Someone Has to Tell Mitt Romney That He Supports a Lower Valued Dollar

In an article on the likelihood that the Fed would take steps to boost the economy at its meeting this week the NYT gave readers Governor Romney's assessment of Fed actions to boost the economy. The article tells readers:

"As for the consequences [of measures to boost the economy], Mr. Romney said the program was 'not extraordinarily harmful, but it does put in question the future value of the dollar and it will obviously encourage some inflation down the road.'"

Romney has repeatedly said that he would take strong measures against China to pressure it to raise the value of its currency against the dollar. This is the same thing as reducing the value of the dollar since it means that the dollar will fall against the Chinese yuan and almost certainly against the currencies of many other countries who will follow China's lead.

If Romney really wants to see the value of the dollar fall against China's currency, as he claims, then it is hard to see why he would be worried that dollar would fall in response to the Fed's actions. This seems to be exactly the policy he is advocating.

It is also worth noting that a lower valued dollar is the standard mechanism for correcting the trade deficit. Those who want to see the United States borrowing less from foreigners should favor a lower valued dollar.

Manchurian
written by James, June 18, 2012 9:22

Bishop Romney sure talks very tough against the communist unfair trade partner right now.

Do people actually take it seriously given one of his largest backers, $25 billion casino operator from Macao, is having the most lucrative casino from China?

Could Adelson's casinos in Macao cited for some violations and suspended temporarily?

James, thanks for your concern but Sheldon's got that covered ...
written by fairleft, June 19, 2012 12:48

"With Newt out of the race, Adelson showers millions on Mitt" http://www.lvrj.com/news/with-...64405.html

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written by jerry, June 19, 2012 4:38

Funny to hear Romney complain throughout the primaries about China manipulating their currency and Obama trashing the dollar.

Currency Linkage
written by Ron Alley, June 19, 2012 6:40

The efforts by China to link its currency to the dollar have great effects on U.S. economic sovereignty because manufactured consumer goods imported from China dominate the U.S. domestic market. The better analogy may be a comparison of today's fiat dollar to the 1920's gold standard dollar.

Efforts of the federal government to stimulate the economy by putting more dollars into the hands of consumers are based on the notion that consumers will buy more goods and services. Such stimulus works directly and clearly when the consumers purchase goods manufactured in the U.S. But the effects of such stimulus are not so direct and clear when U.S. consumers purchase goods manufactured in China. The increase in manufacturing employment caused by increased demand for the purchased goods will take place in China and not in the U.S. This makes me wary of arguments that rest on the equivalence of stimulus in the 1950's when consumers purchased almost exclusively domestically manufactured goods and today when most manufactured goods purchased by U.S. consumers are imported primarily from China.

My intuition is that we have adopted a trade policy with China that impairs our ability to stimulate our economy and impaired our economic sovereignty.

Lower Dollar Is Just a Fantasy
written by Paul, June 19, 2012 7:10

The dollar is much stronger now against the euro because of the abject incompetence of the Germans, while the Japanese and Chinese are doing everything possible to strengthen the dollar against the yen and yuan in order to promote their exports.

Dean needs to give up his fantasy of a lower dollar and embrace his inner Keynes: increase Americans' consumption which is the true driving force of the world economy.

-3

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written by kharris, June 19, 2012 8:15

Paul,

If China and Japan act to strengthen the dollar, then the right policy for the US is to let them? That seems a bit asymmetrical. If they have the capacity to weaken their currencies vs the US, then probably the US has the capacity to weaken the dollar. If China and Japan gain advantage by weakening their currencies, it may also be that the US could gain an advantage by weakening the dollar. I'm not sure why surrender would be the right policy for the US.

In addition, to the extent that other countries have an advantage in exporting to the US, they will benefit from demand stimulus in the US. The US will loose exactly that part of its own demand stimulus that ends up benefiting US trade partners. If we are to stimulate demand, then reasonably that effort ought to be coupled with an effort to limit leakage through exports.

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written by fuller schmidt, June 19, 2012 12:04

Mitt's just got the common schizoid condition. It allows people to say and think things like "corporations are people" and "slaves = 3/5ths of a human being". Which btw when you combine them means "corporations = 5/3rds of a slave". We are way out there.

kharris - No Need to Limit Leakage
written by Paul, June 19, 2012 12:35

The answer is to compel China, Japan, Germany, Brazil and all the other export predators to import more goods and services, especially from the U.S. since they already have so many of our dollars.

American consumers are fully up to the task of increasing their consumption, just as Keynes recommended and they proved during the depth of the Great Recession when Cash-for-Clunkers became a huge success and revived the auto industry.

OTOH, driving down the value of the dollar has never succeeded politically, although you are correct that from an economic standpoint, it makes perfect sense.

Someone Has to Tell Mitt Romney That He Supports a Lower Valued Dollar

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