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Do as I say



I wrote a note earlier this week about the strange cabal of co-dependent nations who are playing macro hot potato with their fiat currency. The nexus of this group is the USD, the U.S. current account deficit, the U.S. bond market, and the U.S. fiscal deficit.

In response to some Q&A yesterday after a speech, Fed Governor Bernanke stated the following (bravo to Joanie McCullough at Bear for pointing this out);

"In particular, yes, it's true, the United States doesn't save very much and we have a fiscal deficit. Of course other countries too have fiscal deficits, by the way...I think the most constructive way to resolve it would be for foreigners to increase their domestic demand and lower their savings and for the United States to increase their savings..."

Call it the do as we do policy. This kind of hubris is hard to fathom. And in Beijing, in Tokyo, and in Brussels I suspect it is hard to swallow. Our article earlier this week suggested that such an alliance depends on the munificence of each player. Speeches - no, pontifications - like these from one alliance member to the other speed the day when one of them says no more.

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