Making change for the dollar | TSLN.com

Making change for the dollar

This chart shows the relationship between the value of the dollar and the value of fat cattle.
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What do the owner of an East Coast manufacturing company and a midwestern cowboy have in common? Perhaps more than it seems – they both produce something they want to sell, and both businesses are sensitive to “similar” but often lower quality products displacing their own production.

The Coalition for a Prosperous America, who represents manufacturers, farmers, ranchers and laborers, supports legislation they believe would help improve profits for manufacturers, farmers and ranchers, which would, in turn, better the job opportunities and living conditions for much of America’s middle class.

The Competitive Dollar for Jobs and Prosperity Act (S. 2357) would help re-align the value of the U.S. dollar with currencies from around the globe, says CPA’s Vice Chairman, Brian O’ Shaughnessy.

“As a country, we’re importing cheap, subsidized goods and exporting jobs,” said O’Shaughnessy, the CEO of Revere Copper Products, a company that Paul Revere himself started and passed on to the generations after him.

Once an advocate of free trade, O’Shaughnessy says he has turned a corner. “Before I joined Revere, I worked for two multinational companies. I thought free trade was the way to world peace. I thought it was a wonderful thing, I didn’t realize it meant we were going to lose our middle class. When I joined Revere, I saw all of our customers disappearing. Then I woke up.”

The Competitive Dollar for Jobs and Prosperity Act (S. 2357) will require the Fed to manage the dollar exchange rate to achieve current account balance.

Probably the biggest business ally, not only of those countries competing with the United States, but also of the multinational corporations located around the world, is currency exchange rates, says O’Shaugnessy.

The manufacturer creates a hypothetical situation where a foreign producer creates an iPad or a leg of beef for *1,000 (the * represents the currency in any country outside of the US). If the currency exchange rate is 5 to 1, the product is worth $200 in US dollars, so if a US producer can create or grow the product for $150, he or she can make a profit.

“But then, let’s say that country – and this has nothing to do with labor or energy or interest rates or subsidies – manipulates the exchange rate to 8 to 1. That means the cost of that import in US dollars is now $125! You haven’t done anything differently but they have manipulated the exchange rate to the point that you are no longer competitive.”

While currently the federal government does not control the value of the U.S. dollar, O’Shaugnessy says that needs to change.

The US dollar is overvalued by 27 percent, said O’Shaugnessy, which sounds good, but is actually creating a challenging environment for manufacturers, farmers and ranchers. The high dollar facilitates the importation of highly subsidized goods, and the exportation of jobs, he said.

“When the value of the U.S. dollar is high, ag prices fall off,” he said, because US products are unaffordable to others around the globe and imported ag goods are that much cheaper in dollars.

Americans tend to think of a strong dollar as a good thing, he said. “What I’m saying is that the U.S. dollar is not ‘strong.’ It is over valued and noncompetitive. What we need for our family ranching, farming and domestic production companies, including mining, is a competitive currency.”

Since 2000, nearly 1/3 of the U.S. manufacturing facilities that were customers of Revere Copper have closed their doors, only to re-open them offshore, said O’Shaugnessy. His company, the nation’s largest supplier of architectural copper in the country, sells flat rolled copper products including sheets, strip, coils and busbar.

The facilities that have offshored production (set up shop outside of the country) tend to be owned by a multinational corporation with distribution channels in the U.S. Most of their new manufacturing plants can be found in China and Mexico, he says.

When a manufacturing company goes out of business in the United States, the local community suffers, he said. Aside from the employees losing their jobs, local mechanics, accountants, engineers and more feel the negative effects when people lose their jobs. “People say, ‘how does that affect me?’ Well, there are more people seeking jobs. There is someone else willing to do your job.”

When he became aware that many of his best customers were seeking labor outside of the country, Revere joined the National Association of Manufacturers. “I thought with their 12,000 members, and lobbyists in Washington DC, they would be the perfect ally to help stem this outsourcing of manufacturing facilities and jobs, and the decline of our middle class as those higher paid jobs move offshore.”

