Paper Soldiers: How the Weaponization of the Dollar Changed the World Order - Hardcover

Mohsin, Saleha

 
9780593539118: Paper Soldiers: How the Weaponization of the Dollar Changed the World Order
Hardcover
ISBN 10: 0593539117 ISBN 13: 9780593539118
Verlag: Portfolio, 2024

Inhaltsangabe

"Incisive debut treatise... Mohsin brings to the proceedings a reporter's eye for story" — Publisher's Weekly

From Bloomberg News reporter Saleha Mohsin, the untold story of how one of America’s most invincible institutions—the Treasury—has used the U.S. dollar to define America’s role in the world, and our economic future.

In 1995, Treasury Secretary Robert Rubin re-defined the next thirty years of currency policy with the mantra, “A strong dollar is in America’s interest.” That mantra held, ushering in exceptional prosperity and cheap foreign goods, but the strong dollar policy also played a role in the devastating hollowing out of America’s manufacturing sector. Meanwhile, abroad, the United States increasingly turned to the dollar as a weapon of war. In Paper Soldiers, Saleha Mohsin reveals how the Treasury Department has shaped U.S. policy at home and overseas by wielding the American dollar as a weapon—and what that means in a new age of crisis.

For decades, America has preferred its currency superpower-strong, the basis of a "strong dollar" policy that attracted foreign investors and pleased consumers. Drawing on Mohsin's unparalleled access to current and former Treasury officials like Robert Rubin, Steven Mnuchin, and Janet Yellen, Paper Soldiers traces that policy's intended and unintended consequences, including the rise of populist sentiment and trade war with China—culminating in an unprecedented attack on the dollar’s pristine status during the Trump presidency—and connects the dollar's weaponization from 9/11 to the deployment of crippling financial sanctions against Russia. Ultimately, Mohsin argues that, untethered from many of the economic assumptions of the last generation, the power and influence of the American dollar is now at stake.

With first-hand reporting and fresh analysis that illustrates the vast, often unappreciated power that the Treasury Department wields at home and abroad, Paper Soldiers tells the inside story of how we really got here—and the future not only of the almighty dollar, but the nation’s teetering role as a democratic superpower.

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Über die Autorin bzw. den Autor

Saleha Mohsin is the Senior Washington Correspondent for Bloomberg News, covering policy, politics, and power in Washington, D.C. An Ohio native, she previously lived in Oslo, Norway, and in London.

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1.

Surviving Donald Trump

It was January 24, 2018, and the seventy-seventh United States secretary of the Treasury, Steven Mnuchin, was in the bucolic resort town of Davos, Switzerland. Hundreds of the alpine city's residents had fled to make room for an exclusive group of self-described thought leaders gathered for the World Economic Forum's annual conference. This year, for a weeklong winter camp dedicated to big problems, lavish parties, and cigar bars, the security bill topped $9 million. In attendance was an incongruous collection of people: 53 heads of state, 116 billionaires, and, for some reason, Elton John.

But before Steven Mnuchin could even begin to hobnob with the global elite gathered, the Treasury chief made a faux paus that put the dollar on an immediate weakening streak and momentarily brought the world to the precipice of a full-blown currency war for the first time in more than three decades.

All because of just seven words: "A weaker dollar is good for us."

While there was more to the statement that Mnuchin made to reporters shortly after breakfast, this was the only part that the world's economic policymakers, business leaders, and investors cared about. To the untrained ear, it was a dull phrase. But for Mnuchin's constituents in economics and finance, it was scary: secretaries aren't supposed to yearn for a weak value for the dollar.

To world leaders like Angela Merkel, the battle-tested German chancellor at the time, Mnuchin had just obliterated a rule that took decades to hone: world leaders do not talk about their currencies. Such chatter amounts to verbal intervention, or "jawboning" in policy parlance, which is intended to hint at a government plan that includes a preferred value for its currency. It suggests that the government is willing to use its own cash to jump into foreign exchange markets, to influence the forces of supply and demand on currency values by buying or selling dollars. As a mark of sophistication and commitment to fair economic integration, in recent decades the world's most influential nations, the Group of Twenty, had refrained from such activities, a pledge enshrined in dozens of joint statements and agreements. Mnuchin now appeared willing to defy that.

