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Page 72
much to us, we, nothing to them. Suppose we pay them in paper dollars. What would the Japanese exporters do with the dollars? They cannot eat them, wear them, or live in them. If they were willing simply to hold them, then the printing industryprinting the dollar billswould be a magnificent export industry. Its output would enable us all to have the good things of life provided nearly free by the Japanese.
But, of course, Japanese exporters would not want to hold the dollars. They would want to sell them for yen. By assumption, there is nothing they can buy for a dollar that they cannot buy for less than the 1,000 yen that a dollar will by assumption exchange for. This is equally true for other Japanese. Why then would any holder of yen give up 1,000 yen for a dollar that will buy less in goods than the 1,000 yen will? No one would. In order for the Japanese exporter to exchange his dollars for yen, he would have to offer to take fewer yenthe price of the dollar in terms of the yen would have to be less than 1, 000, or of the yen in terms of the dollar more than I mill. But at 500 yen to the dollar Japanese goods are twice as expensive to Americans as before; American goods half as expensive to the Japanese. The Japanese will no longer be able to undersell American producers on all items.
Where will the price of the yen in terms of dollars settle? At whatever level is necessary to assure that all exporters who desire to do so can sell the dollars they get for the goods they export to America to importers who use them to buy goods in America. To speak loosely, at whatever level is necessary to assure that the value of U.S. exports (in dollars) is equal to the value of U.S. imports (again in dollars). Loosely, because a precise statement would have to take into account capital transactions, gifts, and so on. But these do not alter the central principle.
It will be noted that this discussion says nothing about the level of living of the Japanese worker or the American worker. These are irrelevant. If the Japanese worker has a lower standard of living than the American, it is because he is less productive on the average than the American, given the training he has, the amount of capital and land and so on that he has to work with. If the American worker is, let us say, on the aver-

 
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