Back in August, the NYT editorial page displayed
its economic ignorance by blaming the weak dollar, inter alia,
on a low domestic savings rate. It got slapped
down by both Greg
Mankiw and Dean
Baker: a low savings rate causes a stronger dollar, and raising the domestic
savings rate would only serve to weaken the dollar further. D’oh!
Of course, we all make mistakes. But smart people learn from their mistakes,
especially when they get free advice from eminent economists pointing those
mistakes out. Which is why it’s rather depressing to see the NYT make exactly
the same mistake all over again this morning:
Dollar weakness is home-grown. It is rooted in the borrow-and-spend behavior
of the United States government and American consumers and in a corollary
lack of domestic savings that necessitates foreign borrowing.
Baker’s on
the case, again, of course. But if they didn’t listen last time, the NYT
ediorialists are unlikely to listen this time. The fact is that fiscal recklessness
of the sort displayed by the present administration is harmful in many different
ways – but the one thing you can’t blame on fiscal recklessness
is the weak dollar.