Snow Backs `Strong Dollar,' Urges Tax Cut for Economy

Bloomberg ^ | May 11, 2003 | Simon Kennedy and Alex Canizares

[bruinbirdman]

U.S. Treasury Secretary John Snow said he continues to support a strong dollar and he predicted President George W. Bush's tax cut would fortify that by boosting a ``soggy'' economy.

``We believe in a strong dollar,'' Snow told ``Fox News Sunday.'' ``The best thing we can do to have a strong dollar is to see that the fundamentals of the economy are strong and that's why we come back to the president's jobs-and-growth plan.''

Snow spoke after a week in which the dollar fell by the most against the euro since March and traded within 0.5 percent of a four-year low. It has dropped in seven of the last eight weeks and has fallen 21 percent against the euro and 10 percent against the yen during the past 12 months.

The Treasury chief projected that the dollar would benefit from a more vibrant economy. He used appearances on four television news shows to say the Bush administration is focused on securing a tax cut to gird an economy.

Indicating acceptance if not endorsement of the dollar's drop, Snow said ``the dollar's value gets set in competitive exchange rates,'' and he told ABC's ``This Week'' that a lower currency ``helps exports, and I think exports are getting stronger as a result.''

Exports fell by $8.6 billion at an annual rate in the first quarter, almost half their decline of the previous three months and the weaker currency is helping boost profit at companies including 3M and United Technologies by making their goods cheaper overseas and increasing the value of international sales when they are converted back into dollars.

`Under-performing Its Potential'

With an unemployment rate of 6 percent in April and gross domestic product expanding at an annual rate of just 1.6 percent in the first quarter, Snow told NBC's ``Meet The Press'' that the economy is ``under-performing its potential.''

``The economy is in recovery, but it's not a robust economy,'' he said.

A $550 billion tax cut would add 1 percentage point to GDP growth in the fourth quarter, creating 400,000 jobs, he said.

``To create a full employment economy, we need to double'' the 1.6 percent growth rate, he told ABC. ``We need to double that, plus we need to be up in the mid-threes at least, and we can get there.''

[John Jorsett]

Nuts. And here I thought Olympia Snowe had had a change of heart ...

[Ahban]

If they want a strong dollar then why do they keep M3 growing at record levels, keep interest rates next to nothing, and continue spending kazillions?

[Dog Gone]

Monetary policy is under the control of Alan Greenspan, not the Administration. But you knew that.

[Moonman62]

Indicating acceptance if not endorsement of the dollar's drop, Snow said ``the dollar's value gets set in competitive exchange rates,'' and he told ABC's ``This Week'' that a lower currency ``helps exports, and I think exports are getting stronger as a result.''

Oh sure. He supports a strong dollar, but he supports a weak dollar too. BTW, foreign currency is the most manipulated market there is. It rarely reflects the true value of a currency.

Exports fell by $8.6 billion at an annual rate in the first quarter, almost half their decline of the previous three months and the weaker currency is helping boost profit at companies including 3M and United Technologies by making their goods cheaper overseas and increasing the value of international sales when they are converted back into dollars.

Sheesh, the dollar is lower and exports are still falling. That's what happens when the politicians create a hostile environment for capitalism. CEO's are more interested in staying out of jail than creating jobs.

[Siegfried]

Don't listen to Snow's words, just look at what the administration is doing to the dollar since his selection as replacement for O'Neill:

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=d6

The dollar has slipped quietly, but steadily, downwards from 106 to about 95.

As with most things in economics, there are good things and bad things about a weak dollar policy. But don't let Snow's cheerleading about "supporting a strong dollar" blind you to what they're actually doing.

I heard Brit Hume put a straightforward question to Snow about explaining why the dollar was dropping and Snow just answered with some kind of balderdash about the dollar being subject to market forces, yada, yada, yada... I was hoping Brit would follow-up with the same question worded more forcefully but Tony Snow interrupted and moved them to another story. Too bad.That would have been the best segment of the show if Tony hadn't cut off Brit's questioning.

[SAJ]

The FX market has already long since learned to fade Snowboy. Yet another case in point tonight...EUR/USD up another 75 pips here.

[Orangedog]

Snow Backs `Strong Dollar...

Great! Now if he get Greenspan and the rest of the Fed to lay off of the cough syrup and stop monetizing the debt....