The Dollar Depreciates – And That’s a Good Thing

Interesting to note that the dollar has declined in tandem with economic policy uncertainty, as measured by the Baker, Bloom & Davis index (and predicted by historical correlations).

Source: FRED.

Not all else is held constant. Expected inflation has risen since the election — about 0.8 ppts on the 5 year breakeven — and the real ten year interest rate has fallen: about 15 bps.

That means the decline in the dollar’s value is over-explained. Real rates have fallen somewhat, despite rising expectations of a large fiscal package. Rising expected inflation is consistent with the dollar’s movement, although the increase has been almost 2 ppts since March of 2020.

From my perspective, dollar depreciation is a good thing, regardless of source. A depreciated dollar will encourage expenditure switching to the extent that exchange rate pass through is high (which is higher if from monetary shocks). I think a decrease in economic policy uncertainty is a win regardless — and that seems to have been delivered by the Biden election combined with unified control of the legislative branch.

By the way, the increase in expected five year inflation is a positive insofar as it helps achieve the real rate necessary to equilibrate aggregate demand to aggregate supply (i.e., set the real ex ante rate at the natural rate).

50 thoughts on “The Dollar Depreciates – And That’s a Good Thing

  1. Moses Herzog

    I’ve never been certain if Menzie Chinn would be a better politician than me. For example if Menzie would deem it super intelligent to eat premium ice cream on a popular late night TV show during a serious economic downturn. I am pretty certain Menzie would be a better diplomat than me:

    “…… is a win regardless — and that seems to have been delivered by the Biden election combined with unified control of the legislative branch.”

    See how Menzie did that seamlessly, without mentioning any political party??

    Reply
  2. Moses Herzog

    JPM is saying bond rates are going to rise. Will be interesting to see if that plays out. I’m assuming this means in like small “bps” kind of moves, nothing like a 2% “move” or something. I’m not very good at predicting such things, but I would say on a 3 month time horizon I would be shocked if bond rates don’t rise some.

    Reply
    1. Barkley Rosser

      Moses,

      I am once again showing why the taxpayers of Virginia should consider it embarrassing to have me on the faculty of one its state unis, but who is “JPM” and why should we take his (or her) forecasts of future bond rates seriously? I mean, old and out of me thinks in terms of J.P. Morgan who died over a century ago when I think of experts on bond rates with those initials, :-).

      Reply
      1. Moses Herzog

        @ Barkley Junior
        This reminds me of the time you insisted goober spelled backwards is booger. It was taking too much time to explain to you.

        Reply
        1. Barkley Rosser

          It would take three words to identify who “JPM” is presumably, but you preferred to write 23 that did not include those three, Moses. Well, thanks, I guess.

          Reply
          1. Barkley Rosser

            Thanks, Moses. I had come around to figuring it must be that outfit, given seeing some references on talk shows to forecasts coming out of there. Of course I must note that technically speaking it ought to be JPMC given that it is now officially JPMorgan Chase.

  3. Bruce Hall

    I guess I have one basic question: the depreciation of the dollar is a good thing … for whom?

    If you are in the lower income demographics with a relatively fixed income, does a dollar that buys less seem like a good thing?
    If you are retired with savings you hope to be sufficient until you die, does a dollar that buys less seem like a good thing?
    If you are a lender that loaned out high value dollars, does a dollar that buys less seem like a good thing?

    A weakened dollar may improve the balance sheets of exporters, but what does that do for importers and people and businesses that rely on imported products not produced in the U.S? Can the increased cost of those goods simply be passed on to customers with declining buying power and have no impact on the volume of goods sold? Or will importers and their customers have to scale back transactions; do without? Can the items that are imported now be produced at a lower cost thereby creating economic opportunity, or will U.S. companies still be less competitive despite rising prices of imports due to lower labor costs from exporting countries… and does that simply translate into paying more for less in the U.S.?

