12:01 AM, Apr 11, 2015 • By IRWIN M. STELZER
The strong dollar, warns Larry Fink, CEO of BlackRock in a letter to be released to shareholders next week, “will lead to an erosion of confidence on the part of CEOs, with the potential to slow both investment decisions and future growth in the U.S.” When you manage almost $5 trillion in assets, and monitor perhaps twice that much for the U.S. Treasury and other institutions, and are variously described as “possibly the most important man in finance today “ and “the first phone call for governments and businesses around the world with questions”, attention must be paid to your views on the problems and direction of the economy -- and not only America’s. But keep in mind the warning of that great philosopher, the milkman Tevye. In “Fiddler on the Roof” he explains one of the reasons why he wishes he were a rich man: “The most important men in town … would ask me to advise them, and it wouldn’t make one bit of difference it I answer right or wrong. When you’re rich they think you really know!”
Fink, however, may really know. He is not alone in worrying that the strong dollar is hurting American exporters and, by extension, overall business confidence. Fed chairwoman Janet Yellen was surprised by the rapidity of the plunge in the euro, which fell 4% in the five days after the European Central Bank started its QE program, and has fallen 25% in the past year. And Treasury Secretary Jack Lew, annoyed with South Korea for artificially depressing its won and our other trading partners for not doing more to stimulate domestic demand, sides with Fink, who is also joined by the nation’s farmers and manufacturers such as Caterpillar, heavily dependent on overseas sales of construction equipment. Both the soil tillers and the dirt mover traditionally press for dollar depreciation every time the value of the greenback ticks up, and have new allies since last week when the most recent US jobs report disappointed, in part, some analysts say, because of a drop in exports and the ripple effect that Fink describes. Devaluation is also attractive to politicians and central bankers dissatisfied with the growth rates being recorded by their economies.
Unfortunately, there are at least two potholes on the road to growth via the path of currency devaluation. The first is that our trading partners are not going to sit idly by forever while we gain advantages in world markets by making the dollar cheaper. It was a long time in coming, but euroland and Japan finally decided that the policy of the Federal Reserve Board -- run the presses to stimulate domestic growth and, oh yes, drive down the value of the dollar -- had to be matched. So the central banks of both Japan and the Europe retaliated, and are now driving down the yen and the euro, relative to the dollar, in an attempt to stimulate exports to the U.S. and, thereby, economic growth.
The second reason to pause before devaluing is that keeping the value of a nation’s currency below the rate set in a more open market only masks the basic problems of an economy. China, perhaps one of the great currency manipulators of the modern age, kept the yuan at an artificially low level for decades. This stimulated exports while depriving ordinary Chinese consumers -- the affluent managed to afford their designer clothes and scrape together enough foreign currency to buy bolt-holes around the world -- of a sufficiently valuable currency to enable them to import the goods that were simply too expensive in yuan terms. And China is now paying the price for this artificially created, export-led growth. Inefficient companies, buoyed by a cheap currency rather than efficient production techniques, dominate the economy, requiring greater and greater subsidies in order to survive in globalized markets. Companies dependent on governments for their survival eventually find it expedient to, er, “cultivate” government officials, who in turn find it personally profitable to keep their new-found benefactors alive. Corruption is piled on inefficiency, and the mess takes sorting out that often involves less than complete respect for Western-style judicial niceties.
12:01 AM, Jan 31, 2015 • By IRWIN M. STELZER
On April 5, 1933, Franklin Roosevelt did it right here in the White House. On August 15, 1971 Richard Nixon came back from Camp David and did it. On September 22, 1985, Ronald Reagan went to the Plaza Hotel and did it.
American presidents are not the only ones who did it. Chinese communists do it often and are doing it now, as is Japan’s Prime Minister Shinzo Abe. And Mario Draghi, the head of the European Central Bank, finally decided to do it right there in Frankfurt even though his German overseers disapprove.
11:25 AM, Jun 23, 2014 • By DANIEL HALPER
Greg Abbott, the Republican candidate for governor in Texas, is now accepting the digital currency Bitcoin. He's just now released this ad, letting supporters know:
11:35 AM, Mar 5, 2014 • By JONATHAN V. LAST
"Bitcoin" is the most widespread, cryptographically-secure Internet currency. It was created in 2009 by someone (or someones) who referred to themselves as "Satoshi Nakamoto." Once it was released into the wild, the bitcoin currency ecosystem operated on a public, inalterable schedule.
12:00 AM, Feb 9, 2013 • By IRWIN M. STELZER
Growth is the summum bonum of economic policy. Tough to arrange at home: stimulus packages don’t work very well, and monetary policy produces lots of fiat money but not very many jobs. The solution: export-led growth—the other guy will buy so much of your goods and services that your economy will grow. There are two ways to make this sort of growth happen. Lower the international value of your currency so that your output is cheaper overseas, or increase productivity at home by lowering labor and other costs and therefore the prices you need to charge foreigners.
12:41 PM, Oct 12, 2011 • By MICHAEL WARREN
During Tuesday night’s debate in New Hampshire, moderator Karen Tumulty challenged Mitt Romney on his recent tough talk on China. Romney says China is a “currency manipulator” and argues that, by setting unfair prices and allowing the theft of American intellectual property, the Chinese government is cheating world markets and must be held accountable
Not yet.12:00 AM, May 28, 2011 • By IRWIN M. STELZER
The fuss about a possible default if our warring politicians fail to agree on an increase in the debt ceiling is good fun for reporters: the president removed himself from the negotiations in favor of a visit to the Palace and says he won’t agree to cut spending unless the Republicans agree to raise taxes on the rich, variously defined as families earning more than $250,000 per year and “millionaires and billionaires.”
A currency divided against itself cannot stand.May 9, 2011, Vol. 16, No. 32 • By IRWIN M. STELZER
A spectre is haunting Europe—the spectre of the disintegration of the eurozone. All the powers of old Europe have entered into a holy alliance to exorcize this spectre: German chancellor and French president, the Brussels eurocracy and the bonus-laden bankers. Let the ruling classes tremble. The debtors have nothing to lose but their burdens.
12:00 AM, Oct 23, 2010 • By IRWIN M. STELZER
The good news, as reported by the Federal Reserve Board survey of business conditions, is that “on balance, national economic activity continued to rise” in September and at the beginning of this month.
Didn't stay in Greece.12:00 AM, Jun 19, 2010 • By IRWIN M. STELZER
There is a direct line from Athens to Toronto, and not only on Air Canada. The more important connection is provided by the financial markets.
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