Bush Fails to "Jawbone" the Dollar
Just one week after his latest dismal failure to "jawbone" OPEC into boosting oil production, President Bush yesterday tried his hand at talking up the plummeting U.S. dollar. Sadly, just 24 hours later, the greenback plunged to record lows against the euro and the Japanese yen. Bush's Reverse Midas Touch, it seems, has now infected both the oil and currency exchanges.
Sounding more like an Econ 101 drop-out than a Harvard MBA, Bush on Wednesday declared he "absolutely" favored a strong dollar:
"We have a dollar that's adjusting, and I am for a strong dollar. One reason I am for a strong dollar is because I want, you know, people to - I think it helps deal with inflation. And you're right, the weakening dollar has affected our capacity to be able to purchase energy. I mean, we're dependent on energy from overseas. Our dollar doesn't buy as many barrels of oil as it used to, and so therefore it's more expensive for the American people. And that's why I'm for a strong dollar; one reason."
Confronted with the grim reality of the dollar's drastic decline against the euro, President Bush feebly responded, "those aren't good tidings, if you're for a strong dollar like I am."
Bad tidings, indeed. On Thursday, the euro surged to a record high of $1.5625 in European trading in the wake of a report showing a decline in U.S. retail sales in February. And for the first time since November 1995, the dollar dipped below 100 yen.
But despite Bush's proclamation that "there are certain things that we can do" to boost the dollar, in the near-term Bush has few tools to choose from. The slowing American economy and continuing credit crisis mean raising interest rates is not an option. For the foreseeable future, the massive twin trade and budget deficits will keep downward pressure on the dollar. (To be sure, Bush's insistence on making his tax cuts permanent and breaking his promise to halve the federal budget deficit by 2009 aren't helping matters any.)
In ways large and small, the ever-shrinking greenback is jeopardizing the American standard of living. In by February 2008 OPEC Secretary-General Abdullah al-Badri suggested the oil cartel over time might make the switch to euro-based pricing. And as the AP documented just this morning, merchants worldwide are fleeing the dollar for the safe haven of the euro:
"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator in the city of Agra where the Taj Mahal is located. "Now we prefer the euro. It gives us more riches."
"If the dollar's going down...save it in Euros!!!" say the signs popping up around La Paz for Bolivia's Banco Bisa.
It's not just Wall Street but Main Street feeling the pinch. Small businesses importing products from overseas face rising prices they cannot pass onto their customers. And for the first time in memory, even New York City merchants are making euros a currency of choice:
With the dollar near its lowest rate ever against the euro and the numbers of international tourists in New York at all-time highs, some store owners figure accepting the euro offers a convenience to customers and sometimes generates a stockpile of a strong currency for themselves.
Meanwhile, the dollar continues to plummet worldwide even oil reaches new records approaching $110 a barrel. So much for the jawboning of George W. Bush.
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