"There is nothing more insidious that a government can do to its people than to debase its currency," Ryan said."Name me a nation in history that has prospered by devaluing its currency."Now, this challenge has been taken on by economists using several examples. But I wanted to help Representative Ryan with a more recent example, so as to give him more contemporary evidence.
Besides, this example is a nation that is near and dear to my heart: Israel.
During the recent financial crisis, Stanley Fischer, head of the Bank of Israel (a mensch if there ever was one) responded to the faltering Israeli economy by engaging in currency devaluation. Specifically, Fischer sold Israeli Shekels and bought US Dollars, to the tune of 10% of Israeli GDP.
That is, the Bank of Israel (unlike the Federal Reserve) engaged in direct devaluation of it's money, the very thing Representative Ryan says has never been successful. So how did Israel turn out?
Israel grew at 4.7% in the second quarter of 2010
Inflation was at 1.8%
Unemployment dropped to 6.2%
Israel was admitted into the OECD
Fischer was selected central bank governor of the year by Euromoney magazine
(Source: http://www.jpost.com/International/Article.aspx?id=190878)
Add to this the fact that Israel was ranked as "the most durable in the face of the crises" in 2010 by the IMD's World Competitiveness Ranking which also ranked Israel at 17th out of 58 of the worlds most economically developed countries, rising 7 ranks from 2009. The Bank of Israel also received high marks.
There you are. A nation that pursued a direct policy of devaluing its currency and prospered.
Does that clear things up Mr. Ryan?
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