I understand that but thank you for further clarification. Again, "treason" need not have narrow legal meaning. Consider for instance its application to some act in France or Australia: whatever is labeled as treasonous, whether fairly or not, lies outside the realm of our Constitution. It is not in the constitutional sense but in its general sense that I was using this word.
One would suspect that they would be opposed to having it serve that role
Very true; consistency is not a pronounced feature of the isolationists' worldview.
I share the feelings in this particular case, however. It is one thing for us to debate whether the existence of a single reserve currency is desirable or whether the demise of the dollar as such currency is inevitable. It is something altogether difference, however, when a U.S. official, be it a member of the administration, Congress or the Fed, precommits to stand aside should the dollar collapse occur. I do find Geithner's statement to be nothing short of preposterous.
It well may be that I am overlooking something essential here, something that mitigates Geithner's behavior. Please tell me if so. What do you think of this?
Quite frankly, I am not sure what I think about what the proper role of the dollar in the international economy should be. It never attained this role because of the intentions of the the US government or people which is somewhat problematic in itself.
It attained that status by virtue of the fact that the Allies won WWII and the US was the only industrial base left standing and the only power with the ability to finance the return of international trade. Had the choice been left to the American people I have little doubt they would not have voted to allow it. But it really wasn’t allowed that choice.
Of course, you also know that economics is a matter of choices and there are negative and positive results for each choice. If the decision has been made to depreciate the dollar (and there have been numerous statements by authorities to that effect over the years), it will mean that imports will become less competitive and exports will become more so which will help the economy wrt the trade balance. Thus, employment and production will pick up.
Unfortunately, it will also spur inflationary pressures and interest rate increases. But the need for such a move (exchange rate depreciation) goes back about a decade and is related to financing the costs of the wars we have had to fight in the Middle East. Since our currency has been the reserve currency it has been relatively simple to force the rest of the world to share in the costs of financing wars in Iraq and Afghanistan through manipulation of the value of the dollar.
My problem with the fixed exchange rate regime is that it is based upon political decisions arrived at at a particular moment in time and a status quo which never (and can never) remain the same so that the political decision continues to justify the power relations going forward. Establishing the fixed exchange rates at Bretton-Woods allowed the European economies to get back on their feet because the dollar was overvalued. This made the ROW exports highly competitive and restricted our exports.
But that need only lasted for about a decade.
As always it was war which knocked the fixed rates for a loop and forced the US off the Gold Standard under Nixon. In this case the Vietnam War.
As to Geithner, I have no interest in defending him or his actions and can’t help but state he would never even be in the office had he been appointed by a Republican because of his tax fraud. However, I have to ask those who are against depreciation what moves they would support to defend it. If the dollar is depreciating when the economy is in the toilet it will only continue to do so IF the economy improves since that will mean more imports and higher prices domestically.
In order to obtain a higher exchange rate the monetary authorities would have to raise interest rates significantly. And/or the fiscal authority would have to restrict gov. expenditures dramatically (which NO one is proposing or able to do), raise tariffs. There is no political understanding within the People to support such moves.
Given all that I see no real alternative to allowing the markets to continue to set the value of the dollar and will continue to point out to those romanticizing gold that the value of the dollar will always be based upon the American economy not some arbitrary value of that beautiful, shiny metal we all love to possess.
Unfortunately, there is a psychological component in the equation through which successful policy makes a positive impact on the exchange rate and unsuccessful ones make a negative impact. Since Urkel is totally clueless there are not going to be any of the former and will continue to be MANY of the latter. Just think what a negative impact Obamacare has on the exchange rate with the reality of huge increases in government spending and deficits.