    If a depreciating dollar leads to rapid inflation, then those who have the ability to match or exceed the rate of inflation with their incomes or revenues may be fine, especially if they are heavily in debt at low interest rates. But then if inflation picks up too much, does the Fed step in to suppress inflation as it has done in the past… and what does that mean for economic growth?

    So, does a dollar that buys less seem like a good thing… and for whom? This seems like a pretty good chart to give some general, but not necessarily comprehensive, answers: https://www.economicshelp.org/wp-content/uploads/2017/06/devaluation-winners-losers.jpg.webp

    We don’t have to worry about another oil shock because the Arab countries are restricting supply, but if the dollar gets cheaper would that encourage more exporting of that resource resulting in less domestic supply available and higher energy costs for businesses and consumers? Is that a good thing? Well, for oil companies, yes. A cheaper dollar should help farmers compete globally as long as the cost of supplies for production like fertilizer, or the cost of operating equipment, don’t increase significantly. But if domestic policy is to try to reduce petroleum and natural gas production through limiting permissible drilling and prevent external supplies from entering (Keystone) while the dollar depreciates, it would seem the cost of domestic production has to go up.

    Just wondering… does a dollar that buys less seem like a good thing? It seems like the answer is more “depends” than “yes”.

    Reply
    1. Menzie Chinn Post author

      Bruce Hall: I’m going to write some words down. I’ll let you figure them out why a depreciating dollar matters.
      0. Aggregate demand
      1. Multiplier
      2. Exchange rate pass through, into (2.1) import prices, (2.2) consumer prices
      3. Collateral constraints and deflation, and financial accelerator.
      4. Natural rate of interest and zero lower bound.
      5. Expenditure switching.
      6. Tradables sector and manufacturing.

      If you are so worried about import users, I am curious why I did not hear you rail against Trump’s tariffs which we now know caused a *net* loss of employment in US manufacturing.

      Reply
      1. pgl

        “If you are so worried about import users, I am curious why I did not hear you rail against Trump’s tariffs which we now know caused a *net* loss of employment in US manufacturing.”

        For MAGA hat wearers like Brucie boy, Trump protectionism good, good. But market forces that raises net export demand – SOCIALISM. Yes – this is what one gets when someone is nothing more than Steno Sue for Kelly Anne Alternative Facts Conway.

        Reply
      2. pgl

        I think this is the source of Bruce Hall’s utter confusion:

        “If a depreciating dollar leads to rapid inflation”. HYPERINFLATION if we allow the exchange rate to float? WTF? I guess Bruce Hall learned his international economics from the likes of Judy Shelton and Stephen Moore.

        Never mind we have had low inflation and floating exchange rates for almost 38 years. Never mind you were referring to things like “expenditure switching” from a real devaluation.

        But of course terms like expenditure switching or even real are not in Bruce Hall’s limited vocabulary. But could someone please tell this know nothing that we have seen dramatic swings in real exchange rates over the past 38 years with very little inflation?

        Reply
      3. Bruce Hall

        Yeah, so good for some. Got it.

        Did the tariffs actually cause a net loss in manufacturing? I’m thinking maybe a very little. After all, manufacturing was on a downward trajectory for a couple of decades as it was “outsourced”. The slight upward trend after 2009 during Obama’s administration didn’t reverse all of that or even what was lost in that recession. https://fred.stlouisfed.org/series/MANEMP – 12,828,000 Jan. 2019 (peak) right after the Dec. 2018 tariffs implemented fell to 12,799,000 Feb. 2020.

        Now, then, the state governors shutting down their economies? That’s a different story. Look out below! 11.414,000 Apr. 2020.

        Meanwhile, “Federal Reserve Chairman Jerome Powell has already said he expects a temporary bump in inflation in coming months, but also indicated the Fed will not let them trigger a preemptive increase in Fed interest rates tamp down whatever price increases occur.” Okay, we have some slack in the employment and production capacity due to the shutdowns, so inflation won’t be a near term problem even if prices go up. And, of course, the “stimulus” is dumping dollars into the economy and that will have no lasting impact the global value of the dollar or on price of goods to the consumers, after all, it’s free money and just “catching up” the economy. The “multiplier” is just a free lunch from the free money, right? We should just make that a permanent feature of the economy. How about guaranteed income – no strings attached? And college tuition paid for by the federal government – no economic problems there? If a little is good, a lot is better. We can just get someone to finance our national debt… which may have to go up just a teensy bit (teensy is an economic term meaning negligible).

