The US dollar – Europe – intervention?

Just as the US dollar’s fall threatens the Korean economy, it also threatens the European economy. In fact they are calling for the US government to intervene, but will the US fight the dollar’s slide?

Probably not. Europe says it’s unfair that they have to suffer because of the US deficit. Rob Nichols and John Snow don’t seem to be losing any sleep over it:

“It is unacceptable that Europe is paying the bill for some major imbalances in the world economy, especially the current-account and budget deficits in the US,” Grasser said.

Asked about the European complaints, US Treasury spokesman Rob Nichols said “on the issue of currencies, our views are very well known.” Treasury Secretary John Snow said last week the United States supports a strong dollar whose value is set by financial markets and indicated the Bush administration wouldn’t act to stop its currency’s decline.

“Markets can overshoot and undershoot, and they often do, but the virtue of markets is they’re self-correcting,” Snow said on December 3. “I’m not going to comment on what we might or might not do, but I will say I’ve got a deep respect for the way markets perform.”

Plus we have to remember that the US treasury doesn’t ahve much recent expereince manipulation the strength of the dollar. The dollar has been the world’s standard currency for so long that it never seemed to need manipulation. To start now would be something of a major policy change in my opinion.

One Response to “The US dollar – Europe – intervention?”

  1. cedric says:

    The fun thing is that on one side Snow says ‘Markets are self-correcting’ and on this other side everyone is celebrating the touch of Alan Greenspan as the one that can handle the economy (which of course, is a pure aberration)

    thanks for your article!