Letter to FT printed today from Tom Berger Deputy Assistant Secretary of the US Treasury (1986-89)
"Barry Eichengreen’s Markets Insight “Yen intervention contains troubling message for dollar” (August 5) illustrates how little has changed in US international economic policy since the Plaza and Louvre accords (1985 and 1987, respectively) spearheaded by Treasury secretary James Baker III. The current US administration, by intervening in currency markets, is aiming to achieve the very same objectives of these accords of the late 1980s: weaken the dollar to boost American exports and lower the huge Japanese trade deficit with the US; discourage Japan from selling its large holdings of US Treasury bonds to finance yen purchases (this would increase US interest rates). With a yen boosted by currency intervention there will be less need for the Bank of Japan to raise interest rates — another positive factor for the Japanese economy — and the potential for more American goods to be purchased with a stronger yen/cheaper dollar. There may be a new sheriff in town, but he appears to be wearing the same badge and uniform. President Donald Trump has portrayed the yen currency intervention as an act of simple goodwill, friendship and virtue: “We are always there for Japan.” Alexis de Tocqueville, the 19th-century French philosopher and historian, observed that Americans did not view virtue as a selfless act but rather as something that benefited all. This was certainly the view back in the heyday of G7 international policy co-ordination under Baker in the 1980s, and no doubt Trump and his Treasury secretary, Scott Bessent, have similar motivations. ________________________________________ Eichengren had pointed out also that the USA intervention to help the Bank of Japan is (once more) ominous for the dollar: "the notable fact is that the US Treasury also participated in the intervention, its first joint operation with Japan in more than 15 years, and that it bought yen using euros, not in exchange for dollars… Last week’s intervention thus contains troubling information about the dollar... The bottom line is that Washington, fearing the consequences for US financial markets, is reluctant to see foreign central banks use their dollar reserves. This is telling us that the dollar is not the attractive reserve currency it once was. When this message sinks in, other countries will redouble their search for more attractive, readily usable alternatives. " H -=-=-=-=-=-=-=-=-=-=-=- Groups.io Links: You receive all messages sent to this group. View/Reply Online (#42875): https://groups.io/g/marxmail/message/42875 Mute This Topic: https://groups.io/mt/120686616/21656 -=-=- POSTING RULES & NOTES #1 YOU MUST clip all extraneous text when replying to a message. #2 This mail-list, like most, is publicly & permanently archived. #3 Subscribe and post under an alias if #2 is a concern. #4 Do not exceed five posts a day. -=-=- Group Owner: [email protected] Unsubscribe: https://groups.io/g/marxmail/leave/13617172/21656/1316126222/xyzzy [[email protected]] -=-=-=-=-=-=-=-=-=-=-=-
