[veyron]

You have to think about more than just the first-order effects. In general, a company will sell more products if they can sell for a lower price.

"Germans worked hard producing goods which they turn around and send to people outside Germany." <-- agreed

"This is a net loss for the Germans." <-- not so simple.

It is a net loss for Germans if you presume that they would sell the same number of goods with a stronger currency. However, that is not how it works. If the currency were stronger, they would actually export less, and as a whole would be worse off.

Let's take Mercedes-Benz cars as an example. Daimler pegs a price in Euros (the home currency) and the US price is driven by the euro price (plus some adjustments, but those are small relative to the product price). If the euro is weakened relative to the dollar, then they can sell cars at a lower price for US consumers. In the US market, then, they would sell even more cars. MB actually cut the price a bit for the E class lineup due to this effect.

As another example, consider China. If China's currency were allowed to appreciate against the dollar, then chinese goods would cost more to the US customers, making US-produced goods more appealing. In the extreme, if the dollar was severely weakened (for example, if the fed printed a ton of money without a similar action by china), then US products would actually be cheaper than the corresponding Chinese products.

[yummyfajitas]

It is a net loss for Germans if you presume that they would sell the same number of goods with a stronger currency.

No, it's a net loss for the Germans because they don't get to enjoy the product of their labor.

Consider your Mercedes example. Some Germans work very hard building this car, and do they get to enjoy driving this car? No. They put it on a boat and send it to the US. In return they receive some colored pieces of paper which they can't buy very much with.

A strong currency means your citizens have access to many goods and services worldwide. The USD is strong relative to the INR - that means I could buy all the dosas I wanted without caring about the price. In contrast, the strong GBP meant that I had to think twice before buying a sandwich in London.

[veyron]

You are forgetting the law of demand here: http://en.wikipedia.org/wiki/Law_of_demand

[yummyfajitas]

The law of demand is only relevant if you are discussing the balance sheets of exporting businesses, which for some reason you seem insistent on doing.

I'm discussing the balance sheets of consumers. Maybe I'm just crazy, but I care more about consumers than I do about Mercedes-Benz Inc.

[veyron]

Ok take a step back.

Suppose that mercedes benz is only able to sell half as many cars as normal. What will happen? Will they keep the same number of employees? If the US is any example, the answer is clearly no. And once families lose their incomes, they have less income to deal with.

If you presuppose that they magically earned the same number of euros without concern for the demand, then yes. However, that's not how it works. You have to look at Mercedes Benz and other companies because they are the ones who are paying most of the consumers.

Put simply, a consumer with no income in a world with a stronger Euro is worse off than a consumer with an income in a world with a weaker Euro (something is better than nothing :)

[yummyfajitas]

You seem to wish to invoke second order effects only while saying "what's good for Mercedes is good for Germany".

Consider the second order effects of a stronger currency. Germans can now purchase big screen TVs, food and non-German cars for less money than before. They still have money left over which can be spent on personal trainers, pedicures, restaurant meals, etc. Or conversely, they can work fewer hours.

In this world, Germans have the same number of Mercedes-Benz cars as before, and they also consume more restaurant meals and leisure.