As an organization, however, the NAM wasn’t concerned. “It turned out that the members who paid most of the dues to fund the organization were multinational manufacturing companies and Wall Street investment bankers.”

Still, O’Shaughnessy secured a seat on the powerful organization’s Board of Directors, and worked to effect change.

He proposed a motion that NAM would support a bill being considered in Congress that would fight China’s manipulation of its currency.

“I got up before some of the most powerful CEOs in the US, and I suggested that some of them may want to recuse themselves from the vote, because those who import parts, components, subassemblies from China are going to be forced to choose between their company and their country.” O’Shaugnessy added that for those CEOs to make the choice between shareholder and stakeholder seemed next to impossible.

“They disagreed. They thought they could represent both and continue to outsource. They shot me down.”

“They” includes such big names as GM, Chrysler, Ford and GE, as well as big ag companies including Cargill and other food processors and multinational meatpackers, he said.

“And this was an awakening to me, when I realized what the multinationals were doing to manufacturing in this country they were also doing to family ranchers and farmers.”

And so, the Coalition for a Prosperous America was born.

And now the organization strongly urges the passage of the Competitive Dollar for Jobs and Prosperity Act.

In a scathing commentary, David Goldman argues that the bill, sponsored by Senators Tammy Baldwin (D-Wis.) and Josh Hawley (R-Mo.) would not help the U.S. economy, but would equate to inflation.

“We need to revive the animal spirits of American entrepreneurs and draw on the power of American innovation to leapfrog China. America needs grand national goals and a vision of its future that will inspire young people to study physics rather than accounting,” said Goldman in his argument against the bill.

Jeff Ferry, CPA Chief Economist responded to Goldman’s article, saying the bill is not intended to deal with currency manipulation, but rather currency misalignment, which is the result of individuals and companies around the world investing in US dollars because they don’t trust their own, less stable, domestic currencies.

“The dollar misalignment problem has increased since its recent low in 2014. At the Coalition for a Prosperous America, we estimate the dollar is overvalued today by 27 percent. The International Monetary Fund, by nature a more cautious organization, puts the range at 6 to 12 percent overvaluation. Whatever the exact figure you choose, the point is that an overvalued currency makes it harder for a nation’s exports to compete in world markets and easier for foreign imports to take share in its domestic market.”

O’Shaugnessy, who bought Revere Copper 30 years ago, just recently purchased a small ranch in New York state with his wife, Jackie Kent.

Revere Copper was started by Paul Revere, and remained with his family for two or three generations. The company has employed a member of the family in some capacity until about two months ago.

O’Shaugnessy grew up in Nevada and worked in the copper mining industry like his father before him.

Brian O’Shaugnessy loves the time spent on the ranch he recently purchased with his wife, who grew up on a dairy farm. Photo courtesy Brian O’Shaugnessy
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He believes that Wall Street bankers and multinational corporations control the U.S. Treasury Department as well as the U.S. Department of Agriculture. “You get executives of companies like Cargill working in big ag positions – that’s a huge problem for family farmers, because they are representing multinational corporations, not independent producers.”

“These corporations and the countries where they have outsourced production decry US protectionism and any suggestion that Free Trade be hindered. The truth is that they outsourced to the most protectionist locations in the world and need the USA to keep its borders open to their imports with Free Trade. That model is the model to maximize profits to enhance shareholder value,” he said.

Many Americans believe in Free Trade not realizing that the growth of our economy since the time of Paul Revere was based on tariffs and duties on imports. This policy was established by Alexander Hamilton and followed up until World War II. Following that war, the USA supported the rebuilding of the world’s economy not only through the Marshall Plan but also by allowing foreign production to grow through Free Trade with open borders of the USA to imports, said O’Shaugnessy.

“Every other major economy in the world today uses tariffs and currency exchange rate management to grow their economies at the expense of the US economy. This needs to stop and the introduction of the The Competitive Dollar for Jobs and Prosperity Act is a big step in the right direction for our country,” he said.

O’Shaugnessy presented information about currency misalignment and much more at the R-CALF USA convention in Deadwood, South Dakota, Aug. 16.