It would quickly emerge that the Treasury chief had no intention of signaling anything new in U.S. currency policy. But to investors, the comment was a green light to sell the dollar-which is what they did that day, pushing down its value by 2.1 percent to reach the lowest level in three years. The remarks fueled an existing trend of depreciation due in part to an optimistic outlook for European economies, but also to uncertainty about where the United States was headed now that President Donald Trump was installing an increasingly protectionist economic agenda. Mnuchin's seven words on the dollar also threw into question the value of investors' stake in precious American government bonds, called Treasuries. A weak currency erodes the value of trillions of dollars in U.S. debt held by foreign countries, banks, and individuals.

For failing to speak about the dollar without absolute care and caution, Mnuchin faced a barrage of criticism. Christine Lagarde, the head of the International Monetary Fund, said that his seven words amounted to an opening salvo of a currency war. Merkel called the nationalistic policies that Mnuchin's words represented "poison," and another European official, unwilling to be named making such a comment, called the incident an example of "buffoonery."

You could say that Mnuchin had succumbed to a common malady among Treasury secretaries. The dollar must be spoken about with the utmost care, but sometimes in the energetic rush of meetings on Capitol Hill, Wall Street, and around the world, there's the inevitable mishap. It doesn't help that Treasury secretaries are frequently asked to elaborate on their views. After all, the Treasury department's decisions affect so much of our daily lives-our tax burden, spending power, and the ability to innovate and operate in a free and fair market, and more. But in reply to persistent questions, all anyone really wants to hear is a boring reaffirmation of a basic tenet of economic order: the U.S. government will not meddle with currency markets, because they should be free and fair, just like a democracy.

But in the Swiss mountain ski resort on that Wednesday in January, the most revealing part of Mnuchin's statement on the dollar was overlooked.

Yes, he boldly said what few predecessors have: a weak foreign exchange rate has some economic benefits. But that's simply a fact. For some parts of the economy, like the manufacturing and services sectors that export goods to those buying in foreign currencies, a weak dollar boosts profits. These companies can sell more at competitive prices, rather than be drowned out by cheaper products made in other countries. Take chocolate, for example: America has Hershey, and Britain has Cadbury. If the dollar is strong against the British pound, then there will be less demand for Hershey's Kisses in England, because their homegrown candy is cheaper. And it makes Cadbury in the United States cheaper and perhaps more appealing than a made-in-America brand.

But it is the rest of Mnuchin's statement that was more revelatory and more reflective of an emerging new era of economic policy, whether the global elite at Davos liked it or not. "A weaker dollar is good for us," his phrase began-but it was what came next that was the most revelatory: "as it relates to trade and opportunities."

In this messy delivery of the president's America First agenda through currency policy, Trump's Treasury secretary was inadvertently conditioning markets to understand that a hands-off approach to the U.S. dollar wasn't a given, especially when its sheer strength in value and the free trade environment that it underpinned were hurting so many Americans.

It was something that Trump had been talking about vociferously since he emerged as a presidential candidate in 2015. The dark vision he conjured of a U.S. economy that was crumbling (despite record economic expansion) resonated with an overlooked part of the electorate. And on November 8, 2016, 62.9 million Americans validated that vision-perhaps because he was the only candidate who acknowledged the pent-up frustration over low wage growth and trade-related job losses that had hollowed out swaths of the heartland. At first glance, the states that voted for Trump represented those Americans who were left behind in the much-celebrated recovery from the Great Recession that lasted from 2007 to 2009. But the pain that Trump found in so-called flyover states had been building for years. Since the 1980s, the decay of steel towns and car factories in the industrial heartland had given rise to a new name for the region that included mostly Midwestern states, like Ohio, Michigan, and Wisconsin: the Rust Belt.

Manufacturing and services jobs, once the backbone of the working-class economy, paid less and less as foreign goods from Europe, Mexico, and Asia were offered at a cheaper price, slashing demand for American-made products. In shops across the nation, made in china or made in vietnam was stamped on everything from Victoria's Secret underwear to Cadillacs. Take-home pay for factory workers had been declining since around 1980, but it worsened after China joined the World Trade Organization and the North American Free Trade Agreement took off. In the three decades leading up to Trump's presidential bid, the United States saw 20 percent of its manufacturing jobs disappear. And in the years since the global financial crisis hit, the share of voters considered "working class" (according to their net income) grew by almost one-third.

To be sure, all advanced economies were seeing a decline in manufacturing. But for those...

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Verlag
Portfolio
Erscheinungsdatum
2024
Sprache
Englisch
ISBN 10 
0593539117
ISBN 13 
9780593539118
Einband
Gebundene Ausgabe
Anzahl der Seiten
304
Kontakt zum Hersteller
Portfolio
https://www.wetones.co.uk/

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