        So, the stock market which doubled under Trump despite the COVID-19 shutdowns and the tariffs may continue to increase under Biden.

        And that $15 per hour minimum wage will keep small businesses and their employment expanding regardless of the current condition of those businesses, just as small business thrived and unemployment plummeted under Trump… until the governors shut down their states, so that’s all good. https://www.cbsnews.com/news/small-business-federal-aid-pandemic/ Maybe the federal government can have a bank account from which small businesses can pay the amount of the pay increases instead of relying on magic.

        And low interest rates won’t change a bit as the dollar depreciates which helps consumers and businesses, so that’s good.

        Yup, economic magic. Prices of energy won’t go up no matter what the energy policy is and energy sector employment will skyrocket as petroleum industry workers start installing solar panels [https://www.liuna.org/news/story/canceling-keystone-kills-union-jobs]. Importers can just charge more for what they sell and they can sell everything they import. Of course, some jobs will have to be sacrificed:
        “I’m just curious how a long-term ban consistent with the president’s goal of unifying our country and putting Americans back to work and helping our economies grow, how is that all consistent?” Sen. John Barrasso, R-Wyo., asked after stating that tens of thousands of jobs will be lost across multiple states as a result of the moratorium.

        “I think the president’s plan of building back better … would create more jobs in energy, clean energy, than the jobs that might be sacrificed,” Granholm said. She’s just not sure where.

        Oh, here’s an export opportunity with the weaker dollar: export old solar panels to China for disposal. https://www.wired.com/story/solar-panels-are-starting-to-die-leaving-behind-toxic-trash/ We can add old wind turbines to that: https://www.npr.org/2019/09/10/759376113/unfurling-the-waste-problem-caused-by-wind-energy We’ll be energy independent and save the planet (except for a few places in China).

        Everyone will thrive because of the magic list of economic truisms and there will be no piper to pay… for anyone… regardless of any pesky policies that will be implemented. As the old saying goes, “a weak dollar and energy dependence is good for the country”. Let’s bring back the 70s and 80s! But, you know what? I don’t believe in magic.

        Reply
          1. Moses Herzog

            I can’t even tell what the hell Bruce is upset about??~~~other than the economic numbers are already looking better since the orange abomination left the White House.

            Just reference Bruce to this consolation prize from Hasbro:
            https://www.amazon.com/Milton-Bradley-The-Apprentice-Game/dp/B00067AE3K

            There’s also super soaker toys. Brushy Brush Elmo might encourage Bruce to self-inculcate some good personal habits:
            https://shop.hasbro.com/en-us/product/sesame-street-brushy-brush-elmo-12-inch-plush-sings-the-brushy-brush-song-toy-for-kids-ages-18-months-and-up:9130D5CA-693E-46D8-9DE6-AB27FE7FB5C2

          2. Bruce Hall

            Hey, I’m only looking at hard data from the St. Louis Fed. If someone wants to draw a straight line from 2009 out indefinitely and believe that is realistic, who am I to question that?

            Let’s see how that works:
            Feb 2010 – 11.4 million mfg. jobs
            Jan 2019 – 12.8 ”
            Average increase per year = 140,000 jobs

            So, that sounds about right.

            Of course if we look at a slightly different time period (Obama’s last two years in office):
            Jan 2015 – 12.3
            Jan 2017 – 12.4 (rounded up but okay then)
            Average increase per year ~ 50,000 jobs.

            So, maybe 175,000 for Dec 2018 – Jan 2020 might be overstated, but who’s arguing? After all…

            Of course just prior to that flattening (Trump’s first two years in office):
            Jan 2017 – 12.4
            Jan 2019 – 12.8
            Average increase per year = 200,000 jobs.

