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New topic 2017-02-06 20:33:59 description
Marty Feldstein Forecasts the Future
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| Martin Feldstein |
With increasing frequency, the op-ed pages of the Wall Street Journal are opened to important people or important ideas. On April 28, 2006,Professor Martin Feldstein of Harvard wrote an article which purports to show how it is possible to have the American currency fixed for Americans but float for foreigners. After reading it twice, I conclude he is saying something rather different, and softening some startling announcements with circumlocution. It is my view that he says the following:
Inflation is not a worry; targeting 2% inflation with adjustments in short-term interest rates will take care of it.
International trade deficits need not be a worry, either, if only the Treasury Department (Could he mean nice old John Snow?) would allow the dollar to float on the international market. Not pure floating, of course, because it is a dirty world out there. The necessary dirty floating might hurt at first, especially American global businesses, but the sooner the boil is lanced, the better we will be. American exports of capital goods, consumer goods, and industrial supplies will especially benefit. Those who worry that trade deficits will weaken the dollar have got it backward a weaker dollar will correct the trade deficit. Yes, some people will be hurt by this.
In particular, high-wage countries like Europe, Canada, and Japan will be hurt, possibly severely hurt.
You will be able to tell that this plan has been set in motion when you see an international conference called among low-wage countries. The main purpose will be to reassure them that the U.S. Treasury won't punish them for strengthening their currency.
You will be able to tell this proposal has been rejected, probably for political reasons, if nothing soon happens to soften housing prices. And the word soon is emphasized. Because if they don't soften, they will break.
Originally published: Thursday, June 22, 2006; most-recently modified: Thursday, May 23, 2019