According to Paul Krugman’s piece, Making Things in America the answer seems to be not much.

First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed.

Yet the Federal Reserve finds itself under intense pressure from the right to make the dollar stronger, not weaker. A few months ago, Paul Ryan, the chairman of the House Budget Committee, berated Ben Bernanke for failing to tighten monetary policy, declaring: “There is nothing more insidious that a country can do to its citizens than debase its currency.” If Mr. Bernanke had given in to that kind of pressure, manufacturing would have continued its relentless decline.

This follows the thesis that I have been presenting here on this blog that in order for our manufacturing industries to become competitive again, our costs have to start to balance out with the competing countries.

I can think of  two ways to make this happen.

One way is to let the value of the dollar fall.  That will cut into everyone’s wealth that is denominated in US dollars.  However, the decline in wealth will be relative to people in other countries and will be little noticed by people here.  The workers and the super rich will all share in the decline.

Another way is to drastically lower the wages in this country in terms of a strong dollar whose value is not declining.  This will be rapidly be noticed by the workers in this country as their debts will stay at fixed amounts, while their resources to pay those debts will decline.  This seems to have the nice effect for the rich in that the money owed to them is not losing purchasing power.  As with the housing bubble, they seem to forget that it makes no difference if the money owed to you stays constant when the people who owe it to you cannot pay it back.  I cannot understand how people who are supposed to be capitalists have such little grasp of this elementary principle of capitalism.