Author Archives: jdingel

Why Oh Why… : Dollar Decline Edition

Dean Baker laments the uselessness of the WaPo‘s reporting on the dollar’s decline:

For example it tells us about a Kenyan coffee grower who is being hit because he sells his coffee for dollars that are rapidly losing their value. Well, coffee is priced on a world market. Its price fluctuates by the hour. If the dollar lost 90 percent of its value, then coffee would simply sell for ten times as much, measured in dollars, unless coffee was also declining in value. If coffee is declining in value, then the farmer’s problem is the decline in the value of coffee, not the decline in the value of the dollar. The story would be different if the coffee grower was locked into a longterm contract denominated in dollars. This may be the case, but the article doesn’t say anything about longterm contracts…

The sharp fall in the dollar over the last five years is a big deal for people in the United States and the rest of world. However, when the Post devotes a front page story to the topic it should at least make sure that it conveys some real information. This one doesn’t.

Globalization discomforts

From a story in the Minneapolis Star Tribune today:

Sure, outsourcing is part and parcel of 21st century life; even the Star Tribune has started to have some of its advertising work done in India…

But still. There’s just something… off about having “Minnesota Nice” sweatshirts with “Made in Pakistan” on the label or “Up North” t-shirts from way down south (Honduras).

What’s off?

The WTO is less than amazing

Dani Rodrik says the WTO is amazing because it forces the United States to eventually act on cotton subsidies. Ben Muse reminds him that the recent WTO ruling was criticizing the United States for its failure to comply. It’s interesting that the WTO has enough institutional legitimacy and clout to eventually force the United States to give in, but keep in mind that this dispute has been ongoing for years.

US cotton programs not WTO-compliant

The WTO has once again ruled in favor of the Brazilian complaint against US cotton subsidies, finding that US reforms have not brought its subsidies into compliance with previous WTO dispute settlement panel decisions.

15.2 (pdf): “The Panel considers that to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding are inconsistent with the obligations of the United States under the covered agreements, these recommendations and rulings remain operative.”

Addendum: FT story.

Sachs-Warner?!

Why are people still using the Sachs-Warner index in empirical work? It’s a dummy variable, and it’s not driven by the tariff and NTB components. Surely by now someone must have built and made readily available a cross-country data set that better describes trade policy. And if not, that’s a project worth pursuing, right?

Is the dollar dive reducing global imbalances?

The FT on the dollar: adjustment or affliction?

But the growing evidence that the dollar’s decline will not be followed by a narrowing of global imbalances, merely a shifting of them around the world, gives cause for real concern.

Normally cool heads in central banks and international organisations are uttering notes of alarm. Mervyn King, governor of the Bank of England, warned last month, for example, that the big upward movements in other Group of Seven leading countries’ currencies against the dollar, while many oil states and China maintained a de facto dollar peg, were causing “great currency tensions”.

“I came away from the IMF meetings in Washington recently more concerned about the implications of these tensions precisely because the unwinding of the imbalances is not just a hypothetical prospect out there, but is happening now,” he said.