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Europe's Loveless Lust for a Strong Dollar


Trichet just wants to use the big, strong dollar policy.


Seriously, European Central Bank President Jean-Claude Trichet can't possibly be serious when he says Europe takes the strong US dollar policy seriously.

... Trichet said officials in the euro area take seriously the US commitment to prevent the dollar from depreciating too much.

"We all note with considerable attention the statements made by American authorities as regards their support in favor of a strong dollar," Trichet told reporters in Luxembourg late yesterday after a meeting of European finance ministers. He also echoed the Group of Seven statement that "excessive volatility and disorganized developments in the exchange market was bad for economic development."

Luxembourg Treasury Minister Jean-Claude Juncker, who led the meeting of euro-area finance chiefs, said the ministers "discussed exchange rates extensively," adding that "it's a problem which worries us."

"We want a strong dollar, we need a strong dollar," French Finance Minister Christine Lagarde told journalists yesterday after the meeting. "We must remain disciplined" on our message, she said.

Two Out of Three Ain't Bad

I hope you recognized the tune. French Finance Minister Christine Lagarde is singing "Two Out of Three Ain't Bad"

I want you, I need you
But there ain't no way I'm ever gonna love you
Now don't be sad
'Cause two out of three ain't bad

The song "Two Out of Three Ain't Bad" has an interesting history. It was inspired by Saturday Night Live comedian Gilda Radner who was a Meatloaf fan. She approached Meatloaf, which typically sings only hard rock numbers and asked "Why can't you just do a simple love song? I want you, I need you, I love you."

"Two Out of Three Ain't Bad" was the result. Now, decades later, we get to hear Europe singing that very same tune.

Sorry Christine, Meatloaf's version was better.

Strong Dollar Policy Examined

The strong US dollar policy precedes Treasury Secretary Timothy Geithner and former Treasury Secretary Henry Paulson, back to Treasury Secretary John Snow (if not long before that).

Consider The Associated Press' December 2004 article Treasury Secretary Snow Reiterates Strong Dollar Policy.

... Snow reiterated Friday that the Bush administration has a strong dollar policy.

Snow's comments, made in an interview with CNBC, came as the dollar sat at an all-time low against the euro and near a 4.5-year low against the yen.

Asked if the administration has a policy of benign neglect toward the US currency or if it still has a strong dollar policy, Snow said, "Well of course, there has been (a strong dollar policy) and it continues. It's the rock solid foundation of our policy."

Strong Dollar Policy Thesis

There you have it. The strong dollar policy is the rock solid foundation of the strong dollar policy.

You can't make this stuff up.

The US strong dollar policy consists of nothing but yapping about it. That was true with Snow, with Paulson, and now Geithner. It's beyond incredulous to believe that Trichet is serious when he says he believes the strong dollar policy. If he really believes what he says, he is unfit to be head of the ECB.

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