- Treasury Secretary Steve Mnuchin didn’t voice support for a strong US dollar while speaking at the World Economic Forum this week.
- Markets hated it.
- Consider this example 1,437 of the administration taking something that should be simple and turning it into a gong show.
If the Trump administration excels at anything, it’s in turning something that should be easily manageable – if not completely benign – into an unmitigated fiasco. Treasury Secretary Steve Mnuchin’s performance at Davos serves as a perfect example.
“Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin said on Wednesday at a panel at the World Economic Forum in Davos, Switzerland.
This was not the right answer. In the name of global economic stability (and attracting investment to the US) the answer to any question about the dollar should be automatic, a no-brainer for any US Treasury secretary: “The US supports a strong dollar.” That is what the guidebook says you should say. Very simple.
But apparently Mnuchin, an alumnus of Goldman Sachs, is not one for no-brainers.
On his words, the dollar – which had been falling for weeks – fell to a three-year low at one point on Wednesday, and markets roiled. Wall Street, up to that moment, hadn’t been concerned about the dollar slide. Last week, one top money manager told me the slide was due to “petrodollar rebalancing,” and shrugged it off as if it was the last thing the US government should, or could be worried about.
But after what Mnuchin said, billionaire investors started freaking out about it in online blog posts. Thanks to him, what should be an afterthought is now a matter of international scrutiny and dismay.
So Mnuchin tried to backtrack that statement. On Thursday he explained that he was not concerned about a weak dollar short-term, and that of course the Trump administration preferred a long dollar in the long term and so forth. Trump himself had to go out and make a statement in support of dollar strength.
That’s fine, but it’s all too late. Now investors will vacillate between wondering if the Trump administration has a weak-dollar policy (bad for anyone wanting to buy US assets which would then go down in price), to anyone who thinks they have no policy (bad for anyone wanting to sleep peacefully at night).
None of this had to happen, especially not at the hands of someone who supposedly spent years in banking. It’s just another example of this administration’s talent for turning something that should be simple into a complete and total pandemonium. That is truly what they excel at.
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