Re: "pizazzy" exchange rates

[Galbraith.James@xxxxxxxxxxxxxxx (James K. Galbraith)]

Following up on Ric's comment:

It is a little bit reassuring to me that Secretary Rubin seems aware that a
defense of the dollar through higher interest rates, which is what our
supposed allies are pressuring us for, would sink his administration even
more deeply than it already is.  It would have been helpful if he and his
colleagues had argued two years ago that the fall of the dollar had to come
sooner or later, given the structural (high employment) trade deficits
bequeathed to us by Ronald Reagan and the unwillingness of U.S authorities
to tolerate European unemployment rates. It might help further if he used a
little Mundell-Flemming analysis in Halifax: tight-money plus loose fiscal =
high dollar (Reagan) ====>  tighter fiscal plus less-tight money = falling
dollar (Clinton).  It would be good enough for government work, as they say.



*****
James K. Galbraith
LBJ School of Public Affairs
The University of Texas at Austin
Austin TX 78713
Phone: 512-471-1244 (o)
Fax:  512-471-1835 (o) 512-480-0246 (h)
Email: Galbraith.James@xxxxxxxxxxxxxxx