            So, do we use Obama’s “victory lap” numbers or Trump’s start of “killing the economy” numbers to figure out how many jobs were “lost”?

            Oh, if we include all of 2019:
            Jan 2017 – 12.4
            Jan 2020 – 12.8
            Average increase per year ~ 130,000 jobs

            Yeah, I’m not feeling that loss estimate.

            2020? Ask the governors who shut down their states.

          3. Menzie Chinn Post author

            Bruce Hall: Sorry, what are you talking about. I’m referring to your completely incorrect assertion regarding the doubling of stock market. Please be specific about how my correction is invalidated by what you ahve just written.

          1. pgl

            “Bruce Hall
            February 17, 2021 at 9:38 pm
            Why don’t you write something useful like a real analysis? Or did you major in snark?”

            How whiney. I have left literally dozens of comments that correct you on both the economics and the facts. But you duck these comments like the little weasel you are.

          2. Barkley Rosser

            pgl and BH,

            I can’t resist a small off-topic deviation myself, in this case regarding “real analysis.” On the awful ejmr that I keep an eye cocked on due to having been personally denounced there occasionally (MH would approve), there is an ongoing half humorous (but only half) about “real analysis,” which it is viewed by certain snotty people there being the math course one must not only take but do well in to do well in a quality grad econ program. One sees comments knocking somebody by saying, “He only got a B+ in real analysis.” BTW, just to annoy MH, I note that I personally knew the author of the fad textbook on real analysis “Baby Rudin.” Did you ever meet him, Menzie? He lived in Madison until he died in 2010. He and his wife and sometime coauthor, Mary, lived in the Frank Lloyd Wright designed “Walter Rudin House.” He also was a refugee from the Nazi Anschluss in Austria, successfully making it out to become the godfather of econ grad students studying real analysis. 🙂

          3. Moses Herzog

            @ Barkley Junior
            I know of your constant desperation for attention, but you needn’t manufacture and fabricate things people would be annoyed by. Your steady and unvarying utterances of falsities and even lies (seemingly intentional, but I won’t dig into personal motivations) are enough. There’s no need to contrive reasons you are annoying. With your, at this stage, never changing persona, just your “being” is enough to annoy.

            I guess you’d like to take away people’s attention from your multitude of errors on this blog by contriving abstract imaginations about your supposed chummy-ness with certain academics. I would think those academics, if they were indeed personal friends of yours, might have discussed you enough themselves, again, if they actually felt that close to you, that you needn’t cry out for attention by dropping their name.

          4. Moses Herzog

            BTW Barkley, I hope you visit EJMR often, and spend a good amount of time there. It seems like the place very suitable to your demeanor. People in dire need to have their self-importance corroborated can be very useful, and the mutual admiration society you can form with the typical person squandering time there and not spending time on their research could provide much needed sustenance for your personal psyche, So I applaud you taking all the time you can on “EJMR”.

          5. Menzie Chinn Post author

            To whom it may concern: Can I please remind commenters to try — for the benefit of your host — to refrain from comments that do not even refer to the post or another comment and solely engage in personal attacks.

          6. Barkley Rosser

            Moses,

            This is pretty goofy on your part. I put this post up for humorous purposes, taking off on the double meaning of “real analysis.” But there is nothing false in this at all, nothing. What piece of it, any of it, do you think is false? You address me here, like you like to do so often, as “Barkley Junior.” But, Moses, my late father, J. Barkley Rosser, Sr., was in the same math department at UW-Madison as Walter Rudin. Of course I knew him and his wife, Mary, whom my late mother was good friends with. You want to challenge any other part? I am sure you do not keep an eye on ejmr, but do you wish to challenge that people making these weird remarks about “real analysis” there are false, or that “Baby Rudin” is indeed the book most frequently mentioned as good for econ grad students to study the topic? It is the easiest of the several books Rudin wrote on Real and Complex Analysis, with the most difficult one known as “Grandpa Rudin.” Do you even know what real analysis is? Do you doubt that he was a refugee from the Anschluss in Austria? Do you doubt that he lived in a house in Madison, Wisconsin designed by Frank Lloyd Wright that is now identified by his name? Wright was born near Madison and there are several buildings in town there designed by him. Heck, he attended the UW-Madison and helped design one of the buildings on campus, Science Hall. Rudin was a fairly well-known local figure, so it is not unreasonable that the house has been named for him.

