With Great Power Comes Great Responsibility to Use That Power...
Ryan Avent writes, apropos of:
Safety in dollars: Here's a look at the recent relationship between the euro and the dollar... a long run of euro appreciation, then a sudden reversal amid the flight to safety associated with the 2008 financial crisis, then a return to appreciation, and finally another bout of dollar strengthening. The reversal there at the end of 2009 and the beginning of 2010 is just what you'd expect to happen amid growing fears of sovereign debt problems in the euro zone. Such issues would increase the desire for safe havens and dampen the demand for euros, both of which trends would boost the dollar....
[America] is the issuer of the world's reserve currency.... [It] can borrow cheaply amid crisis.... America is somewhat insulated from market pressures to address deficits. Which, again, is nice when you need to provide stimulus...
It is nice when you need to provide stimulus if you then in fact provide the stimulus. The fact that the U.S. government is ideally positioned as the reserve-currency hegemon to serve as the locomotive of global recovery is very nice. But it needs to live up to the role--and right now we aren't: a declaration that the congress is "focused on jobs" and passage of a $100B job-creating stimulus bill is just not big enough.
If the dollar were falling and long-term Treasury bonds were falling, I would think differently. But they aren't.
