On those awkward occasions when he is asked about his nation’s currency, President George W. Bush has a simple response. “We believe in a strong-dollar policy,” he’ll say–or words to that effect. For his Treasury Secretary, Hank Paulson, the mantra is, “A strong dollar is in our nation’s interest.”
The dollar hasn’t been paying much attention, apparently. It has lost 41% of its value against the euro, its main global competitor, since Bush took office in 2001. And Paulson, when he’s not busy battling financial crises here, can usually be found in China beseeching the authorities there to let their currency rise against the dollar.
It should be pretty obvious, then, that the U.S. doesn’t have a strong-dollar policy. What’s more, it almost certainly shouldn’t have one. The huge trade deficits that the country has been running for the past decade seem like a pretty good indication that the dollar was overvalued in global currency markets and needed to come down. Read more.
I finished the column Monday morning in the speakers’ room at the World Health Care Congress in Washington, where I was about to moderate a panel. While I was typing away, George Shultz, who was on the panel before mine, came in and sat down next to me. He’s a former Treasury Secretary, and held the job when the Bretton Woods system of fixed exchange rates was finally and definitively cast aside. There had to be something I could ask him about the dollar. As I pondered what to ask, though, people started lining up to talk politics with Shultz or get him to sign a copy of his new book. Then it was time for him to go on stage. Oh well.