Memo to Tres. Sec. John Snow

A

AAAintheBeltway

To: John Snow

From: AAAinthe Beltway

You know from your previous Washington experience and your career as CEO of CSX that our Treasury Secretaries are not always experts in the nuances of the international FX and securities markets, not to mention global derivities trading. Moreover, you surely understand that the market is continually parsing any comment the US Treasury chief makes on the dollar for the slightest nuance. Accordingly, a practice arose among prior Secretaries, most notably Robert Rubin, to answer any question regarding the dollar with a standard pahrase, typically "A strong dollar is in the interests of the US", and refuse any other comment.

It is perhaps ironic that this administration would be advised to continue a practice of the prior one, considering the prior President's determined efforts to disgrace his office and his current egregious failure to practice the verbal self-restraint expected of ex-presidents. Nevertheless, your recent forays into commenting on the dollar demonstrate the wisdom of this policy. Wittingly or not, you have given a signal to the markets that the US is quite happy to see the dollar fall. You may recall that a prior Republican Secretary, James Baker, found it easier to start a slide in the dollar than to stop it. Markets have a tendency to go to extremes, and extreme weakness in the dollar can wreck havoc in the markets. The unfortunate experience of October 1987 bears witness to that.

Should you require additional consultation of this or other matters, I can be reached through the message boards at www.elitetrader.com, the site for elite traders.
 
Quote from AAAintheBeltway:

To: John Snow

From: AAAinthe Beltway

You know from your previous Washington experience and your career as CEO of CSX that our Treasury Secretaries are not always experts in the nuances of the international FX and securities markets, not to mention global derivities trading. Moreover, you surely understand that the market is continually parsing any comment the US Treasury chief makes on the dollar for the slightest nuance. Accordingly, a practice arose among prior Secretaries, most notably Robert Rubin, to answer any question regarding the dollar with a standard pahrase, typically "A strong dollar is in the interests of the US", and refuse any other comment.

It is perhaps ironic that this administration would be advised to continue a practice of the prior one, considering the prior President's determined efforts to disgrace his office and his current egregious failure to practice the verbal self-restraint expected of ex-presidents. Nevertheless, your recent forays into commenting on the dollar demonstrate the wisdom of this policy. Wittingly or not, you have given a signal to the markets that the US is quite happy to see the dollar fall. You may recall that a prior Republican Secretary, James Baker, found it easier to start a slide in the dollar than to stop it. Markets have a tendency to go to extremes, and extreme weakness in the dollar can wreck havoc in the markets. The unfortunate experience of October 1987 bears witness to that.

Should you require additional consultation of this or other matters, I can be reached through the message boards at www.elitetrader.com, the site for elite traders.
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AAA, while you are at it, ask Mr President to get rid of Snow and place Ken Lay in charge. That would set the economy straight
 
I blame Greenspan for the bubble and the one that will follow. Rubin at least was smart enough not to mouth off.
 
Quote from AAAintheBeltway:

It is perhaps ironic that this administration would be advised to continue a practice of the prior one, considering the prior President's determined efforts to disgrace his office and his current egregious failure to practice the verbal self-restraint expected of ex-presidents. Nevertheless, your recent forays into commenting on the dollar demonstrate the wisdom of this policy. Wittingly or not, you have given a signal to the markets that the US is quite happy to see the dollar fall. You may recall that a prior Republican Secretary, James Baker, found it easier to start a slide in the dollar than to stop it. Markets have a tendency to go to extremes, and extreme weakness in the dollar can wreck havoc in the markets. The unfortunate experience of October 1987 bears witness to that.

Should you require additional consultation of this or other matters, I can be reached through the message boards at www.elitetrader.com, the site for elite traders.
More...

To provide some context, despite the dollar's fall, the current euro conversion is still at its 1998 levels, when the euro was first issued. From the euro's inception on 12/98 the dollar proceeded to climb 42% until its peak in October of 2000, shortly before the US economy and market bubbles burst.

So, one could argue that the recent drop in the dollar is simply a retracement from the irrationally exhuberant two-year rally in the dollar that took place during Rubin's tenure. I think that Rubin's at fault for not having taken steps to control the dollar's climb during that period. I also think that anyone ripping on Snow for not propping up the dollar is akin to ripping the government for not propping up the stock market at its 2000 levels.

Considering that the dollar was flying high to begin with, Snow's turning a deaf ear to the recent fall is not inconsistent with his stance on maintaining a strong dollar. Also, considering how it should benefit the economy in terms of spurring exports and fighting deflation, I'm all for a devaluation.
 
Quote from rolegario:



To provide some context, despite the dollar's fall, the current euro conversion is still at its 1998 levels, when the euro was first issued. From the euro's inception on 12/98 the dollar proceeded to climb 42% until its peak in October of 2000, shortly before the US economy and market bubbles burst.

So, one could argue that the recent drop in the dollar is simply a retracement from the irrationally exhuberant two-year rally in the dollar that took place during Rubin's tenure. I think that Rubin's at fault for not having taken steps to control the dollar's climb during that period. I also think that anyone ripping on Snow for not propping up the dollar is akin to ripping the government for not propping up the stock market at its 2000 levels.

Considering that the dollar was flying high to begin with, Snow's turning a deaf ear to the recent fall is not inconsistent with his stance on maintaining a strong dollar. Also, considering how it should benefit the economy in terms of spurring exports and fighting deflation, I'm all for a devaluation.
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Reasonable people can debate what is an appropriate level for the dollar. No doubt much of the rise to its peak was driven by stock market flows. Still, I think little good can come from dollar bashing, either intentional or by nuance or worse yet by inadvertance. Hence, the beauty of the "strong dollar is in US interest" boilerplate.
 
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