now become the most dominant in the world. They have a reputation of thievery not honouring patents by pumping out products considered counterfeit, all in the name of profit.

If the cost of production is not a concern the products produced are cheaper, thus more profitable. Keep in mind, that this shift and proliferation of Chinese dominance have been allowed to flourish with a simple amendment to a global agreement. It was President Clinton, through the World Trade Organization (WTO), that single-handedly set the tone to destroy the Middle Class in America by allowing China to become a member.

In the agreement in 1999, China was considered a developing nation therefore their imports have only a 1% tariff applied.  Consequently, for developed nations, a 25% tariff is imposed if sending their products abroad to these developing countries. It was sold as a means of levelling the playing field. In fact, it was setting the table for the demise of the middle class. This proposal allowed large multinational corporations to shift their manufacturing facilities abroad without consequences. They no longer needed to pay higher wages for labour or provide benefits. The alternative was a plentiful labour force that worked for the proverbial bowl of rice with no benefits required.  Clearly, this agreement was made to accentuate profits for corporations, taking advantage of the poorest of the poor.

The strength of the USD allowed greater purchasing power by importing cheaper goods and filling the coffers of the exporting country with USD. This allowed the Chinese to invest abroad to diversify by creating revenue streams. Then they invested aggressively in resources to bring back to China to use in the production of finished manufactured goods. To this day, China maintains the status of a Developing Nation. It wasn’t until the Trump administration that the tariff issue had been re-addressed, now Biden wants to reverse all to bring down inflation? 

China is on the verge of eclipsing the Americans as the number one economy in the world. Their modernization has been incredible and easily achieved through an authoritarian dictatorship. It is the ruling class that controls all. The weaker currency has allowed much more than economic dominance, it has given the Chinese the means to develop a military that is comparable to any in the world. The perception of being the strongest isn’t always the true reality. It’s all about taking advantage of the opportunities and realizing weakness is strength in more ways than one.