"A lower dollar is desirable because it would help America achieve the right kind of recovery. The US economy is severely constrained by household and financial sector deleveraging and possibly by a permanent fall in potential growth. In the absence of another housing bubble and consumer boom, an export-led recovery is the best growth strategy the US could employ.
[...] But a strong dollar is the last thing the US economy needs right now. There are two further factors that support a weaker dollar. The first is, of course, the double-digit public sector deficit, which has already unnerved investors and which is not going to come down with any haste. The second is monetary policy.
[...] What about the rest of the world? Would the Europeans, for example, not fight tooth and nail against a weakening dollar? Not necessarily. Just look at the situation from the perspective of the European Central Bank. Ideally, it would like to exit early by withdrawing liquidity support and raising interest rates, but it is severely constrained because many European banks are still dependent on low interest rates and ECB life support operations for their survival. Fiscal policy is also extremely loose and likely to remain so. From the ECB’s point of view, a strong euro is probably the most effective insurance against resurgent inflation, at a time when interest rate policy remains constrained. A strong euro would nicely take care of Germany’s persistent current account surplus.[...]
[...] I expect a much reduced current account surplus for Germany in the next few years and, for the eurozone, a sizeable, probably not excessive, current account deficit. The sensible goal of a more balanced world economy is entirely consistent with a weaker dollar and a stronger euro.
[...] Exchange rates cannot solve the problem of global imbalances. They did not in the past. Reform of the global monetary system is necessary for sustained balance. [...] a reduced international role for the dollar would be in the best strategic interests of the US as continued imbalances would end up producing intolerable instability, no matter whether they are financed or not.
[...] I expect we will [...move] towards a dual system in which the dollar and the euro act as the world’s de facto reserve currencies. The rise in the euro’s international role, which is already formidable, is not a reflection of the strength of the eurozone economy but of the liquidity of its bond markets and the need of foreign investors to diversify."
Ler o artigo completo em FT.com / Columnists / Wolfgang Munchau - Making the case for a weaker dollar.
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