Why Steve Mnuchin

FILE
PHOTO: U.S. Treasury Secretary Steve Mnuchin arrives at Joint
Base Andrews
Thomson
Reuters

• 
  Treasury Secretary Steven Mnuchin touted the benefits
  of a weak dollar, causing a commotion in currency
  markets.
  


• 
  The president himself was forced to echo the Treasury's
  long-standing strong-dollar mantra, but the US currency
  continued to fall.
  


• 
  Lawrence Summers, former Treasury Secretary under
  President Bill Clinton, wrote in a Washington Post op-ed that
  Mnuchin's comments fell flat in both "style and
  substance."
  

---

Treasury Secretary Steve Mnuchin’s remarks on the benefits of a
weaker dollar in Davos, whether an off-the-cuff gaffe or
part of a coordinated policy strategy, earned him an
unusually blunt rebuttal from one of his predecessors in that
role, Harvard economist Lawrence Summers.

In a
Washigton Post op-ed, Summers argued that Mnuchin's comments,
which sent the dollar reeling despite attempts to walk them back,
were a failure on the global stage in both "style and substance."

"There are good economic reasons the last seven Treasury
secretaries stayed with the strong dollar mantra," he wrote.

"Yes, a weaker dollar means cheaper U.S. exports. But it also
means higher priced imports and so less purchasing power for
American incomes. It is much better to strengthen our
fundamentals than to make ourselves poorer by putting our goods
on sale as we push our currency down."

Mnuchin told reporters in Davos that "obviously a weaker dollar
is good for us as it relates to trade and opportunities."

He did later add the currency's short-term value is "not a
concern of ours at all." And his boss, President Donald Trump,

all but walked back Mnuchin’s remarks when, likely prompted
by one staffer or another, he echoed the long-running "strong
dollar" mantra repeated by the US Treasury.

Still, financial markets took it as a statement of administration
policy, taking the dollar down sharply for three sessions
running.

Mnuchin’s tone ignores America's 21st-century economy, which is
based more on consumer spending and services than manufacturing
and exports. It also conflicts with American interests insofar as
they risk competitive devaluations elsewhere — witness European
Central Bank head Mario Draghi’s thinly-veiled
rebuttal of Mnuchin immediately after his remarks.

Summers continued: “Previous Treasury secretaries had little to
say about the dollar. What they have said has been carefully
scripted and oriented to long-term soundness. They insisted on
being their administration’s sole spokesman on foreign exchange
issue."

Through both Republican and Democratic administrations, Treasury
secretaries have been extremely cautious about their currency
comments, arguing that, in the long-run, a strong dollar would be
a reflection of America's economic strength.

In contrast, Summers said, "Mnuchin spoke without a script, began
with near-term commercial considerations, and was apparently
contradicted by the Commerce secretary. None of this can be
reassuring to those looking to judge the competence and
credibility of the Trump administration."

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