Posted on 02/10/2004 9:34:24 AM PST by blam
Does Bush give a buck about the euro?
Judging by the attention he has paid to a recent G7 communique, apparently not, writes William Keegan
Tuesday February 10, 2004
During the exchange crisis of the early 1970s - the one that brought the collapse of the Bretton Woods system of fixed exchange rates - President Nixon was asked about the plight of the Italian lira. In a notorious remark he replied: "I don't give a [expletive deleted] about the lira." We know about this not from the memoirs of the former treasury secretary Paul O'Neill - it was well before his time - but from the Watergate tapes.
It would not be at all surprising if President George Bush, or his boss Dick Cheney, had said the same thing last week, substituting euro for lira. For all the fuss made by European finance ministers and central bankers before last weekend's Florida meeting of the group of seven, the US does not seem to have budged an inch to overseas pressure.
"The best economic recovery that money can buy" (in the words of the former International Monetary Fund chief economist Kenneth Rogoff) is one in which the dollar finally adjusts to the reality of the US trade position - sample figures: exports $1,000bn (£534bn), imports $1,500bn - and the exports of US manufacturers benefit from a more competitive currency while imports are made more expensive.
Both of these processes, which are two sides of the same coin, contribute to the Bush administration's desperate efforts to make this into a job-creating recovery, as opposed to the widely advertised jobless recovery experienced so far.
The Europeans tried to spin the G7 communique like mad. But the fact of the matter is that, apart from altering the wording of the belief in "flexibility" to make it clearer that the US has the Chinese yuan in mind, all that was offered was hot air of the sort that was unmetaphorically available in Dubai last September and on the coast of Florida last weekend.
The markets saw straight through the communique and voted with their feet. The dollar plunged on Monday, the euro rose to new highs and the pound onwards and upwards towards two dollars - at which rate even your correspondent might abandon his habits of inertia and start buying in New York.
The fundamental point is that the G7 meeting brought no stated or implied intention to intervene to stop the dollar's fall. The US does not want to do so in election year, and would only change tack in a crisis - such as a free fall of the greenback, a total collapse of Asian funding of the twin US budget and trade deficits, and the prospect of panic rises in interest rates on the eve of the election.
This was not a Louvre-style agreement of the sort we saw in February 1987 when the world's leading finance ministers and central bank governors decided that the September 1985 Plaza Hotel agreement to devalue the dollar had achieved its object and "enough was enough".
The financial markets always tend to test currencies to the limits and further falls are being widely predicted. The Europeans are trying to talk the markets into stability, but such talk only has limited impact.
The problem is that the eurozone is stuck in a pre-Keynesian time warp and is trying to blame the falling dollar for its own egregiously mistaken macro economic policies. Certainly the rising euro is hurting the fledgling eurozone recovery.
But in the past, the overvalued dollar and the undervalued euro were papering over the deficiencies of eurozone policy. Now the collapse of the policy structure is visible to all.
There is a potentially serious economic crisis brewing in continental Europe, and all the European Central Bank can say is that it does not need to reduce interest rates while eurozone states should tighten their belts. As one of Mrs Thatcher's senior ministers said during her monetarist phase: "This is the economics of the madhouse."
· William Keegan is the Observer's senior economics commentator
Sure he would...here is a quote from an article about the Iraq war:
Recently, one British visitor was chatting to CIA Director George Tenet about the Europeans’ role. ‘I’ll tell you exactly what the President said the other day on that very subject,’ said Mr Tenet. ‘He said, “I don’t give a shit what the Europeans think.” ’
I think he would say the same thing in this case.
Desparate? It seems like he is just doing the right thing and keeping expectations in reality; the Dims, however, are desparately trying to keep things jobless, or at least the perception of joblessness...
Desperate? It seems like he is just doing the right thing and keeping expectations in reality; the Dims, however, are desperately trying to keep things jobless, or at least the perception of joblessness...
''...the dollar plunged on Monday...
Versus Euro, the dollar traded in a 129-pip range, hardly a wild span, from Friday's 3pm close, both lower and higher, and finished UP 5 pips on the day. The dollar DID decline notably vs GBP, and modestly vs JPY, in the former case because the mkt is more persuaded than ever that UK's MPC are going to raise short rates, in the latter because Japan's MoF have been continually stating the case for intervention, but acting on said intention only spasmodically, and the mkt is in ''I dare you'' mode.
When I read this cheap shot, I stopped reading: It would not be at all surprising if President George Bush, or his boss Dick Cheney.
The socialists in charge of the Euro would give their testacles, if they have any, to have the unemployment rate that we have in America, particuliarly Germany and France.
Yup. I believe they are double or close to double our rate.
In a decade, ceteris proximis paribus, Wonderland will be a swamp, with some number of civilised enclaves here and there. Long before that, the fishwrapper (aka the oh-so-''strong'' Euro) will be so far down the sewer that one will need a telescope to see it.
I've always thought that the whole Euro thing was a bad idea for the countries concerned, but now that they've gone and done it, I hope they succeed. It won't help the USA at all if western Europe crashes and burns.
Your typical ripping post spared me the reading of this bs lib article. Thanks.
Freeper comments to lib articles are always better reads.
One of my mates, who had had a few pints but always has a wonderful turn of phrase, asked sardonically ''Who wrote this mess, bloody Jonathan Swift?'', to which yr hmbl srvnt, who had also had a couple (well, several (g!)) replied, ''More like Lewis Carroll, this is f*cking Elysses in Wonderland.''
The name has stuck with our group ever since -- and I think the world is coming round to agreement...or, it will shortly.
BTW, treat yourself sometime, if you haven't: read that idiotic treaty. You flat out won't **believe** parts of it!
You're right, they are getting so easy to spot.
At any rate, these sites' text seem to my recall (always a somewhat doubtful concept, sadly) to be awfully close to the original nonsense.
http://www.ciesin.org/TG/PI/TRADE/maastric.html
Or, try this site (the Euroweenies are deliberately, shall we say, covering up their, er, tracks)
http://www.undp.org/missions/netherlands/maastric.htm
If **NEITHER** of these sites yields you the full text of the treaty, do PLEASE let me know. I'll get you 10 others, at minimum (and my apols for your inconvenience into the bargain, too!)
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