If it were not for this solid support by Japan, the world's biggest creditor country, the financial conditions of the United States, the world's largest debtor, would be rather precarious. In many parts of the world the U.S. dollar is greatly undervalued in terms of purchasing power. The dollar buys 30 percent to 50 percent less in Japan and Germany than it does here in the United States. Yet in this age of instant communication and capital mobility, it is not purchasing-power parity that determines exchange rates but capital profitability and opportunity. America is consuming too much while saving and investing far too little.
Protectionism makes for strange bedfellows.
It unites many petitioners for political favors and largess in a common cause against consumers and foreigners. Hans F. Sennholz Reprinted with permission from The Freeman, a publication of The Foundation for Economic Education, Inc., August 1995, Vol.