Who could have figured? Just one day past the publication date of Peter Schweizer's "Architects of Ruin: How Big Government Liberals Wrecked the Global Economy -- and How They Will Do It Again if No One Stops Them," Sarah Palin found time to promote the book on her Facebook page. Schweizer must be delighted at the product placement -- last I checked, Sarah had 918,902 Facebook "supporters." Cha-ching!
Sarah's opening Facebook salvo -- a sober, footnoted (!) analysis of global economic trends that includes sage observations about the dollar, the price of oil and gold, and the consequences of "out-of-control" debt -- is making something of a splash. The Financial Times immediately used her post as the hook for a piece titled "Obama's critics pounce on falling dollar as fears grow over currency."
Sarah Palin, the former vice-presidential Republican candidate, yesterday sought to link the dollar decline to rising US indebtedness and dependence on foreign oil. "We can see the effect of this in the price of gold, which hit a record high today in response to fears about the weakened dollar," she wrote on her Facebook site.
Stop and think about that for a second. A Facebook post supposedly written by Sarah Palin, a woman who proved unable during the 2008 presidential campaign to put together so much as a single coherent sentence on global economic affairs, much less a complete paragraph, is now considered newsy enough to lead off an article exploring the politics of the dollar. It is very, very rare that I agree with the American Enterprise Institute, but I've got to say amen to AEI's Norm Ornstein, who is also quoted in the FT article.
"The dollar has always been a testosterone issue among America's political classes," said Norm Ornstein, a veteran analyst at the conservative American Enterprise Institute.
"This time there may be a legitimate debate to be had over the dollar's reserve status, but Sarah Palin is not qualified to participate in it."
Ouch! A direct hit from your own side! That's gotta hurt.
Palin's argument, such as it is, takes Robert Fisk's "scoop" on the secret global plot to crush the dollar, discussed here earlier this week, as, shockingly, the launching point for her familiar "drill baby drill" thesis of American energy independence. If you crave an authoritative "fisking" of Palin's Fisk-iness, the Economist's FreeExchange blog delivers. A summary: More drilling in the U.S. is unlikely to protect us from foreign nations who plan to "dump the dollar as their trade currency."
But much as I enjoy mocking Palin, I also have to concede that the semiotics of dollar politics are perfect for her. When the dollar rises in value compared to the currencies of other nations, it is "strong." When it falls, it is "weak." Nobody wants to be weak. And Sarah Palin is all about being strong.
But, as noted here yesterday, a dollar that is too strong isn't good for American exports, or for American manufacturing workers. And one reason for the dollar's supposed "weakness" right now is, as the Financial Times points out in a separate story today, "optimism" about the ever-rosier prospects for global economic growth. Now that investors no longer fear a global depression, their appetite for risk is rising, and they are moving their money out of the world's safest possible haven -- which just happens to be the mighty dollar. Indeed in response to this happy global trend, a bevy of Asian central banks are frantically buying U.S. dollars right now, because it is in their interest to keep their currencies "weak" to benefit their own export position.
In this context, a weak dollar is a good thing because it is a strong signal that people are no longer eying the nearest window as their exit strategy.
Despite all the talk about the dollar's precipitous plummet, the greenback is now, according to the Federal Reserve, back to about where it was in August 2007, shortly before the financial crisis began. So was it too strong or too weak then? Clearly that depends on the beholder -- Midwestern American workers getting crushed by Chinese competition probably weren't too crazy about a pumped up, muscle-bound dollar. Could it sink too low in the future? Sure, especially if the currently nonexistent threat of inflation gains traction. But somewhere in there there must be a sweet spot, where the value of the dollar is advantageous to American workers but not too distressing to foreigners sitting on huge stashes of U.S. currency.
Strength, in this context, is not necessarily a positive. Not an easy case to make in the hyper-stupid landscape of American political discourse, where sense and reason too often get portrayed as weakness, but we'll keep trying, anyway.