Real cul­prit

Forbes - - Contents // -

The bank­ruptcy of eco­nomic pol­icy was on dis­play with the U.S. Trea­sury’s re­cent re­lease of its “watch list” of po­ten­tial cur­rency ma­nip­u­la­tors. Con­spic­u­ously ab­sent was the big­gest ma­nip­u­la­tor of the 21st cen­tury: Un­cle Sam him­self. Washington’s de­ci­sion in the early part of the last decade to “grad­u­ally” weaken the dol­lar to stim­u­late the econ­omy and boost ex­ports led to the eco­nomic dis­as­ter of 2007–09, which, in turn, led to the dis­as­trous elec­tion of Barack Obama.

Coun­tries that are fooling around with their money are only fol­low­ing our dread­ful ex­am­ple.

Volatile money hurts in­vest­ment, the key to a higher stan­dard of liv­ing. Like a com­puter virus, cur­rency in­sta­bil­ity cor­rupts the in­for­ma­tion that mar­ket­place prices are sup­posed to con­vey. The surge in oil prices from around $20 to $25 a bar­rel to well over $100 led peo­ple to be­lieve we must be run­ning out of the stuff. As hap­pened in the 1970s, when we last de­bauched the dol­lar, prodi­gious amounts of cap­i­tal were di­rected into the en­ergy sec­tor. When the dol­lar strength­ened, oil crashed, and con­sid­er­able an­guish en­sued.

Cur­rency ma­nip­u­la­tion never leads to long-term eco­nomic strength. Ask Brazil, Ar­gentina and Zim­babwe. 254 West 23rd St. (Tel.: 212-352-0075) Eventi Ho­tel, 849 Av­enue of the Amer­i­cas, at 30th St. (Tel.: 212-201-4065) 1586 Sec­ond Ave., at 82nd St. (Tel.: 212-988-1112)

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