Over at Politico, Eamon Javers notes an odd trend in the Drudge Report:
On Tuesday, Matt Drudge ran a headline about the weakening U.S. dollar on his website, Drudgereport.com. In and of itself, that would be unremarkable, except that it was the 18th time Drudge had posted a link to a story about the weak dollar this month.
And October was only 20 days old.
Clearly, Matt Drudge has developed a fascination with the declining U.S. dollar.
"He's fixated on it," said Tom Rosenstiel, director of the Pew Research Center's Project for Excellence in Journalism. "There's no question that Drudge can alter what people are paying attention to."
Market watchers say it's unlikely that Drudge is actually moving the currency markets with his relentless attention.
"I don't think that anyone who seriously trades currencies reads The Drudge Report before making important buy or sell decisions," said Chris Roush, a professor of business journalism at the University of North Carolina at Chapel Hill. (emphasis added... because that's a priceless quote)
Drudge isn't the only one obsessed about the dollar. Last week, James Pethokoukis blogged the following for Reuters:
The aftershocks of the global financial crisis may now be propelling the dollar back to the political forefront. The greenback's continuing slide makes it a handy metric that neatly encapsulates America's current economic troubles and possible long-term decline. House Republicans for instance, have been using the weaker dollar as a weapon in their attacks on the Bernanke-led Federal Reserve.
For more evidence of the dollar's return to political salience, look no further than the Facebook page of Sarah Palin. The 2008 GOP vice presidential nominee "” and possible 2012 presidential candidate "” has shown a knack for identifying hot-button political issues, such as the purported "death panels" she claims to have found in Democratic healthcare reform plans. In a recent Facebook posting, Palin expressed deep concern over the dollar's "continued viability as an international reserve currency" in light of huge U.S. budget deficits.
She might be onto something here, politically and economically. A recent Rasmussen poll, for instance, found that 88 percent of Americans say the dollar should remain the dominant global currency. Now, the average voter may not fully understand the subtleties of international finance nor appreciate exactly how a dominant dollar has benefited the U.S economy. But they sure think a weaker dollar is a sign of a weaker America.
OK, let's be as plain as possible about this - as a reserve currency, the dollar is not going anywhere. Really.
The dollar's slide in value has been predictable, as the need for a financial safe haven has abated. By and large, a depreciating dollar helps the U.S. trade balance (though it would help much more if the Chinese renminbi got in on the appreciation).
Even the Chinese, who have spoken like they want an alternative to the dollar as a reserve currency, are in point of fact not doing much to alter the status quo. Why? To paraphrase Winston Churchill, the dollar is a lousy, rotten reserve currency - until one contemplates the alternatives.
Because all of the alternatives have serious problems. The euro, the only truly viable substitute for the dollar, is not located in the region responsible for the largest surge of growth. It would be unlikely for the ASEAN +3 countries to agree to switch from the dollar to a new currency over which regional actors have no influence (the Europeans wouldn't be thrilled either, as it would lead to an even greater appreciation of the currency). Oh, and the European Union has no consolidated sovereign debt market. The euro is worth watching, but it's not going to replace the dollar anytime soon.
The other alternatives are even less attractive. Most other national currencies beyond the euro - the yen, pound, Swiss franc, Australian dollar - are based in markets too small to sustain the inflows that would come from reserve currency status. The renminbi remains inconvertible. A return to the gold standard in this day and age would be infeasible - the liquidity constraints and vagaries of supply would be too powerful. There's the using-the-Special-Drawing-Right-as-a-template-for-a-super-sovereign currency idea, but this is an implausible solution. As it currently stands, the SDR is not a currency so much as a unit of account. Even after the recent IMF authorizations, there are less than $400 billion SDR-denominated assets in the world, which is far too small for a proper reserve currency.
So, what's really going on here with the dollar obsession? I suspect that with the Dow Jones going back over 10,000, Republicans are looking for some other Very Simple Metric that shows Obama Stinks. The dollar looks like it's going to be declining for a while, so why not that? Never mind that the dollar was even weaker during the George W. Bush era -- they want people to focus on the here and now.
The thing is, I'm not sure this gambit is going to work. People who already think Obama is a socialist will go for it, sure, but that's only rallying the base. I'm not sure how much fence-sitters care about a strong dollar, however. If anything, populist movements tend to favor a debasing of the currency rather than a strengthening of it.
Still, I'm just a political scientist -- I'm sure that, "theories on political behavior are best left to CNN, pollsters, pundits, historians, candidates, political parties, and the voters."
So, have at it, readers! Will the falling dollar be a source of populist outrage if Drudge links to it enough?
UPDATE: contrasting takes from Kevin Drum and Megan McArdle.
I wonder whether Matt Drudge understands that keeping the dollar strong undermines American industry? Or whether he cares?
If it DOES become an item of populist outrage, for how many people do you think the outrage will focus on the fact that the (longer-run) decline began in early 2002, and how many do you think will focus solely on the decline since the beginning of 2009? Yeah, that's what I thought, too.
Even the Chinese, who have spoken like they want an alternative to the dollar as a reserve currency, are in point of fact not doing much to alter the status quo. Why? To paraphrase Winston Churchill, the dollar is a lousy, rotten reserve currency - until one contemplates the alternatives.
We've got the Chinese nice and trapped on that one. The instant they make a major sell-off of their dollar reserves, the dollar will depreciate heavily in value, causing the rest of their reserves to plummet in value and crushing Chinese exports.
For what it's worth, the Bank of Canada (and we all know they're out to destroy America) is trying to lower the value of the Loonie since if it gets too high it hurts exports.
For what it's worth, the Bank of Canada (and we all know they're out to destroy America) is trying to lower the value of the Loonie since if it gets too high it hurts exports.
Umm...the unemployment rate has risen by nearly 40% under Obama. We've lost 4 million jobs in less than a year. Take a peak outside poli sci academia, and you'll see there's really no need to manufacture fake outrage.
... why harp on the dollar?
It didn't work for the Democrats under Bush, don't know why it should work for the Republicans under Obama.
http://www.businessweek.com/magazine/content/05_11/b3924034_mz007.htm
http://www.americanprogress.org/issues/2008/05/weak_dollar.html
1899 L Street NW, Suite 550 | Washington, DC 20036 | Phone: 202-728-7300 FOREIGN POLICY is published by the Slate Group, a division of Washingtonpost.Newsweek Interactive, LLC. All contents ©2009 Washingtonpost.Newsweek Interactive, LLC. All rights reserved.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.
Read More »
Contact me at: ddrezner [at] gmail.com (But click here to read my e-mail policy)
Reviews
"Sharp but informal commentary on politics and foreign policy." -The New Republic
"Dan Drezner is terrific.... Excellent blog." -Andrew Sullivan
"Dan's stuff is always worth reading." -Eugene Volokh
"One of the essential weblogs." -Gawker.com
"Old battle horse of the blogosphere." -Jewcy.com
"Soft porn." -Amitai Etzioni
"Spawned grave atrocities and vast destruction." -Glenn Greenwald
"Monday morning quarterback... conservative robot... the very foundation of troubles in this country." -not-so-random readers
5 Surprising Countries Going Nuclear
America's Reassurer-in-Chief
Iraq Policy Fight: State vs. DoD in Baghdad
Is Wal-Mart Taking over the World?
Read Full Article »