12/03/2004: Thought for the Day:
Buried among [U.S. Treasury Secretary John] Snow's bromides was a massive contradiction about the dollar. The United States is in favor of a strong dollar, Snow said, because it's in favor of a strong dollar. Always has been. Always will. America is strong and so must its dollar be. But the United States, which favors free markets, also insists that the value of the dollar be set through competitive markets. In other words the United States wants a strong dollar in principle, but it also wants the dollar to weaken against the propped-up Chinese yuan, so that the trade gap narrows.
The market scoffed at Snow. As he spoke, the dollar plunged to a new record low against the euro. Snow's performance worsened during question time. When an audience member had the temerity to ask why Snow persisted in discussing the strong dollar policy while the greenback was plummeting, he simply responded "because it's our policy." Challenged again, he reiterated: "The policy is the policy."
Why do our officials bother to say that we're for a strong dollar, when we're plainly not? It has to do with our self-image--no country worth its salt openly says it wants its currency to be weak. But even economic policymakers as obtuse as Bush's should know by now that you can't make the dollar strong by talking about it. If a government is seriously interested in strengthening the path of the dollar, it can control spending and cut the deficit--policies this administration seems notably uninterested in.
--Daniel Gross [on Bush bAdministration monetary policy]
Len on 12.03.04 @ 08:01 AM CST