Why Nobody Should Care About a Weak Dollar

The Dollar Is Down, but Should Anyone Care?

By EDMUND L. ANDREWS (2004)

United States is spending nearly $600 billion more a year than it produces, almost 6 percent of its annual gross domestic product.


(...) school of thought holds that foreign governments like China and Japan will continue to finance American borrowing and keep the dollar strong because they are determined to sustain their exports and create jobs.

(..) where foreign investors in the 1990's poured trillions of dollars into American stocks (...) now comes mostly from foreign central banks and goes heavily to buying Treasury securities

(...) Rather than profits, their goal has been to stabilize exchange rates and keep their exports from becoming more expensive. (...)

(...) Asian central banks have created an informal version of the Bretton Woods system of fixed exchange rates(...)

"It's striking how many parallels there are between today and the early 1970's," Mr. Rogoff said.(...)

(...) The real question is, when will Japan join the fray? It is by far the biggest holder of Treasuries among central banks, with about $740 billion.

If Tokyo gets uneasy about the falling dollar pushing up bond yields, officials could pull the plug on the United States. (...)

U.S. Treasury officials could not have been happy with recent comments by Kaoru Yosano, a senior member of the governing Liberal Democratic Party in Japan. "The Japanese government is going to ask for a strong dollar policy," he said. "If it continues to fall, there would be enormous capital flight from the dollar."(...)

"Several times in the past, we have been tempted to sell large lots of U.S. Treasuries," Ryutaro Hashimoto, the Japanese prime minister at the time, told an audience in New York in June 1997.(...)

He also cited occasions when "the exchange rate has suffered extreme movements and the American people have done little but look at domestic issues." (...): "We were very tempted on these occasions. However, in terms of fund management, we did not take the most advantageous road."(...)




Across Asia, the sound of sharpening knives