Successful at Incompetence?

I was struck by this passage from Paul Craig Roberts' column entitled Successful at Incompetence.

During Bush's first term, the value of the U.S. dollar declined dramatically in relation to other traded currencies. The extraordinary diminution in the dollar's exchange value threatens its role as the world's reserve currency. If the dollar loses its place as reserve currency, there will be catastrophic consequences for U.S. living standards and superpower status.

The decline in the dollar's exchange value has failed to reduce the U.S. trade deficit, because the Bush administration permits China to peg its currency to the dollar. As the dollar declines, China's currency declines with it, thus maintaining China's advantage in U.S. markets, while China gains greater advantage in all other markets. Because China pegs its currency to the dollar, the dollar's decline has not reduced the advantage of outsourcing to China.

What to make of it.  He worries that the dollar may lose its place as reserve currency, then complains the China pegs its currency to it.  He is certainly much more learned than I, but doesn't that mean China is using it as a reserve currency?  Perhaps there is someone who can explain that one to me.  And then there is this.  This administration "permits China to peg its currency to the dollar."  Imagine that.  China conducts its own monetary policy without getting permission from the Bush administration. 

It is certainly true that inflation poses its own set of threats to the economy, but at the same time there are those who see some benefit from a little inflation.  Got a mortgage, anybody?  But I digress.  The point here is Paul Craig Roberts appears to be one of those who will view anything the administration does as incompetent.  For my money he is unpersuasive.

Comments

[Scott]

These are all legitimate worries but gosh it is tiresome how commentators and journalists like to blame the party in power for every problem. Similar things happened during the Clinton years as well. Pointing fingers and laying false accountability is more important than discussing problems--doesn't get more counterproductive than that.

[Scott]

Similar things meaning journalists blaming the party in power, not the currency issues of the moment.

[Scott]

A last comment--this is not to say none of the blame lays at Bush's feet, some of it very much should be.

[Tom Bowler]

I think the issue of inflation itself can be laid at Bush's feet. After all, the currency supply is under the control of the Treasury Secretary. It will be instructive to see what kind of person gets nominated to replace Greenspan at the Fed.

[Scott]

Tom, have you picked up Imperial Hubris yet?

[Tom Bowler]

It's next on the list. I'm finishing up American Soldier by Tommy Franks at the moment.