In the excitement over the debt ceiling debate, the increasing extent of fiscal drag, and anxiety about an economic slowdown, I have neglected discussion of the dollar. I still think that continued dollar depreciation is necessary to effect global rebalancing. I’d prefer it to happen by way of expansionary monetary policy, but we might get dollar depreciation as intransigent policymakers work hard to destroy the safe-haven role of US Treasury securities. [0] So, while all eyes are on Jackson Hole, here’s a quick, stream of consciousness review of some dollar-related issues.
Author Archives: Menzie Chinn
Fidei defensor
Or, some people continue to defend the view that rapid inflation is just around the corner
An Econbrowser reader writes, in defense of Governor Perry’s assertion that the Fed is debasing the currency: “The CPI is not a valid indicator of ‘debasement.'” I think this comment provides a wonderful example of the Alice in Wonderland world in which some people reside — if the data do not cooperate, redefine the terms!
Tax Expenditures
The Slowdown at Home and Abroad
Governor Perry on Monetary Policy
From the Washington Post:
…”If this guy [Fed Chairman Bernanke] prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous, or treasonous, in my opinion.”
Chinn and Swagel on Radio Times: “Economic News Roundup”
This morning, I was a guest on WHYY’s Radio Times with Marty Moss Coane. The other panelist was Phill Swagel, and topics covered the stock market, the stimulus, and the state of the economy. One can hear the podcast here: [mp3].
Still Waiting for Expansionary Fiscal Contraction in the UK
And Generalissimo Francisco Franco is still dead (with apologies to the under 35 set).
Since in the U.S. we are currently embarking upon a program of reducing fiscal stimulus, it seems useful to examine whether this action would result in rapid economic growth as some have predicted. The UK is at the forefront of conducting this fiscal experiment.
Facing Reality
And dispensing with childish things, such as the belief that our economic future can be secured by spending cuts alone. From “The Downgrading of a Debtor Nation”, by me and Jeffry Frieden, in today’s New York Times:
THE Treasury can cry foul all it wants, but the decision by Standard & Poor’s to downgrade America’s credit rating by one notch last Friday, and the subsequent plunge in the stock market, are serious symptoms of a loss of confidence — an assessment that is fundamentally political, not economic.
Joe Gagnon: “A Plan for Action on Jobs”
Joe Gagnon (formerly associate director of Monetary Affairs, and of International Finance, Divisions at the Fed) of the Peterson Institute for International Affairs has had enough with the policy paralysis . From Stop Sticking Our Heads in the Sand! A Plan for Action on Jobs:
…our leaders have been in denial about the true nature and magnitude of the problem. The ongoing stock market anxiety surely must wake them up.
The S&P Downgrade and Tax Revenue Increases (or lack thereof)
There is plenty of commentary on the S&P decision, including S&P’s difficulties with math, but I do find of salience this part of the release: