Several U.S. political leaders have recently reiterated their desire to punish countries that undervalue their currencies. News flash: Since June 7, 2010, the value of the U.S. dollar has fallen 17.3 percent. If the United States gives countries a green light to designate low currency rates as an unfair trade practice, which of these trading partners (above) would be the first to impose big tariffs on U.S. exporters?
Last Friday, The Heritage Foundation hosted three experts on international monetary policy for a lecture titled, “The Dollar, The Euro, and the International Monetary Order: What is the U.S. to Do?“. The panel consisted of Dr. Judy Shelton of the Atlas Economic Research Foundation, Dr. Robert Mundell, winner of a Nobel Prize in Economics, and Johns Hopkins University Professor Steve H. Hanke. Before their panel, they sat down for a short interview to discuss the Euro and the crisis in Greece, the prospects for inflation in the coming years, and …
The New York Times, Washington Post, and others today ran front-page stories on economic and political disagreements the U.S. has with China. The headlines mostly distract from the real issue. China is nowhere close to a global military power but it is becoming a global economic power. It is therefore almost inevitable that the U.S. and PRC will clash more often over economic matters. The goal in managing those disputes must always be more open international markets, or the result will be that both sides lose. The next month in …
President Obama didn’t accomplish much on his Asia trip. He has the media covering for him, though. They’re not praising him, they’re making bigger errors than he did, especially on the U.S. and China. Tough times have made people pessimistic about America’s future, and with good reason. Elements of the media have picked that up and run (and run and run), to the point of claiming the U.S. is economically subservient to the PRC. This is not just wrong, it’s outrageously wrong. Not to pick on CNN (OK, maybe a …
Confusing times lead to conflicting concerns. Worries over current deflation run into worries about explosive inflation down the road and now there are growing worries over another global asset price bubble. All of these worries are valid, but the possible return of the asset price bubble is the newest and perhaps most serious in the near term. As with the previous bubble, however, commentators seem to be conflating the causes. The simple evidence of a bubble begins with the Dow Industrials pushing toward 10,000. Who knows what the right level …
The dollar’s steady and sometimes fleet downward slide in exchange markets is eliciting a number of interesting explanations, but most commentators are only looking at their favorite piece of the economic puzzle. The dollar is under pressure against, well, every currency that matters. But why, and are there other financial markets oddities demanding attention, like U.S. interest rates? Part of the explanation for the dollar’s slide is surely the Obama Administration’s pursuit of a wide range of policies sharing the singular characteristic that they would permanently weaken the U.S. economy. …
As unemployment and debt both spiral up, the US economy should brace itself to avoid what could be a real knockout punch. Even before the financial market collapse a year ago, several key countries have voiced their growing concern over the role of the US dollar as the reserve currency in world trade, and many have suggested a new world currency take its place. The world mandate to Obama and Congress is that they are spending too much money and the rest of the world does not want to be …
The rumblings of the dollar’s decline are louder than usual at the moment, tied to speculation that oil producing countries are seeking to move to a basket of currencies in oil pricing, rather than using the dollar alone. There are genuine developments behind such rumblings, mostly concerning American economic policy. But there are also reasons to believe the dollar has staying power, especially if U.S. errors can be fixed. If Arab and other oil producers are indeed looking to move away from the dollar, they have cause. The Federal Reserve …
Remember when China was going to stop buying American bonds and the world was going to end? This hand-wringing was always wrong-headed; perhaps now it will finally cease. In May, net official Chinese holdings of U.S. Treasuries jumped $38 billion. This is the flip side of the return of large-scale capital inflows into the PRC, after these were interrupted by the financial crisis. Net official Chinese holdings of U.S. Treasuries do not constitute the last word. They miss some less direct Chinese purchases of Treasuries and all Chinese purchases of other …
Today’s New York Times op-ed page features two columns on the dollar and the Chinese currency, the RMB. Nouriel Roubini concentrates on American policy. Victor Gao gives a somewhat depressing lesson in personal Chinese economic history. It’s a better discussion than standard claims the PRC is trying to ruin the dollar. Gao correctly suggests that, cheap talk aside, China is a primary supporter of the dollar. As Roubini points out, it’s the U.S. that’s ruining the dollar. There’s no official figure on this, which is important, but Gao puts the …
