In recent days, we have read numerous articles about a possible agreement between the US administration and its main trading partners to devalue the US dollar. It has been named “The Mar-A-Lago Accord”, a concept inspired by the Plaza Accord of 1985, which aimed to devalue the US dollar to address trade imbalances. That plan failed.
The objective, according to the financial media, would be to weaken the US dollar, boost US export competitiveness, and rebalance global trade. Another proposal involves restructuring US debt by swapping existing obligations for longer-term bonds, such as 100-year Treasury bonds, to ease fiscal pressures. However, this would be a dangerous and potentially counterproductive idea.
The Mar-A-Lago Accord concept starts from two wrong premises, which are to believe that US exports are not large enough due to a strong currency and that debt is too high because of a robust US dollar. Both are simply incorrect.
Devaluating the dollar, or in other words, beggaring our neighbors, is not really an option for a strong economy. Beggaring our neighbors was one of the factors that lead to the Great Depression and Roosevelt heavily beggared our neighbors with the devaluation of the price of gold in dollars. You can see from the history books what good that did us then and would probably do for us this time, too. A weak currency does not make a strong economy, does it?