" devaluation makes our industry more internationally competitive."

Devaluation is always a detriment to the economy. Sure, it makes exports more competitive but that is a good by-product to a bad outcome. We export to pay for imports. A devaluation means you need to export more to pay for the same amount of imports. Its effectively taking a pay cut and then cheering that it makes you more employable.

Nations should always...always.. try to have a strong currency, not adopt policies that make a weak currency inevitable.

"Inflation does have adverse consequences, but it's relatively easy to halt by raising taxes or cutting government spending. "

Well this is just fantasy-land thinking. Really, imagine a situation where the dollar is falling, real income is falling, inflation is rising. Do you really think that a politician in that situation is going to successfully propose, let alone implement a tax rise and/or cut government spending. We can't even do that in relative good times. What chance in growing bad times.

The more likely response, and this has been seen time and again throughout history, is to double down on unfinanced spending via the printing press. And the downward spiral takes off.

Your notion that "governments using that money to create real work that benefits people and businesses is sustainable and desirable" is equally fanciful. If government get the chance to buy votes while not being held to fiscal rectitude, they'll spend it without concern for outcomes eg NBN, pink batts.

mhaze,
"Devaluation is always a detriment to the economy"
No it isn't; it's the result of a detriment to the economy, but it in turn results in increased production. I don't dispute it's a bad outcome; but as I said, it's the penalty for failure not the cause of failure.

"Nations should always...always.. try to have a strong currency,"
RUBBISH!
All other things being equal, a strong currency would be better than a weak one. But all other things are not equal, and sometimes having a weaker currency is the least bad option. Greece would be in a much better situation today if it had stuck with its own weak currency rather than joining the strong European one. And China would never have become the world's leading manufacturer if it had kept its currency strong.

"not adopt policies that make a weak currency inevitable."
We have to make a distinction between short term and long term strength. In the long term, the best strategy for increasing the currency value is to make the nation more productive and more efficient, and that approach is what I advocate.

If you instead try to keep the currency strong, it will cause businesses to fail and production to fall. The currency will end up far weaker than if you hadn't tried to keep it strong.

"Well this is just fantasy-land thinking"
No, it's economic reality and it's politically plausible. Governments like to portray themselves as good economic managers.

:The more likely response, and this has been seen time and again throughout history, is to double down on unfinanced spending via the printing press. And the downward spiral takes off"
Those are not the circumstances in which that has been done.

" If government get the chance to buy votes while not being held to fiscal rectitude, they'll spend it without concern for outcomes eg NBN, pink batts."
The NBN, if done properly with FTTP, would have been a wise and productive use of government money, boosting Australia's prosperity for many decades into the future. And the problem with Pink Batts wasn't economics.

And the problem with Pink Batts wasn't economics.
Aidan,
Agee, that was Labor. But, that does by no means mean that the Coalition is doing any better in other areas. Welfare is vital for those unfortunate who can not cope with the crap that life, other people & Governments throw at them.
It is criminal to give monetary aid to people who already have the best of both worlds but because some insipid policy makers & just as insipid bureaudroids money is withheld from the needy & given to the greedy. That is deflationary. Taking work away from your own & giving it to other countries is deflationary. Printing extra money due to mismanaging is deflationary, overpaying the non-productive is deflationary & on goes the list.
Anyone who wants to kill welfare should be made to depend on it first. Now that would deflate the Public service to an economically viable level.

No, individual, the problem was safety. But in economic terms the outcome was better than doing nothing and keeping people unemployed.

> Printing extra money due to mismanaging is deflationary
Everyone else recognises it as inflationary. So what exactly is it you think "deflationary" means?

"I don't dispute [devaluation is] a bad outcome; but as I said, it's the penalty for failure not the cause of failure."

Yes its the penalty for the failure of spending beyond the national means ie merrily printing money.

Your 'policy' is to spending our 'unlimited' credit on projects which may or may not pay off on the basis that if they don't pay off we'll 'merely' suffer the penalty of a weaker currency and a lower standard of living. The idea that we can recklessly bet the future on the good judgement of government and special interests is insanity itself.

Sure, Greece's devaluation was necessary and the best of a bunch of bad options. But the Hellenes were forced to make these decisions because they followed the policies you advocate. That's my point.

Perhaps a different analogy....its the same as someone saying they'll have unprotected anal sex because, worse comes to worse, drugs now mean AIDS isn't a death sentence.

" the best strategy for increasing the currency value is to make the nation more productive and more efficient, and that approach is what I advocate."

Yes, make the nation more productive. But the policy you advocate is one that has been shown time and again to do the opposite. It impoverishes the nation and destroys productivity.

One thing I still don't understand about the USSR is how it got to that situation. They used to be interested in efficiency, but they obviously weren't by the end. So why did they become so indifferent? What prevented those factory managers making better use of their workforce?"

I don't think their main concern was ever efficiency except in those areas where the power of the party was at stake ie the army and the KGB/NKVD. Its said that most of the leaders since Yeltsin are ex-KGB because that was the only organisation where merit mattered.

As far back as the 1920's we can see that efficency ran second to power and control. For example, pre-war Russia was a net exporter of grain. But because the peasant class needed to be bought to heal, the Party introduced collectivisation which increased their control but destroyed the agriculture sector. They remained net grain importers throughout the Communist era - one of the reasons I was there.

Efficency was not the main concern of the managers. Their success signals were very different. Profit, our means of determining efficency, wasn't measured or measurable. But reporting on targets met was the measure. For a manager, staffing levels meant more prestige. Managers of 100 people had higher status than those managing 50.

The authorities were aware of this which is why these problems never applied to the armed forces etc. But elsewhere, efficency and quality of output just weren't the priority and as far as I could tell, never was.