Official: U.S. Dollar Policy Unchanged

[Libertarian_Guard]

http://news.moneycentral.msn.com/breaking/breakingnewsarticle.asp?feed=OBR&Date=20030519&ID=2563718

May 19, 2003 4:09:00 PM ET


WASHINGTON (Reuters) - A U.S. Treasury spokesman on Monday reiterated there has been no change in U.S. dollar policy, despite an increasing belief in financial markets that the United States accepts a weaker value for its currency.

``There's no change in policy,'' said Treasury spokesman Rob Nichols during a regular weekly briefing with reporters.

After this weekend's meeting of finance ministers from the Group of Seven industrialized nations, Snow said currency moves recently, which would include a fall in the dollar's value compared to those of its other big trading partners, were ``really fairly modest.''

Currency traders have seized on those comments as an implicit tolerance of a weaker greenback.

Nichols' comments echoed those earlier in the day by White House spokesman Ari Fleischer.

``The dollar policy is unchanged. No change at all in the dollar policy. The government supports a strong dollar,'' Fleischer told reporters.

Asked several times about the reaction of markets and others to Snow's comments, Nichols declined to comment or repeated that there was no change in policy.

The United States has followed a ``strong dollar'' policy since the mid-1990s. At the time, Clinton-era Treasury Secretary Robert Rubin often repeated that a strong dollar was in the nation's interest. While Rubin almost endlessly hewed to the strong dollar mantra when talking to reporters, Treasury secretaries in the Bush administration have not been as consistent, drawing market skepticism about the administration's commitment to the policy.

At a Group of Seven finance ministers' meeting in Deauville, France, over the weekend, Snow said he defined a strong dollar as ``a good medium of exchange,'' and one in which people have confidence

[Tachyon Flare]

I am reminded of a crisis not parallel yet related. The inauguration President Zedillo of Mexico in 1994 after a botched free market experiment (NAFTA), he announced devaluation of the Peso. American firms such as Fidelity, Scudder, Goldman Sachs and Solomon Brothers lost over 30 billion dollars invested in the Mexican economy. What was the result? Massive employment crisis, 50% annual inflation rate, bank failures, increase in poverty rate, bankruptcy and in the midst of this travesty of justice, the American taxpayers paid the bill. No doubt the so-called liberty of unregulated markets destabilized not only the economically but politically and socially. On the other hand, had we not paid the price tag, no doubt the financial shocks would have resulted in a domino effect taking down Latin America. Instead of correcting the economic policies (unregulated capital and trade liberalization), and reforming the innately unstable monetary regime we continue to prop up this bankrupt system. Today we are in a similar crisis, but this time the devaluation will not be announced nor will it be controllable, it will come crashing down because of our foolish policies that have resulted of deindustrializion of a nation. The so-called official strong dollar policy is not simply a “fairly modest realignment of currencies” as John Snow states but a liquidation of the dollar from foreign central banks as a reserve currency.

At some pivotal point in the near future, the declining value of dollar will have a considerable impact on financial institutions using derivative portfolios that depend on this so-called “strong dollar policy.” While the “prosperity” (More like pumping the monetary aggregate to create the illusion of wealth) of the 90’s bailed out the Peso crisis, I am unconvinced that anyone will bail the American economy. In its present form the American economy with its debt to GDP ratio, derivatives exposure by various banks, and a number of many other problems, is not salvageable! The current administration with its devotion of Keynesian doctrines will no doubt bring an uncontrollable currency devaluation that will be similar to the Peso crisis. Allow me to add another layer of sunshine! During this crisis, “The Man who broke the Bank of England” George Soros has decided to short the dollar. Financial speculators like Soros infamous short of the Pound in 1992, which came at the expense of British citizen, will not doubt take advantage of the inevitable dollar crisis. Do not expect a quick recovery, expect the worst my friends! Nuff' said.


-Tachyon