The Wall Street Journal-20080122-Sound as a Dollar-
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Sound as a Dollar?
Regarding David Malpass's op-ed ("Markets and the Dollar," Jan. 14), I cannot tell you how refreshing it is to see an economist take issue with the Fed lowering interest rates in these times of high inflation as well as the relentless printing of U.S. dollars and its subsequent devaluation. While we're at it, could we please make a token effort at balancing our fiscal budget? Perhaps then we'll be real "conservative Republicans" instead of the "radical Republicans" who have been "governing" these last seven years. Doesn't anyone on the Bush economic team care what kind of currency and country their kids and grandkids will inherit? If not, please tell me where they are planning to relocate when the bottom drops out.
Mike Fitzsimmons
Crossville, Tenn.
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Mr. Malpass claims that "the best stimulus policy is a sound currency" and "By saying they want a strong dollar, the Fed, the president, or the Treasury could make it happen." The first claim is counterfactual. History is crammed with countries that have cheapened their currency to promote export-driven growth. Today's Exhibit A in such "beggar thy neighbor" is China and its currency manipulation.
The second claim is just silly. America has traveled long past the days of any ability to use its bully pulpit to firm up the dollar. That leaves economic fundamentals to determine currency flows, and any claim to the contrary undermines both the international monetary system and global free trade.
Today, American economic fundamentals are bearish for the dollar. Chronic budget and trade deficits coupled with the Fed's easy money point to an ever-cheapening greenback. Only strong actions, not words, will reverse this.
Peter Navarro
Professor of Business
University of California-Irvine
Irvine, Calif.
