Skip to comments.Is Treasury Chief Hank Paulson the financial equivalent of Civil War General George B. McClellan?
Posted on 05/03/2008 10:55:04 AM PDT by The_Republican
Is Treasury Chief Hank Paulson the financial equivalent of Civil War General George B. McClellan? The "Young Napoleon" brilliantly organized and trained Union armies in the first year and a half of the Civil War. His problem: He couldn't bring himself to actually engage the enemy, always proffering excuses as to why he couldn't take decisive action. An exasperated Abraham Lincoln finally fired him.
Mr. Paulson repeatedly says he wants a strong U.S. dollar. Last month he told Reuters: "I've been as consistent as anyone that you've ever heard in saying that the strong dollar [is] in our nation's interest." Yet, as McClellan did when facing Robert E. Lee, Paulson shrinks from bold engagement. So we continue to have a weak dollar and the inflation that engenders. No wonder Paul Volcker sternly warned that all this reminded him of the early 1970s, when Paulson-like passivity gave us a destructive decade of inflation and its ugly political consequences.
Here's what Paulson and Federal Reserve Chairman Ben Bernanke should do: Soak up the excess dollars. Announce to the world that they are doing this and why. Get the G7 to intervene to help prop up the buck. The Fed could simultaneously point out that the Bear Stearns (nyse: BSC - news - people ) operation demonstrates we can take pinpoint action to prevent the financial system from seizing up but that there is no need--if there ever was one--to throw gobs of dollars from a helicopter all over the U.S. and the world.
In his defense, Paulson would probably say that he'll deal with the dollar when the financial crisis has passed. But that's like saying you'll deal with those pesky mosquitoes after you deal with the spread of malaria. The man has it backwards: The weak dollar is the fundamental problem.
(Excerpt) Read more at forbes.com ...
It’s a tough job, when as an Administration official, one of your primary tasks is to claim the Administration’s policy is the exact opposite of what it is.
Those words come straight from W. Forbes should know better.
First, the Fed makes 17 consecutive rate hikes up to 5.25%.
Then, the Fed makes 5 panic stricken cuts back to 2.0%.
Now, Steve Forbes wants the Fed to hike rates again?
That’s a GREAT policy for long term business planning, Steve.
And G-7 currency intervention?
Gimme a break.
All that means is that the Central Banks will try to terrify the dollar short traders by periodically blowing up their short positions.
In the near term that will take some downward pressure off the dollar, and nothing more.
In the long term, the value of the dollar is ruled by three brutal facts.
One, America must buy huge amounts of energy from abroad.
Two, almost every country in the world has designed an economy that focuses on exporting TO the USA.
Three, most countries in the world try to discourage, or block, imports FROM the USA.
And by golly there is ...
I am Sherman, McClellan, or Lee, but the test was so long I stopped paying attention somewhere in the middle.
Pretty satisfactory as far as I'm concerned, although I thought my Sherman or Custer would be higher.
For some reason my tag-line is coming up gibberish, although it shows clean on preview and on my profile page. Oh, well ... I guess it might be time to change the old thing.
Let’s try this for a tag-line ...
The dollar is an asset. The market value fluctuates according to the laws of supply and demand. It is best that the dollar obtain its equilibrium value whatever that might be. The fed should make sure that the money supply increases at a slow constant rate and not worry about the dollar value or the deficit.
One huge component to the dollar’s value is investment climate. Lowering taxes and regulation almost always helps.
I came out Sherman (65%), Burnside (55%)and Lee (55%).