What Happened to the Strong Dollar?
For some reason Paul O’Neill looks cooler when he’s hanging out with Bono than when he’s talking about monetary policy. But what the U.S. Treasury Secretary suggests about the dollar matters a lot, because it affects all those things trade, aid, the economy that his trip with Bono to Africa is about. As the dollar hit five-month lows against the yen and slouched to around 92 to the euro, it became clear that O’Neill had abandoned the Clinton Administration’s strong-dollar policy to let the markets rule. A strong dollar makes it cheaper for America to buy imports and expensive for others to buy American goods, which is why U.S. manufacturers have lobbied for months to weaken the currency. It’s also why Japan, desperate to keep goods flowing to America, acted repeatedly last week to stop the slide. It didn’t really work. As Deutsche Bank economist Michael Lewis notes, “this looks like a fundamental structural decline.” With the U.S. market overvalued, foreign investors are taking their m
