Were Bush’s economic advisors visibly cringing while Bush was presenting his economic analysis to reporters, or were they just silently praying? CBSMarketwatch reports:
“The policy of my government is a strong dollar policy,” Bush said.
Ok so far.
Then Bush went on to repeat the phrase that markets have come to believe signals the policy of benign neglect.
“We believe that the markets should make the decision about the relationship between the dollar and the euro,” he said.
If it had ended there, Bush’s comments would not have been provocative. But the president continued:
“Therefore, to the extent that the federal government is involved with strengthening — making the conditions such that a strong dollar will emerge, we’ll do everything we can in the upcoming legislative session to send a signal to the markets that we’ll deal with our deficit, which, hopefully, will cause people to want to buy dollars,” Bush said.
“Independently, the Federal Reserve, under the leadership of Alan Greenspan, raised the interest rates yet again, a signal to the world markets that the Chairman is also aware of the relative currency valuations between the euro and the dollar,” he concluded.
Analysts were puzzled by Bush’s comments about Greenspan, particularly when Fed officials go to great lengths to distance their recent policy of gradual tightening from the dollar.
It seems that most market players sufficiently discount what Bush says about economics that his remarks had no major effect on the markets. They seem to understand that Bush has no clue about economics. Nevertheless, his remarks still reflect staggeringly poor judgement on Bush’s part, particularly for calling into question the Fed’s motives for its interest rate policy.
But perhaps Bush was then trying to fix things (in an odd sort of way) when he later made it completely clear exactly how poor his understanding of international economics is:
Bush said one way to combat the U.S. trade deficit, which hit a record $55.6 billion in October and which is a major factor behind the dollar’s slide, was to buy American.
“There’s a trade deficit. That’s easy to resolve. People can buy more United States products if they’re worried about the trade deficit,” he joked.
If Bush ever listened to his economic advisors he would understand that the trade deficit has nothing to do with Americans’ preference for imported goods over domestic goods, and everything to do with Americans’ preference for consuming more than they produce. So maybe the clever Bush added this comment to reassure the markets that he really has no idea what he’s talking about when it comes to international economics, so they really shouldn’t pay attention to what he says. If it weren’t for the slight detail that Bush is actually the person who gets to make the final decisions on economic policy for the country, reassuring the markets that he doesn’t understand how the economy works would be an excellent idea.