Wednesday, August 02, 2006

A New Dollar Mantra

Today's Wall Street Journal reports on "dollar policy:"

Mr. Paulson offered this statement on the U.S. dollar: "A strong dollar is in our nation's interest and that currency values should be determined in open and competitive markets in response to underlying economic fundamentals." It is a phrase he is sure to repeat over the next two and a half years, a tactic that another former Goldman Sachs chief executive, Robert Rubin, used to avoid inadvertently moving financial markets with offhand comments on the currency.

He didn't say what is widely understood inside the Bush administration and among economists: Some weakening of the U.S. dollar is likely in response to U.S. trade deficit that has grown very large and to flows of foreign savings to the U.S. that are unlikely to keep growing.

One of the more bizarre rituals in Washington is the press corp trying to get a Treasury Secretary to say something newsworthy about the exchange value of the dollar. The Treasury Secretary's goal is to say something that makes him look smart and authoritative without actually saying anything substantive which might cause market volatility.

The old Rubin mantra fits the bill, but it is getting a bit stale by now. I have a suggestion for a new dollar mantra that is just as good and a bit shorter. It's...


Even though the sound of it
Is something quite atrocious
If you say it loud enough
You'll always sound precocious.