Oil Currency Hypocrisy

It makes no sense for the Bush administration to be supporting oil-exporting countries' hard dollar exchange-rate pegs while simultaneously blasting Asian countries for not letting their currencies appreciate faster against the dollar. Indeed, the US should be supporting the IMF’s behind-the-scenes efforts to promote de-linking of oil currencies and the dollar.

CAMBRIDGE – Does it make sense for United States Treasury Secretary Hank Paulson to be touring the Middle East supporting the region’s hard dollar exchange-rate pegs, while the Bush administration simultaneously blasts Asian countries for not letting their currencies appreciate faster against the dollar? Unfortunately, this blatant inconsistency stems from the US’s continuing economic and financial vulnerability rather than reflecting any compelling economic logic. Instead of promoting dollar pegs, as Paulson is, the US should be supporting the International Monetary Fund’s behind-the-scenes efforts to promote de-linking of oil currencies and the dollar.

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