Sta Hungry Stay Foolish

Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

The dollar is our currency, but it’s your problem

27 January 2018


In November 1971, the U.S. Treasury Secretary, John Connally, spoke the following (in)famous words during a Rome G-10 meeting: “The dollar is our currency, but it’s your problem.” (eg, Bloomberg, HB, IPE, Reuters, ZH). Almost 50 years later, his words are all over the news again.

On Thursday, the FT published an interesting – related – article: “Has the US dollar stopped making sense?John Authers tries to explain the recent US$ sell-off while “global economic markers would normally signal a stronger greenback” (FT video).

The article also refers to the current US Treasury Secretary‘s recent comment at the World Economic Forum in Davos. Steven Mnuchin suggested a “reversing [of] 25 years of Treasury Department strong dollar policy by asserting” that, “obviously a weaker dollar is good for us as it relates to trade and opportunities.” (eg, DR, FT#1, FT#2).

Trump’s subsequent comments had little impact on Mnuchin’s words: “The dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar.” “Our country is becoming so economically strong again and strong in other ways, too.” (eg, CNBCFortune). 

Mnuchin and Trump suggest a currency war, or “competitive devaluations“. Reuters: “The term “currency war” has found its way into a number of research notes and they echo Nixon’s treasury secretary John Connally’s famous “The dollar is our currency, but it’s your problem”.”

During Trump’s presidential campaign, he vowed “to make U.S. manufacturing more competitive”. He “threatened to slap tariffs on countries like China, which he claims are gaining an unfair trading edge due to poor trade deals or purposely depressing their currencies” (USA Today). It seems that Trump is indeed delivering on his 2016 campaign promises (eg, CNNWP).

A weaker dollar may also help Trump’s idea of buying back US government debt at a discount (eg, CNNEconomist, PolitiFact, WP). Trump’s idea mirrors his longstanding business practices. In 2016, Trump said to CNBC: “I am the king of debt. I love debt. I love playing with it.”

In business, Trump’s idea is already dangerous as bluff will not help reaching a creditors’ settlement. You must be willing to bankrupt your company, like Trump indeed does (PolitiFact).

In government, bankruptcy is – usually – not an option, at least for most countries. The Economist (2016): “But if the deal were voluntary, it wouldn’t help the American government. And if it weren’t voluntary, it would wreck the financial system and the economy.”

Comparing Trump with a (diplomaticlegislative, political, racial) arsonist (in chief) makes sense. Arson is “the crime of intentionally starting a fire in order to damage or destroy something”. Also see my blogs on the Trump – and Bannon/Farage – Revolution of disruption, chaos and destruction (parts #1, #2, #3, #4).

Putting Out The Fire (with gasoline) – a.k.a. Cat People (1982) by David Bowie
artist, lyrics, video, Wiki-artist, Wiki-1982 filmWiki-song

Note: all markings (bolditalicunderlining) by LO unless in quotes or stated otherwise.


Framework Posts


Submit a Comment

Your email address will not be published. Required fields are marked *

Pin It on Pinterest