The dollar; a beggar they neighbor policy?
Farm and Ranch November 15, 2010 The United States has received plenty of criticism from other countries over the move by the Federal Reserve to pump 600-billion dollars into the U.S. economy and its impact on the value of the dollar. American Bankers Association economist Keith Leggett sees the currency battles as part of the overall discussion of trade policy. Leggett: “What is occurring right now is that with quantitative easing by the Federal Reserve the impact will be a weakening of the dollar relative to other currencies. That is good for U.S. exports but it is bad for the other countries‘ exports. Now these other countries may decide they may need to intervene in foreign exchange markets to devalue their currencies. So you end up having these competitive devaluations occurring where central banks intervene in the currency markets to weaken their currencies to promote their export sectors. Now what that really amounts to is that you are adopting a beggar thy neighbor policy. I will succeed by making you worse off.” The risk says Leggett is protectionism. Leggett: “And so what occurs is that as countries watch this taking place they may adopt protectionist policies so as to protect their domestic industries from exports of other countries, especially if they view the country as manipulating their currency to gain a competitive advantage relative to their own currency.” ABA economist Keith Leggett. I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on Northwest Aginfo Net.
