The Bush-Dollar Curve -Does the dollar fall when the president is unpopular?

[babylonsister]

http://www.slate.com/id/2165579/nav/tap2/

The Bush-Dollar Curve
Obscure economic indicator: Does the dollar fall when the president is unpopular?
By Daniel Gross

Quick quiz: Is the dollar weak because Americans think President Bush is a miserable failure?

Tom Gallagher of the ISI Group has observed a bizarre, and obscure, economic indicator: The fortunes of the American president and the fortunes of the American currency seem to move in tandem. Though there is no clear reason the dollar and the president's popularity should be connected, as the chart shows, for at least the past 18 years, there has been what Gallagher calls "a loose correlation" between presidential approval ratings, as measured by the Gallup organization, and the value of the U.S. currency, as measured by the trade-weighted dollar. In general, the dollar is buoyant against its global competition when Americans approve of their president. Performance slumps when Americans disapprove. Both President Bush and the greenback have been in the grips of a steep decline since their respective early-2002 peaks.

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What about the reverse? Is it possible that the weaker dollar causes lower presidential-approval ratings? The case for that is considerably feebler. In theory, a declining dollar would make imports more expensive, thus making American consumers feel poorer. In their reduced straits, they might take out their anger at the president. But a huge and growing chunk of imports originate in China, which has pegged its currency tightly to the dollar in recent years. The dollar today may buy fewer BMWs and Prada shoes than it did in 2002, but it buys about the same amount of Chinese-made microwaves, T-shirts, and toys. And yes, Americans who suddenly find travel to Europe prohibitively expensive might be expected to come home enraged. But most of these travelers already hated Bush. An August 2004 poll showed that voters with passports preferred John Kerry to Bush by a whopping 23-point margin.

So, the dollar and President Bush remain shackled together. Neither shows signs of reversing the longstanding downward trend. Given the global interest-rate climate—the U.S. Federal Reserve's next move will most likely be to cut interest rates if the economy continues to flag, while the rest of the world is still going full steam ahead—the forces driving down the dollar are strong. As for Bush, he continues to plumb new depths of unpopularity, and the news flow—on Iraq, on the domestic economy, on the scandal front—isn't getting any better.

In my neck of the woods, the heartland of Bushenfreude, new bumper stickers have begun to appear on the Audis, Volvos, and Priuses driven by liberal-leaning financial-services professionals: "1.20.09." The message: Things will get better when the Bush administration ends, regardless of who the successor is. Or maybe they're just predicting when the next bull market for the dollar will begin.

[Warpy]

1. The dollar is weak because he presented us with

the culmination of Reaganomics. In other words, he totally fucked this country up from an economics standpoint.

We have far less industry backing up the buck. We allowed other countries to loot it, aided by corporations.

Our country's financial house is not in order. That is what is causing the dollar to drop.

[AX10]

3. Industry only? We don't have much of anything to back...

up the dollar in terms of stable jobs. We have massive public and private debts and a massive trade deficit with massive wages. Add stagnant wages too....

[Rydz777]

2. An interesting correlation but

its our massive debt and mismanaged economy that is sinking the dollar. Come to think of it, Bush may have a major role in that. If as some think, the Fed is about to cut rates, that'll probably sink the dollar even further. Now, for the first time, there are more Euros than dollars in circulation in the world.