The blurb on today's NYT mailshot concerning Paul Krugman's
Op-Ed "Standard Operating Procedure" says:
<<<<
Misleading the public has been a consistent strategy for the Bush team on
issues from tax policy to the war in Iraq
>>>>
While at the G8 meeting in Evian, Bush said that his administration
believed in a strong dollar. Personally, I am no more inclined to believe
him on this issue as any other because it is much in Bush's interest that
the dollar should go down with the consequent effect in boosting American
exports and employment in time for the next presidential election. Bush
needs a really vigorous economy by this time next year at the
latest.
To this end, Bush's original Treasury Secretary, O'Neill, and his current
one, Snow, have both been talking the dollar down over the past twelve
months -- O'Neill clumsily, Snow with much more finesse. Of course,
currencies don't necessarily don't do what government spokemen tell them
but the 'butterfly effect' of such opinions, even if given informally,
can be considerable when conditions are already poised for change -- such
as the American trade deficit, currently the largest in
history.
Actually, it is quite unprecedented for a president or prime minister to
mention exchange rates, and one wonders why Bush mentioned it at all.
Perhaps he was feeling defensive in a crowd of European leaders. After
all, most of western Europe (except the UK at present) are scared stiff
of the dollar depreciating any further, making the euro stronger and
Europe's exports more expensive.
The dollar has been quiescent for the last few days. If it remains so for
a few days longer it's my view that Snow will once again say something
about the dollar that will have the effect of unsettling it again. (I
confidentally expected him to say something during the past week-end but
I'd forgotten that the world's eyes were otherwise on St Petersburg and
Evian.)
Keith Hudson
Keith Hudson, 6 Upper Camden Place, Bath, England