            Menzie can probably verify some of this, but probably not all of it, but it would be a waste of his time to drag him into this, especially as I put this up just as an amusing thing. But you have somehow decided to go off your nut once again to make ridiculous and in fact totally false accusations regarding this. You really should know better. I am, after all, as you like to constantly remind everybody, “Barkley Junior,” which means that I indeed have known a lot of famous mathematicians whom my father knew, which most certainly includes the late Walter Rudin from my father’s math department, whose “Baby Rudin” book is indeed widely read by many economists trying to learn real analysis to study economics. You got really silly and foolish with this one, Moses. Deal with it.

          7. Barkley Rosser

            Menzie,

            I apologize for my off-topic remark. Did not mean to set Moses off. Thought it was a minor bit some people would find amusing. I shall try to stick to my usually good behavior on this in the future.

        1. pgl

          “As the old saying goes, “a weak dollar and energy dependence is good for the country”. Let’s bring back the 70s and 80s!”

          You still are so afraid of HYPERINFLATION that you wrote all that incoherent and inconsistent word salad? Yea – the 1970’s had somewhat high inflation but you do know that inflation was low after 1983 even when the dollar devalued during the latter part of the decade? Don’t you? Oh wait – I’m talking to Bruce “no relationship to Robert” Hall who cannot remember WTF he had for breakfast. Never mind!

          Reply
        2. noneconomist

          Say, Bruce, which stock market “doubled under Trump? “ Don’t see that looking at the DJIA, or the S&P 500, or the NASDAQ, or the Russell 3000. We own the Vanguard Total Stock Market Fund (VTSAX), and I don’t see a doubling there either.
          Inquiring minds.

          Reply
          1. Moses Herzog

            S&P 500 is a pretty broad measure. Has it up 58%. The more interesting measure might be “How did donald trump do on average GDP per year vs the last 6 Presidents before him??” And what about employment?? What about the trade deficit?? Those are 3 numbers I guess Bruce baby just isn’t interested in talking about anymore. How strange…….

          2. Moses Herzog

            I apologize, that data I was using was from a Reuters story dated October 29, 2020, I’m assuming this accounts for the difference in my 58% quote on S&P 500 and Menzie’s 67% quote which I take to be the more accurate number. I apologize if this misled anyone and not getting my facts correct. Here is the article I lifted the 58% quote from:
            https://www.reuters.com/article/us-usa-election-markets-stocks-graphic/trumps-stock-market-a-wild-four-years-idUSKBN27E1IC

          3. Bruce Hall

            NASDAQ went from ~6,000 (Jan 2017) to ~14,000 (Dec 2020) https://money.cnn.com/data/markets/nasdaq/
            S&P 500 went from ~ 2,400 (jan 2017) to ~ 3,800 (Dec 2020) ”
            DJIA went from ~20,000 (Jan 2017) to ~31,000 (Dec 2020) ”

            The Dow is not exactly the broader market so I just went with the first two and roughly approximated a doubling. What do you want to use?

            Regardless, a pretty good 4-year performance.

          4. pgl

            “The Dow is not exactly the broader market so I just went with the first two and roughly approximated a doubling.”

            Bruce is dumber than a rock. First of all NASDAQ is not a broad market either. Also – the S&P 500 went up roughly at the same rate as the DOW which was less than 60%. And he rounds this off to 100%? I’m sorry but I almost fell out of my chair at his incredible stupidity.

        3. pgl

          “Bruce Hall
          February 17, 2021 at 9:37 pm
          Hey, I’m only looking at hard data from the St. Louis Fed.”

