The Dollar Is Everyone’s Problem
In 1971, US Treasury Secretary John Connally famously told his counterparts in the G10 that “the dollar is our currency, but it’s your problem.”
Connally was being unexpectedly candid about the fact that, even though the greenback was the world’s main reserve currency, its foremost purpose was to advance US interests.
In June, the US Treasury added Japan to its “monitoring list” for potentially unfair foreign-exchange practices.
Although the Treasury stopped short of designating Japan as a currency manipulator – which could have resulted in the US imposing sanctions on one of its staunchest allies
Japanese authorities have indeed spent billions of dollars to prop up the yen, which has lost a third of its value since 2021
Ordinarily, monetary authorities will intervene to weaken the local currency to boost exports and enhance competitiveness.
The 1985 Plaza Accord, which led to the yen appreciating 46% against the dollar, did just that for the US, but diminished Japan’s competitiveness, prompting Japanese automotive companies to establish factories in America.
Hippolyte Fofack Project Syndicate 9 August 2024
The strong dollar
https://englundmacro.blogspot.com/2024/07/the-strong-dollar.html
1985 Higher U.S. interest rates and budget deficits had driven up the dollar and trade deficit.
At New York’s Plaza Hotel that September, the Reagan administration persuaded Japanese and European officials to boost their currencies against the dollar.
https://englundmacro.blogspot.com/2024/04/solid-growth-big-deficits-and-strong.html
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