Rubin Says He Has Too Many Dollars


Bloomberg:

Robert Rubin, who as U.S. Treasury secretary in the 1990s promoted a stronger dollar, said he has too much of his personal investments in the currency.

A “disproportionate amount” of his assets are in cash and he “should be more allocated away from the dollar,” Rubin, 73, said yesterday in a speech at the TradeTech conference in New York. He said he also was “greatly overweighted” in private equity and had investments in hedge funds.

http://www.bloomberg.com/news/2012-03-09/rubin-ha…

 

I wish people would stop making a connection between "strong dollar" and "strong America." There is nothing patriotic or treasonous about your opinion on the relative value of US Currency. Weak dollar policies support exporters, strong dollar policies support importers. We should be less concerned with the relative strength of USD and instead focus on monetary policy which supports stable and consistent M2 growth and stable inflation within a targeted range. The end.

 
Boothorbust:
I wish people would stop making a connection between "strong dollar" and "strong America."

Historically, strong countries always had a strong currency.

Boothorbust:
Weak dollar policies support exporters, strong dollar policies support importers.

US trade deficit widens to three-year high of $52.6 billion in January as imports hit record: http://finance.yahoo.com/news/us-trade-deficit-hits-52-133525474.html

Weak dollar = you're punishing a whole population to support a few. On top of the fact that it is immoral, it isn't very bright economically. See, if your dollar is weak, your input imports to produce your product will raise = your product now costs more to produce. Also, your transportation costs to export the product rise as well.

Boothorbust:
We should be less concerned with the relative strength of USD and instead focus on monetary policy which supports stable and consistent M2 growth and stable inflation within a targeted range. The end.

Real economic growth bring prices down. The U.S. industrial revolution was made on the gold standard and prices were falling for 100 years.

 
Best Response

Abdel:

"Historically, strong countries always had a strong currency." - You are confusing correlation with causation. China has been gaining strength for years, largely on the back of devaluing its currency. Greece could get out of a whole load of mess if it could devalue its currency. "See, if your dollar is weak, your input imports to produce your product will raise = your product now costs more to produce. Also, your transportation costs to export the product rise as well. " - I'm not sure I entirely follow your logic here. Inputs only increase if your inputs are imported. Relative currency strenght has nothing to do with domestic prices of domestically produced goods. "Real economic growth bring prices down. " - An exogonous increase in supply will, all else equal, bring prices down. However, it is better to target stable inflation, low inflation rather than zero inflation due to the devastating effects of deflation. Low stable inflation is harmless, even a good thing. Read Friedman. "The U.S. industrial revolution was made on the gold standard and prices were falling for 100 years. " - Cite your time period/source please. I'm not saying you are wrong, but I find this highly suspect. I think the "The U.S. industrial revolution was made on the gold standard " is both poorly phrased and a stupid argument.

 
Boothorbust:
Abdel:

"Historically, strong countries always had a strong currency." - You are confusing correlation with causation

No, when a country has a strong economy, people around the globe want to hold it's currency, which pushes it's value upward.

Boothorbust:
"See, if your dollar is weak, your input imports to produce your product will raise = your product now costs more to produce. Also, your transportation costs to export the product rise as well. "
  • I'm not sure I entirely follow your logic here. Inputs only increase if your inputs are imported. Relative currency strenght has nothing to do with domestic prices of domestically produced goods.

Aren't US exporters importing raw materials and other inputs to make their products? If that is the case, you want a strong dollar! Even if you currently buy your raw material in the US, if you have a strong USD, you can simply import it for cheaper overseas!

Boothorbust:
"Real economic growth bring prices down. "
  • An exogonous increase in supply will, all else equal, bring prices down. However, it is better to target stable inflation, low inflation rather than zero inflation due to the devastating effects of deflation. Low stable inflation is harmless, even a good thing. Read Friedman.

What's economic growth other than an increase in the supply? When the supply increases, the value of the paper money I hold goes up because I can buy more stuff with it (standard of living go up). If instead, my money loses value (FED prints), the value of the paper money I hold goes down because I cain't buy as much stuff as before (lower standard of living).

Also, we know that the price system is the most efficient system to help us allocate our ressources. It sends us the right signal about the abundance or scarcity of a product. However, the FED defines inflation as rising prices and try to cap it at 2%. This means that the FED is going against the price system. Is it against efficiency? Why are they trying to hide the market signals?

This is only to show you that their definition is phony. The real definition of inflation (look up older dictionaries) is an increase in the money supply. And one of the consequences could be higher prices (depends on where the printed money is channeled).

I like friedman but this is one of the few issues that I don't agree with him.

Boothorbust:
Abdel, regarding your "100 years of prices fallng" here is data from the Minneapolis fed with estiamted inflation since 1800 http://www.minneapolisfed.org/community_education/teacher/calc/hist1800… As you can see during any period you might call "The Industrial Revolution" prices were not consistently falling and in fact were extremely eratic - not a good thing for economic growth, credit markets, etc.

Industrial revolution: 1820-1870 ; prices were mostly falling or not moving at all (except the civil war period - 3 years-) and a few years with 3-4%. Overall though, people saw higher standard of living.

 

What's your point swagon? That eratic prices aren't bad for credit markets? Because thats the ONLY argument I was making. If so please cite your source.

This is getting a bit off topic anyway. My initial point was just that weak currency/strong currency debates have zero to do with "patriotism". A lot of Americans say they want a strong dollar without really understanding why or what the implications and causalities are. There are good arguments on both sides, none of which have to do with how much you love your country.

 

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