          Let’s take a look at just one of your many lies. The stock market doubled? You did not get that from FRED. Oh wait – your host has a new post for this particular lie of yours. BTW if you got this lie from Judy Shelton – she does not work for the St. Louis FED. Neither does Kelly Anne Conway.

          Reply
    2. pgl

      “A weakened dollar may improve the balance sheets of exporters, but what does that do for importers”

      Can we just skip the rest of your word salad and focus on something rather key to all of this. It is not the balance sheet of exporters but it is the demand for their products where exporters gain. I guess you are opposed to increased jobs in the export sector? Dollar depreciation also raises the demand for products and jobs in the import competing sector.

      I thought everyone knew that but apparently not Bruce “no relationship to Robert” Hall.

      Reply
    3. pgl

      “A cheaper dollar should help farmers compete globally as long as the cost of supplies for production like fertilizer, or the cost of operating equipment, don’t increase significantly.”

      I could not pass on this level of incredible stupidity. Maybe a discussion of the effective rate of protection might help here especially once one considers the fact that most of the inputs used by American farmers are sourced from domestic suppliers. Especially the operating equipment. After all Caterpillar and John Deere are American companies. Only a complete idiot would think these goods are made in China.

      Reply
      1. Bruce Hall

        What constitutes the cost of operating the equipment for farmers? Primarily maintenance and fuel. We know that the cost of fuel will skyrocket under the Biden energy policies so that can’t be too helpful. Maintenance? Well, hard to predict parts and labor costs, but if the dollar weakens by 10-15%, one might expect some additional costs for parts and labor. But perhaps the equipment manufacturers will eat the cost and the market will not be impacted by higher wage minimums.

        Reply
        1. pgl

          “What constitutes the cost of operating the equipment for farmers? Primarily maintenance and fuel.”

          Biden’s policies??? Hey dumbass the topic is the recent dollar devaluation. A lot of this fuel comes from places like North Dakota. I guess you think that means imports from China. Maintenance is down by people locally. Oh wait – Chinese immigrants fixing the tractors. Got it.

          Bruce – please stop trying so hard to prove you are dumbest troll ever. We get it.

          Reply
    4. pgl

      ‘This seems like a pretty good chart to give some general, but not necessarily comprehensive, answers: https://www.economicshelp.org/wp-content/uploads/2017/06/devaluation-winners-losers.jpg.webp

      You might actually read your own link before writing such a stupid rant like yours. You will notice when you finally read it (we have asked your before to read your own damn links and this one is really short so take the time) it did not say rapid inflation. Yea if someone is stupid enough to work for a fixed nominal wage, higher prices might lower real income a wee bit. But guess what – you made the case for raising the minimum wage which is not going to sit well with your right wing masters.

      Other than that – your link which of course you did not read noted winners would be exports firms, import competing firms, overall aggregate demand, and the current account. Which is what Menzie meant by ‘expenditure switching’ a common term in international macro (since we know you had no idea what he meant).

      Hey Bruce – after you learn to read your own link for a change, try taking a freshman economics class. Damn!

      Reply
        1. pgl

          I did not accuse you of using that word. A lot of other things you did say but you do not get. How effing stupid are you anyway? I know two year olds who have better reading comprehension skills than you do.

          Reply
        2. pgl

          I did say you were ranting about hyperinflation. After all this was your comment – right?

          Bruce Hall
          February 16, 2021 at 8:33 pm

          On and on and on about how currency devaluation is a movement to hyperinflation even if all decent international macroeconomists know such a claim is really, really stupid. Then again – all of your comments are incredibly stupid.

