News Home
Home - Index - News - Krisen 1992 - EMU - Economics - Cataclysm - Wall Street Bubbles - US Dollar - Houseprices
Fall in the dollar will increase inflation rather lower the trade deficit
A big fall in the dollar will increase inflation rather lower the trade deficit
In today's Financial Times, Garten focuses on the possibility of a dollar panic
Yale Professor Jeffrey Garten
Naked Capitalism 11/10 2007
Yale Professor Jeffrey Garten has long argued that letting the dollar fall will do little to remedy America's chronic balance of payments deficit. In a recent Newsweek article that picks up on themes he presented in a 2004 New York Times op-ed, namely, that America is so addicted to imports that a big fall in the dollar will increase inflation rather than do much to lower the trade deficit
In a comment in today's Financial Times, Garten continues his ruminations on the dollar and focuses this time on the possibility of a dollar panic and what might be done to avert it.
Garten:
Conflicting interests among countries make any grand scheme, such as the Plaza Accord that realigned and stabilised currencies in 1985, a non-starter.
There are, however, at least four moves that finance ministers and central bankers should make soon.
At an opportune moment, they could make a sharp and powerful co-ordinated intervention in the currency markets to buy dollars.
This surprise move would not change long-term trends, but it would show speculators that shorting the dollar is not always without consequence.
Over the long term, a floating Chinese currency is important, but for now a stronger renminbi adds petrol to a raging fire.
Third, the US needs to be prepared for a large increase in foreign acquisitions.
While protectionism would be a disaster, allowing many of the government investors in the Persian Gulf and Asia to use America as a bargain basement would itself result in a nasty nationalistic reaction.
The aim: to facilitate investment in a highly charged political environment.
None of these measures deals with important longer-term questions.
That is why the Bank for International Settlements ought quietly to undertake a thorough examination of the future of the dollar in the international economy.
RE: Words, words.....
How do we get out of this scenario alive?
Rolf Englund, Financial Times 4/10 2005
Full text of article in Financial Times
Beware the Weak Dollar
Jeffrey E. Garten, Newsweek International, Sept. 10, 2007
Don't Let the Dollar Take the Fall
Jeffrey Garten, New York Times December 7, 2004