Cure for a Sinking Dollar? A New Name.
Sunday, December 3, 2006; Page F02; Washington Post
If it were not bad enough that the aura of American military has been diminished by the war in Iraq, now that flagship of American economic power -- the USS Dollar -- is sinking.
On Friday, the dollar slipped to its lowest level in 20 months against the euro after a report showed that U.S. manufacturing contracted in November for the first time in more than three years. The dollar also hit a 14-year low against the British pound.
This might actually be good news for the economy. After all, the "strength" of the dollar isn't an inherent virtue. The exchange rate is a balancing mechanism that will help correct our enormous trade deficit and bring U.S. prices in line with prices overseas. Some sectors or companies may be hurt by a lower dollar, but others will benefit by selling more goods abroad.
That didn't stop the usual suspects on the pundit circuit and in the policy world from rounding up the usual quotes. Treasury Secretary and Rear Adm. Henry M. Paulson Jr. made the customary salute to a strong dollar -- even as he announced a voyage to Beijing to jawbone the Chinese government into taking steps that would mean a weaker dollar against the yuan.
There must be a specially programmed machine at the Treasury that concocts statements for such occasions. On May 10, then-Treasury Secretary John W. Snow said: "Let me state at the outset: A strong dollar is in our nation's interest, and currency values should be determined in open and competitive markets in response to underlying economic fundamentals."
Paulson used the same script Sept. 21: "I would say to you that -- and I think I've been pretty clear on this -- a strong dollar is in our nation's interest. And our currency values are always determined -- and I believe they should be determined -- in a fair, competitive marketplace based upon underlying economic fundamentals."
There is only one real reason to talk like this: to convince the Chinese, Saudis and Russians who buy U.S. government debt that their multitrillion-dollar stashes are safe. That way we keep the petrodollars -- or sneaker dollars -- flowing here instead of Europe so that instead of saving our money, we can keep spending it on Christmas gifts.
In reality, the Bush administration, like the Clinton administration, hasn't done much of substance to strengthen the dollar. Treasury officials, Democrat and Republican, have moved toward the laissez-faire monetary policy that economists like.
What we have then is a problem of vocabulary. How can any American official be against "strength" and in favor of a "weak" dollar? Maybe they should kick the steroids and talk about a "competitive dollar." Who could be against that?
Sunday, December 3, 2006; Page F02; Washington Post
If it were not bad enough that the aura of American military has been diminished by the war in Iraq, now that flagship of American economic power -- the USS Dollar -- is sinking.
On Friday, the dollar slipped to its lowest level in 20 months against the euro after a report showed that U.S. manufacturing contracted in November for the first time in more than three years. The dollar also hit a 14-year low against the British pound.
This might actually be good news for the economy. After all, the "strength" of the dollar isn't an inherent virtue. The exchange rate is a balancing mechanism that will help correct our enormous trade deficit and bring U.S. prices in line with prices overseas. Some sectors or companies may be hurt by a lower dollar, but others will benefit by selling more goods abroad.
That didn't stop the usual suspects on the pundit circuit and in the policy world from rounding up the usual quotes. Treasury Secretary and Rear Adm. Henry M. Paulson Jr. made the customary salute to a strong dollar -- even as he announced a voyage to Beijing to jawbone the Chinese government into taking steps that would mean a weaker dollar against the yuan.
There must be a specially programmed machine at the Treasury that concocts statements for such occasions. On May 10, then-Treasury Secretary John W. Snow said: "Let me state at the outset: A strong dollar is in our nation's interest, and currency values should be determined in open and competitive markets in response to underlying economic fundamentals."
Paulson used the same script Sept. 21: "I would say to you that -- and I think I've been pretty clear on this -- a strong dollar is in our nation's interest. And our currency values are always determined -- and I believe they should be determined -- in a fair, competitive marketplace based upon underlying economic fundamentals."
There is only one real reason to talk like this: to convince the Chinese, Saudis and Russians who buy U.S. government debt that their multitrillion-dollar stashes are safe. That way we keep the petrodollars -- or sneaker dollars -- flowing here instead of Europe so that instead of saving our money, we can keep spending it on Christmas gifts.
In reality, the Bush administration, like the Clinton administration, hasn't done much of substance to strengthen the dollar. Treasury officials, Democrat and Republican, have moved toward the laissez-faire monetary policy that economists like.
What we have then is a problem of vocabulary. How can any American official be against "strength" and in favor of a "weak" dollar? Maybe they should kick the steroids and talk about a "competitive dollar." Who could be against that?
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