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Bloomberg Poll Casts Doubt on Barack and Ben

Posted by Larry Doyle on November 11, 2010 10:51 AM |

That haze hanging over Washington DC is not the residue of last week’s elections, it is the less than sanguine outlook of investors on the policies and programs being put forth by President Barack Obama and our lead central banker, Fed chair Ben Bernanke. How hazy? Well, close to two thirds of those polled recently by Bloomberg are pessimistic about Barack’s policies and how they affect the investment climate in the United States. More than three quarters of those polled believe the Fed’s newly launched round of quantitative easing will have little or no benefit on unemployment. Ouch!!

In regard to the greenback, almost seven in ten polled believe the U.S. is deliberately trying to weaken the value of our dollar relative to other currencies. Who else believes this?

None other than former Fed chair Alan Greenspan. He says as much in this morning’s Financial Times, Greenspan Warns Over Weaker Dollar:

The US is pursuing a policy of weakening its currency which is driving up exchange rates in the rest of the world, according to Alan Greenspan, the former chairman of the Federal Reserve.

Writing in today’s Financial Times ahead of the G20 meeting in Seoul, Mr Greenspan argues that with China also holding down the renminbi, the upward pressure on currencies elsewhere risks a return to widespread trade protectionism. Mr Greenspan criticises China for continuing to prevent the renminbi strengthening, saying it reflects a misguided view that a weak currency is necessary for export growth and political stability. “China has become a major global economic force in recent years,” he writes. “But it has not yet chosen to take on the shared global obligations that its economic status requires.” More unexpectedly, Mr Greenspan adds: “America is also pursuing a policy of currency weakening.”

Mr Greenspan does not specify which agency in the US system is implementing policies to weaken the dollar, but his words are likely to be seized on by critics of the US Federal Reserve. Governments around the world have complained that the Fed’s recent move towards pushing more dollars into financial markets is creating destabilising capital movements and pushing up exchange rates elsewhere. In the US system, formal responsibility for exchange rate policy lies with the US Treasury. Tim Geithner, Treasury secretary, has always maintained that the US’s policy of a strong dollar is unchanged, though the Treasury has never specified what value that implies.

What are the real costs of our leaders’ lack of clarity –if not being outright disingenuous–in our government’s approach to the value of our currency? Credibility. I highlighted as much in my writing last week, The Real Cost of Quantitative Easing.

Speaking of credibility, you do not need to read too much into the Bloomberg poll (click on image below for a pdf document of the poll and its methodology) to see that investors have a dim view of the policies put forth by Barack Obama and Ben Bernanke. The numbers speak for themselves.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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