“In spite of the strength of the U.S. economy, the steady growth of Gross Domestic Product and  robust economic indicators, there is reason to be concerned about the relative instability of the U.S. dollar.

 

Inflation is a frightening word to economists and financial types the world over – and it should be worrisome for families, too.  The good or bad expectations about what direction inflation is heading, and therefore the amount of goods one U.S. dollar can buy, is a substantial force in financial markets.

 

Betting on what direction inflation will move governs the interest rates on homes, cars, credit cards, and savings accounts.  Inflation directly affects the strength of the U.S. dollar when compared to other currencies.  And when the rate of inflation in the prices of goods and services outpaces the rate of growth in real wages, the family budget can afford less and less, no matter how much we are earning at our jobs.

 

In 1989 Argentina suffered one of the worst recorded instances of hyperinflation in history, when the rate of inflation reached 20,000 percent between March of 1989 and March of 1990.  A long history of inflationary problems climaxed that year, causing Argentina to default on its debt and destroying the value of its currency.  Inflation had catastrophic effects on Gross Domestic Product, and the net exports from Argentina to the rest of the world fell by 21 percent.

 

Here in America, we are fortunate to not experience inflation to this extreme degree.  The Consumer Price Index, a measure of the cost of a market basket of the same goods and services from one year to the next, usually hovers between one and three percent in growth each year.  Yet there are warning signs we must heed in order to maintain our nation’s fiscally health.

 

One day last week, the dollar dropped sharply in value against other world currencies.  The stock market stumbled a little bit that day, but little else changed.  I barely noticed the news story, but at about the same time, I definitely noticed that gasoline prices in Southern Missouri climbed about 10 cents on the gallon.  Of course, a weak dollar buys less oil on the world market than a strong one. 

 

Looking deeper, we find a growing lopsided balance of trade between the U.S. and foreign countries.  We import much more than we export – through the first nine months of this year, the American trade deficit with the rest of the world is a staggering $586.2 billion.  This trend puts us on track to break last year’s record trade deficit of $716.7 billion. 

 

Even more disturbing is that the bulk of this deficit belongs to China – more than $150 billion.  Independent studies suggest that America has lost over 1.5 million job opportunities to China since 1989.  China has grown into America’s single-largest competitor in the global energy market, and China’s central bank holds a tremendous amount of U.S. currency.  All these signals in the American economy could point to a dangerous long-term trend. 

 

Considering only the abstract numbers of the U.S. economy, we are living in good times.  The economy is still growing at a decent pace and national unemployment is relatively low.  Still, in rural America, we must do better to keep and add jobs as we continue to be the country’s breadbasket and home to a highly-skilled workforce.  This is a strong mandate for the coming year. 

 

Restoring our balance of trade and protecting U.S. markets, especially agricultural markets, must be a priority if America is to continue to grow and prosper.  The opportunity to correct our trade imbalance and protect American jobs must not pass us by.

 

I have no doubt that we in rural America can accomplish this turnaround by buying American, working hard to retain American jobs, and investing in economic development in our Southern Missouri communities.  Our efforts at home can help America catch a falling dollar.”