          Reply
  4. Moses Herzog

    Folks, just outside here, at 1:00pm local it’s a burning hot 19 degrees Fahrenheit out there, and I got the water dripping because it’s been sub 20 degrees for umpty dumpty hours now, and they’re threatening “rolling blackouts” so I got the house running at 68 degrees (which is 4 degrees lower than usual, but actually is where I would run it ALL the time if other parties were not in consideration. I like it slightly cold, I think my mind works better when the air is cold.). But still. never let it be said Uncle Moses is not a “team player”. I’m going to underestimate (in the name of accuracy) that we got 12″ of snow outside. Which is relatively unusual for the “southwest plains”. Inventory is “well stocked” (if you count sans alcohol “well stocked”). One of the household here almost got their first vaccine shot on Saturday, and in the name of my head not exploding in anger, not going to go into that one. Suffice it to say, never trust your state level health dept in an illiterate red state. We will “roll with the punches” and find other means to get that first shot.

    Reply
    1. Barkley Rosser

      Mose,

      Sorry you are having a hard time, really. But you are lucky that you are not in neighboring “Lone Star” state that is disconnected from the federal electricity grid, along with some other stupidities and attendant disasters, which even as poorly your state is run, they have not been that stupid and incompetent.

      Reply
      1. Moses Herzog

        We have been more fortunate than them, that’s a good point, but I suspect that’s related more to scale, the logistics of Texas are much more challenging than Oklahoma I would imagine. It would be an interesting social experiment to switch state legislators for 5-7 years and watch what happened. I suspect the folks north of the Red River would be the beneficiaries of that personnel swap. Or even utilities regulators if that is where the crux of the issue is.

        Reply
      2. Moses Herzog

        Actually when I stop to think about it—it’s no small coincidence two of the largest states in the nation are having issues. Would be interesting to know how a state like Alaska does theirs if they’re not having problems. Montana is the 4th largest state square footage wise, and also very cold. Or some provinces in Canada. You have both the size and the cold, but I doubt if Canada has those problems (though I don’t actually know).
        https://www.nytimes.com/interactive/2021/02/16/us/winter-storm-texas-power-outage-map.html

        Reply
  5. Bruce Hall

    I’m passing along a view somewhat different from most (all?) on this site. From an email of an acquaintance who spent 40-years in government service, consulting on government policy, and economic and policy negotiations. Try not to have immediate knee-jerk spasms. The whole world (of economists) do not subscribe to the magic list of Menzie’s economic rules… as interpreted. Like all economists, Roach has detractors; like all economists, Roach is wrong as well as right. Perhaps that’s because economics is more art (craft) than science and relies heavily on incomplete data and interpretation.
    ——

    STEPHEN ROACH:

    Economist Stephen Roach says the US economy’s V-shaped recovery is ‘in tatters’ and the dollar could crash 20% this year | Markets Insider (businessinsider.com)
    https://markets.businessinsider.com/news/stocks/dollar-crash-us-economy-recovery-tatters-coronavirus-economist-stephen-roach-2021-1-1029959173

    The decline of the U.S. dollar could happen at ‘warp speed’ in the era of coronavirus, warns prominent economist Stephen Roach – MarketWatch
    https://www.marketwatch.com/story/the-decline-of-the-us-dollar-could-happen-at-warp-speed-in-the-era-of-coronavirus-warns-prominent-economist-stephen-roach-2020-06-22

    Dollar forecast: collapse in 2021? The analysis by a Yale economist – Finance Drops
    https://www.financedrops.com/dollar-forecast-collapse-in-2021-the-analysis-by-a-yale-economist/#:~:text=Dollar%20forecast%202021%3A%20up%20to%2035%25%20less%20for%20the%20greenback&text=With%20the%20same%20speed%2C%20the,to%2035%25%20of%20its%20value.

    —–

    $1.9 Biden Stimulus Plan:

    The macroeconomic implications of Biden’s $1.9 trillion fiscal package (brookings.edu)
    https://www.brookings.edu/blog/up-front/2021/01/28/the-macroeconomic-implications-of-bidens-1-9-trillion-fiscal-package/
    The Significant Uncertainty Surrounding this Analysis

    The extent of uncertainty underlying our results is significant. First, the path of GDP with no additional fiscal support is hard to predict, as it depends critically on the pace of the vaccine roll-out and the response to the new more contagious COVID-19 variant. Second, the increase in demand in response…. (read the article)

