Economic Policy Contradictions

Watching the markets this morning. Third-quarter GDP report comes out stronger than expected. Stock indices and the dollar take off, bonds dump. Good times seemingly ahead.

Then Treasury Secretary Snow opens his mouth, asserting disingenuously that the U.S. still has a strong-dollar policy, and carping about how China and Japan run monetary policies that actually benefit their domestic economies. The second Bloomberg article linked above puts it well:

Even as he called on China and Japan to adopt policies that might weaken the U.S. currency, Snow insisted “a strong dollar is in the U.S. national interest” because “no country can devalue its way to prosperity.”

The contradictions in Bush’s politically-driven monetary policy are difficult to avoid and are having negative consequences for the securities markets. A usually mild-mannered trader friend of mine, with whom I was having an IM exchange during the Treasury secretary’s testimony, said that the way in which Snow lies about our weak-dollar policy is disgusting. I don’t think that my friend is the only one who thinks this. Stocks and the dollar sold off during Snow’s remarks.

As of 1:00 PM EST stocks have recovered some of their losses. But the losses were unnecessary. Stock market recovery is being held back by bad policy. (Bonds stayed down during all of this. That tells you something. Either there’s going to be continued economic recovery and bonds are going to get killed, or there’s going to be a weaker recovery combined with inflation and a weak dollar and bonds are going to get killed.)

I hope that the Bush people get their act together. Snow reminds me of G. William Miller, about whom an ex-boss of mine once quipped that the T-Bill market moved 50 points whenever he opened his mouth. That was back in the days when markets were opaque enough for insiders to profit consistently from politically induced price swings. Nowadays things are much more open, bid/ask spreads are tight, and unexpected volatility of the Miller/Snow variety is at least as likely to lead to trading losses as to gains. It would be in everyone’s interest for the Bush Administration to shut up, get out of the way, and let the economy follow the path of least resistance.

3 thoughts on “Economic Policy Contradictions”

  1. Econopundit’s (I think he’s in Chicago, maybe invite to the BB?) got a graph that W might be able to claim next year that almost 5 m jobs were created over his term in office.

    And Hobbs Online has this:

    …Also, I went hunting for stats and found that there are more people working today than when George W. Bush took office back in January 2001. That’s right – more people are working now than at the end of the Clinton administration. That’s not a partisan shot at Clinton, it’s just a statement of fact. The source for it is the U.S. Bureau of Labor Statistics:

    The number of people working in January, 2001, when George Bush took office: 136.0 million

    The number of people employed as of September 2003: 137.6 million
    That’s right. There are 1.6 million more Americans working today than at the end of the Clinton administration. So, how is it that Democrats can claim millions of jobs lost under President Bush? And how come the unemployment rate is higher now than when Bush took office?…

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