The NYT, the Dollar, and the Savings Rate

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.

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