    Larry Summers and the Biden stimulus inflation debate, explained – Vox
    https://www.vox.com/policy-and-politics/22268787/larry-summers-op-ed-biden-stimulus

    Larry Summers Is Wrong About Biden’s $1.9 Trillion Splurge. Ask Japan. (forbes.com)
    https://www.forbes.com/sites/williampesek/2021/02/15/larry-summers-is-wrong-about-bidens-19-trillion-splurge-ask-japan/?sh=8a943a66d72b

    Larry Summers
    http://larrysummers.com/

    Larry Summers and Paul Krugman Debate Stimulus | Larry Summers
    http://larrysummers.com/2021/02/15/larry-summers-and-paul-krugman-debate-stimulus/

    POLITICO on Twitter: “Everyone in the West Wing is reading a Larry Summers op-ed being circulated among liberal policy wonks. Why? Summers put down on paper what many liberal wonks have been whispering about for weeks: That President Biden’s stimulus bill may be too big. https://t.co/KyPFr0H10G” / Twitter
    https://twitter.com/politico/status/1357670672307277825

    Larry Summers Is Still Worth Ignoring | The Nation
    https://www.thenation.com/article/economy/larry-summers-stimulus-neoliberalism/

    ——

    BROOKINGS INSTITUTE:

    Unintended consequences: Trump and Warren’s bipartisan plan for the US dollar (brookings.edu)
    https://www.brookings.edu/blog/future-development/2020/02/20/unintended-consequences-trump-and-warrens-bipartisan-plan-for-the-us-dollar/
    It’s good to see a glimmer of bipartisanship. But it is disappointing that it had to be on such a terrible idea. In our new working paper, we model what might happen if their wish was granted. We show that at best, this policy delivers only temporary benefits but unfortunately with long-term costs. It could trigger a currency war with dangerous consequences, and is likely to achieve the opposite of many of Trump and Warren’s stated objectives.

    US_led_currency-war_final.pdf (brookings.edu)
    https://www.brookings.edu/wp-content/uploads/2020/02/US_led_currency-war_final.pdf

    The macroeconomic implications of Biden’s $1.9 trillion fiscal package (brookings.edu)
    https://www.brookings.edu/blog/up-front/2021/01/28/the-macroeconomic-implications-of-bidens-1-9-trillion-fiscal-package/

    Reply
    1. Menzie Chinn Post author

      Bruce Hall: You do know that at least two of the links you’ve just put up have been posted by me (i.e., Menzie Chinn, co-blogger on this weblog) in my posts (i.e., not just my comments). I know almost all of these people personally and have cited them (Sheiner, Edelberg, W. McKinnon) in other recent posts. So what the heck are you talking about?

      Reply
      1. pgl

        Bruce often posts links that he has not bothered to read. I suspect he Googled Biden and bad and posted anything he came up with. Of course his latest suggests that FED policy that allows the dollar to value will be really bad as it will be INFLATIONARY. He leads with Stephen Roach but did he bothered to read even the subtitles of the first link he put up:

        “The US economy’s V-shaped recovery is “in tatters”, due to rising coronavirus cases and new restrictions, according to Yale economist and former Morgan Stanley Asia chair Stephen Roach.
        Roach said the dollar could drop around 20% this year, thanks to the growing US budget deficit and next-to-zero interest rates at the Federal Reserve.”

        So Roach is saying the recovery is not guaranteed and we may need a lot of economic stimulus. In this context, devaluation of the dollar is good policy but not bad.

        But Bruce Hall is too stupid to get this. He is too lazy to read his own links. No – he does not know what he is talking about. He never does. But this fool cannot stop himself from going on and on babbling nonsense. He reminds me of Donald Trump in that way.

        Reply
    2. pgl

      Is your computer just randomly posting links you have not read again? If you bothered to READ what these economists are saying you might just see they are supporting what our host has been saying. Then again you are truly too stupid to understand what ANY of these discussions mean.

      Most people by now would just give up. But you go on and on embarrassing yourself and your poor mom.

      Reply

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