January 25, 2005
Whaddya Know? I'm Anti-American! (Or So Andrew Sullivan Says)
Daniel Drezner thanks Andrew Sullivan for a link to a post commenting on Chris Giles's Financial Times article stating that "in actions likely to undermine the dollar's value on currency markets, 70 per cent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the US." Daniel points out that the managers surveyed did not include the Big Asian Two--China and Japan--and that the fact that we have not seen the dollar fall more in the past two years casts doubt that words accurately reflect actions. I disagree: that central banks are unhappy holding their reserves in dollars is news whether or not they have been able to act on that unhappiness in the past; central banks have lots of policy goals to be balanced against each other.
More worrisome, perhaps, is that Dan Drezner appears happy to be cited by Andrew Sullivan in support of Sullivan's claim that:
www.AndrewSullivan.com - Daily Dish: ...the FT is now such an Anti-American paper, I'm beginning to wonder if its financial reporting isn't part of the bias....
What's supposed to be anti-American here? That the FT is worrying and reporting about the possibility of a dollar crash when foreign central banks find that they have to stop purchasing Treasury bonds. I have news for Andrew: if that's anti-American, every single international finance economist--including political appointees--at the U.S. Treasury, at the CEA, and at the Federal Reserve is anti-American. And the overwhelming bulk of international economists worldwide. And me.
I half understand Sullivan's position. Since he's converted to Paul Krugman's view of Bush administration fiscal policy, of the competence of Bush's neoconservative national security advisers, of torture, and of the moral standing of the Bush administration in general, he would look like a real idiot if he continued his Krugman-bashing campaign. So he needs to pick another target.
Dan Drezner, however, needs to rethink. It does him no good at all to be cited in support of the positions that the FT is an anti-American newspaper, or that worries about the possibility of a dollar crash are anti-American propaganda. That's not the reputation he needs.
Brad Setser's Web Log tells you why you should care about foreign central banks' attitudes toward the euro:
The real question is how the United States' growing need for external financing can be reconciled with central banks' desire to scale back on their dollar-reserve accumulation. It is hard to see how the US could raise the $800 billion plus it could well need in 2005 (assuming oil stays high) by selling private investors abroad ten year Treasury bonds that pay 4.14%.... By the way, the consensus forecast for the 2005 US current account deficit -- $694 billion -- strikes me as way too low. With realistic assumptions about transfers and income, a $694 billion current account deficit translates into a $600 billion trade deficit. That works out to $50 billion a month. November's deficit was $60 billion -- or $720 billion on an annualized basis. The trend line is still up.... Lots of folks must be predicting that the lagged impact of the 2003 fall in the dollar (and maybe the small additional fall in 2004) will have a big impact on the monthly trade balance by the end of 2005, and wipe out the impact of still strong US demand growth on US imports (non oil US imports are currently growing at a 15% clip). That is possible, but there is no evidence that it is happening....
UPDATE: Andrew Northrup is a national treasure:
Brad DeLong is cruel. Andrew Sullivan gave DeLong no reason to say those cruel true things, for Andrew Sullivan accuses people of opposing his current country of residence the way other men breathe. Or perhaps the way a dog barks - as a way of signaling displeasure or discomfort, or just as a way of drawing attention to itself, but with no real "meaning", at least not such as can be ascribed to human speech. In addition to conventionally-trained economists who hold conventional economic views, here is a list, by no means complete, of other people, groups, organizations and inanimate objects which Andrew Sullivan has identified, at one time or another, as enemies of the United States.
Dianne Feinstein, D-Calif.
Michael Moore, Gore Vidal, and Norman Mailer
The Daily Mirror
[many?] Islamist theocrats
Mark Morford, like some Americans
the Guardian's unmoderated internet message boards
The Guardian proper
[many/some] people in London
not the Economist, at a visceral level
one BCC journalist
John Simpson of the BBC (sternly)
Robert Mugabe, aided and abetted by the BBC
the ideologues who run the BBC
a battery of left-wing intellectuals
The Arab News
Germany and France
the DC sniper
[many in?] the Labor party of Tony Blair
many on the far left
Noam Chomsky's latest screed
professor Hisham Sharabi at Georgetown University
the far left
[many?] people who hate George W. Bush
the future democratic Iraq, "with any luck"
many of the mainstream left's allies
not Andrew Sullivan
And, of course:
Posted by DeLong at January 25, 2005 09:19 AM