GENERAL COMMENTS ON THE

CAPITAL MARKETS

ON BEING REALLY, REALLY

PREPARED FOR THE HOLIDAYS

We Must Get Ready For

A Weak Dollar World

We’ll grant him the title, and we’ll grant him the

argument for his case is well made, although the dollar

may well have a day or two of further strength before it

has gone from having been egregiously over-sold early

last week to becoming swiftly over-bought as it has

bounced materially from those lows. He argues that

the budget deficit is unmanageable; that the US trade

problems can only be repaired by a material

weakening of the dollar to make US goods cheap

abroad and foreign goods expensive here, and he

argues that Washington really has no choice but to

adopt “the time honored course for big time debtors:

print more dollars, devalue the currency and service

debt in ever cheaper greenbacks.” His arguments are

nothing new, although the weight of his voice makes

them resonate a bit farther.

However, what caught our eye was a paragraph well

down toward the end of the letter when he said that

Treasury Secretary Geithner should move swiftly

To invite his colleagues in the US, euro zone,

Japan and China to meet secretly, perhaps

between Christmas and New Year, to start

discussions out of the public spotlight. The big

question: what kind of monetary system will be

best serve the world given deep-seated

changes in the balance of economic power,

and what process can be followed to develop

it

We cannot imagine that Dr. Garten is speaking wholly

out of school on this issue; we cannot believe that this

is nothing more than idle meanderings on his part. We

have to believe that he’s had talks with ranking officials

here in the US and perhaps in the UK and even in

Europe regarding such a meeting, and it gives us

reason to be very, very concerned about what is

coming at us given an Administration that is openly leftof-

centre, openly solicitous of the foreign powers, and

openly given to “Change.” Perhaps we are reading far

too much into Prof. Garten’s public missive in The FT.

Certainly we hope that we are, but discretion and

caution are the far better parts of valor. Forewarned is

perhaps modestly fore-armed.

are not talking here about having one’s gifts bought

and wrapped , nor having one’s home decorated

properly, nor having one’s liquor cabinet well stocked

(although the latter will help immensely with the former

duties and we do strongly recommend making certain

that the latter is done first if the former are to be

properly accomplished!), but we are instead talking

about an ominous letter-to-the-editor written by Dr.

Jeffrey Garten, a long standing Washington insider and

a current professor of international trade and finance at

the Yale School of Management [Ed. Note: For those

who do not know who Dr. Garten is, we note that he

was the Undersecretary of Commerce for International

Trade in the Clinton Administration. Professor Garten

served in the Nixon White House’ Council on

International Economic Policy and also served on the

policy planning staffs of Secretaries of State Kissinger

and Vance during the Ford and Carter Administrations.

Professor Garten has written five books and is

currently the Juan Trippe Professor in the Practice of

International Trade, Finance, and Business at the Yale

School of Management, where he was once the Dean.

Thus, when he speaks, people tend to listen. Certainly

we do.]. The letter’s “title,” written in very bold print was