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A tale of two Bobs

By Owen Paine on Wednesday December 6, 2006 04:24 PM

I figure you already know Wall Street Bob Rubin wants a "strong" dollar. But so does a lesser Bob -- Globe columnist Robert Kuttner. I'd never suggest you read Kuttner, but he manages in this one piece to put it all together on the sinking of the strong dollar. Here's my epitomization.

First we have the de rigeur Yellow Peril schtick:

The greenback is sinking mainly because the United States runs an immense trade deficit with the rest of the world, especially East Asia. Countries like China, Korea, and Japan have an unhealthy co dependency with the United States. Their governments help their industries capture leadership in technologies, products, and jobs. They then sell America far more then they buy. However their central banks happily lend those dollars back to us, so that we can finance the trade deficit and keep buying their exports.
Notice, no trans-nat superprofits need be mentioned at this point, even though that's why this super-combine job ripper-dipper and wage compactor keeps going and going and going. Bobby the K continues, with a big warning about "This past week's decline of the dollar against the Euro."

Huh? He was just talking about a deficit vis-a-vis Asia, so how did we segue into the dollar-Euro gyrations?

In fact, it's good for the trans-nats -- now an even stronger Euro will allow old Europe to share in the good-paying job demolition derby. The falling dolar readjusts the deindustrialization rate between the two advanced economies, since the dollar-pegged (and therefore also falling) east Asian currencies are "facilitated" in their "Asian invasion" of Europe.

According to Bob K, American trans-nats are hapless, myopic dupes of the heathen Chinese, since their low costs are

enticing US manufacturers to locate production in China to take advantage of the cheap labor, government subsidies, and depressed currency...
Enticing! That's good, isn't it? Hellooo, sailor!

Of course, you write long enough, sooner or later you say something that's true. Here's Bob again:

Treasury Secretary Henry Paulson goes through the motions of pressuring the Chinese to let their currency trade like normal currencies, but Paulson doesn't really want that outcome...
Our man quickly covers this lapse into veracity, however. Paulson is said to be reluctant because "a big jump in the value of the Chinese yuan could trigger a run on the dollar."

Pure purple-spotted horse feathers. A run by who and toward what? it's pure piffle. A controlled rise of the yuan/rmb against all North currecies over, say, five years, to twice its present value presents no problem, if the North central banks do another accord like they did in the mid-80's for the final yen rise. This is easy as slicing a banana.

After much more of this gas-baggery, Kuttner finally gets to the heart of the matter, straight from Hamiltonian central:

Paulson's predecessor as treasury secretary in the Clinton administration, Robert Rubin, now a senior executive at Citigroup, confirmed to me in an interview that Wall Street wants only the most modest dollar adjustment...
...and for obvious reasons: they make a profit fatter then Jerrold Nadler's ass.

Here's the peroration:

Due to our dependency on foreign financing of our trade imbalance, which in turn requires confidence in the dollar, we can't behave like normal countries... let our currency fall, and thereby make our products cheaper in world markets... improve the trade imbalance.
That's the rock-bottom line here, folks -- we "can't" stop the job loss and the wage squeeze, we "can't" defend ourselves against industrial decline, we "can't" let the dollar sink till we're in trade balance, and the domestic market is safe again for domestic production.

It gets worse: Bob wants us to Rubinize the federal budget, because "The precarious dollar is also weakened by the big federal budget deficits." That is, we buy overseas stuff with the tax cut money and higher take-home. Conclusion: cut, cut, cut. Mister president, tear down that entitlement.

Comments (4)

js paine:

i'm leaving a comment here for two reasons

one no boby else will
and two
this strong dollar can't be fixed is the biggest ball buster in amerika
long after iraq is part of yesterdays linoleum
the destruction of the post war job pay scales
will be grinding our asses

less pay but more hours and a bigger credit line
only works till you reach the nut limit
then the man owns u like he never could b4


JSP-- Keep the faith, brother. Seriously. You've convinced me, but it may take awhile before the idea catches on. Ideas are like that.


Bob wants us to Rubinize the federal budget, because "The precarious dollar is also weakened by the big federal budget deficits."

When I look back fondly upon the days of my youth in the 1980s, I remember the Atari 2600, bands with big hair, and the budget deficit being blamed for making the dollar too STRONG.

js paine:

va green

back in the mid 80's the deficit was all things to all people

sowing confusion was the aim

since the reaganauts knew they were in the midst of a wave of large deficits and had a base that wanted uncle min and polonian finance

the fed deficit may well increase imports and thus effect the trade balance
but the concept is for the dollar to weaken enough to rebalance trade regardless of the fed deficit

the point of these hocus pocus phoney causality exercises is simple

disarm the gubmint

make its instruments
of macro management appear to be agents of harm and/or impotent

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This page contains a single entry from the blog posted on Wednesday December 6, 2006 04:24 PM.

The previous post in this blog was Oh the humanity.

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