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By Stephen Green

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Keep Your Fingers Crossed (And Maybe Some Gold in the Attic)

January 23, 2009 - 1:24 pm - by Stephen Green

Now this would be a welcome change from the last eight years of economic silliness:

Less than 48 hours after Barack Obama became president, his choice for U.S. Treasury secretary, Timothy Geithner, said a strong dollar is in the United States’ interest.

That phrasing — first used by former Treasury Secretary Robert Rubin more than 14 years ago — lost its weight and credibility when it was over-used by the Bush administration.

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The greenback lost about 40 percent of its value versus the euro and more than 15 percent versus the yen between 2000 and 2008. A weaker currency was an important step for the Bush White House in rebalancing a global economy plagued by a U.S. trade deficit and huge Chinese surplus.

“This time around the administration probably means it when it says it backs a strong dollar. They have to be dead serious about it,” said Samarjit Shankar, a director for global strategy at the Bank of New York Mellon, in Boston.

The problem, of course, is how well dollars will hold their value when Congress is ordering them up out of thin air by the trillion. And then there are events outside our control, like what would happen if China starts dumping US securities in order to stimulate its sagging economy.

But I wish the Administration luck on this one, I really do.

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4 Comments, 4 Threads

  1. 1. Larry J

    Read the history of things like the Weimar Republic (and much of Africa and South America) where government massively increased the money supply and be afraid. Be very afraid. Think hyper-inflation can’t happen here? Think again.

    January 23, 2009 - 2:28 pm   Link to this Comment
  2. 2. jon

    Those 40% and 15% losses are against other currencies that have yet to reflect much of their actual losses in buying power. I’ve been hearing about not just hyperinflation but hyper-stagflation, which sounds like an embittering scenario where frivolous things cost less while things like fuel and energy and food cost much more. It sounds great, since we’ll need that new ipod for that long walk to work, or at least that walk to find a job.

    January 23, 2009 - 6:43 pm   Link to this Comment
  3. 3. jaymaster

    I wish the new administration luck too. I really do.

    But just in case, I’d skip the gold and go for some baser metals.

    Like lead and brass.

    January 23, 2009 - 9:27 pm   Link to this Comment
  4. 4. Stephen Green

    “Baser metals.” I am so stealing that one.

    January 23, 2009 - 9:31 pm   Link to this Comment