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Making Sense of the Dollar: Exposing Dangerous Myths about Trade and Foreign Exchange
Has the greenback really lost its preeminent place in the world? Not according to currency expert Marc Chandler, who explains why so many are―wrongly―pessimistic about both the dollar and the U.S. economy.
Making Sense of the Dollar explores the many factors―trade deficits, the dollar’s role in the world, globalization, capitalism, and more―that affect the dollar and the U.S. economy and lead to the inescapable conclusion that both are much stronger than many people suppose.
Marc Chandler has been covering the global capital markets for twenty years as a foreign exchange strategist for several Wall Street firms. He is one of the most widely respected and quoted currency experts today.
Making Sense of the Dollar explores the many factors―trade deficits, the dollar’s role in the world, globalization, capitalism, and more―that affect the dollar and the U.S. economy and lead to the inescapable conclusion that both are much stronger than many people suppose.
Marc Chandler has been covering the global capital markets for twenty years as a foreign exchange strategist for several Wall Street firms. He is one of the most widely respected and quoted currency experts today.
240 pages, Hardcover
First published August 19, 2009
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Displaying 1 - 5 of 5 reviews
September 11, 2009
This book shows how American's aren't actually in that bad of shape with the current recession. Chandler states that, "The credit crisis of the U.S. dollar, nor will the euro or yuan replace the dollar as the world's currency. The U.S. economy is much more durable and innovative than people suppose, even in the face of market turmoil. Policy makers, investors - and the public - need to start thinking about the dollar and trade in a different way."
Here are just a few examples of how Marc explains the following myths:
* The trade deficit reflects U.S. competitiveness.
* Current account deficits drive currencies.
* Labor market flexibility is the key to U.S. economic prowess
* Globalization has destroyed American industry.
* The dollar's privileged place in the world is lost.
I tend to be an optimist so I thought this was a great book to help me understand that maybe the country I live in, isn't as bad off as I thought. If an expert is optimistic, that gives me more hope than I already had. If you're worried about the current state of U.S. currency, I recommend this book.
Here are just a few examples of how Marc explains the following myths:
* The trade deficit reflects U.S. competitiveness.
* Current account deficits drive currencies.
* Labor market flexibility is the key to U.S. economic prowess
* Globalization has destroyed American industry.
* The dollar's privileged place in the world is lost.
I tend to be an optimist so I thought this was a great book to help me understand that maybe the country I live in, isn't as bad off as I thought. If an expert is optimistic, that gives me more hope than I already had. If you're worried about the current state of U.S. currency, I recommend this book.
November 14, 2009
Not convinced by this. My problem is more with the rigor of the analysis than the conclusion. The arguments are more ideological than empirical, and the writing is repetitive and at many points irrelevant to his thesis. There are good and even thought-provoking points made on the nature and fundamental technological competitive of the US economy -- which I do not disagree with -- but these appear to me less than critical to thinking about dollar strength/weakness. A big omission is complete failure to discuss the Fed's current QE-type policies -- Chandler touches on lax monetary policy in about 2 paragraphs near the end, but there is hardly any mention of the Greenspan put or of the Bernanke/Summers/Geithner policy complex in this book at all.
Chandler's 10 points are repetitive; I found my attention wandering at various points reading this. I think his main points can be summarised thus:
1). US MNCs are still extremely competitive, and much of the US current account deficit is actually due to intra-firm trade within US multinationals. Thus, US imports are okay because the profits still accrue to US corporations, and when they repatriate profits back, the capital inflow offsets the current account deficit. Since equity ownership among US citizens is high due to pension ownership of mutual funds, the ultimate beneficiaries of all this consumption is... YOU.
Further, trade flows are irrelevant to thinking about US competitiveness, because MNCs tend to localise production in overseas markets, so the weakness of US exports doesn't mean the US isn't involved in the economic production of foreign consumption.
(Fair enough, but that doesn't make the trade deficit go away. As for equity participation -- that's why the excessive financialisation of America's economy is such a tragedy; all the competitiveness of US MNCs disproportionately goes to lining bankers' pockets.)
2). Current account is irrelevant anyway, as capital account is bigger, and on that front, everyone still loves the USD -- evidence is that SWFs are still buying US Treasuries, the US financial markets are the deepest and most liquid in the world, and much of global trade is still priced in USD.
(I agree but this is water under the bridge. He makes no attempt to engage with ongoing and future change -- there is no discussion here of Brad Setser's analysis that SWFs are shifting toward the short term end of Treasuries, implying they are looking for longer term alternatives, or of China's noises about the preservation of reserves, or of denominating trade in RMB, or of oil producing nations talking of using another pricing currency -- all points that while in the news only recently, are things that have been hinted at and should've been discussed)
3). Actually, economic growth means that cost of living has fallen, leisure time has risen, and living standards in the US are very high. (Agreed. Point being? It's the direction of change and not the level 0that counts)
4). Americans spend a lot on college education, which is classified as consumption but should arguably count as investment. (I concede this point, and also the point that America is the most research intensive economy in the world, though I'd argue the Chinese are fast catching up; the problem of not being familiar with that language means that so much of their knowledge creation is virtually invisible)
What I did find interesting was his discussion of different capitalistic/socialist systems, but isn't this quite irrelevant in a book that purports to be about the dollar? Also, he tends to defend America's social contract, but from reading the Naked Capitalism and other blogs, I'd guess that cracks are starting to show.
Chandler's 10 points are repetitive; I found my attention wandering at various points reading this. I think his main points can be summarised thus:
1). US MNCs are still extremely competitive, and much of the US current account deficit is actually due to intra-firm trade within US multinationals. Thus, US imports are okay because the profits still accrue to US corporations, and when they repatriate profits back, the capital inflow offsets the current account deficit. Since equity ownership among US citizens is high due to pension ownership of mutual funds, the ultimate beneficiaries of all this consumption is... YOU.
Further, trade flows are irrelevant to thinking about US competitiveness, because MNCs tend to localise production in overseas markets, so the weakness of US exports doesn't mean the US isn't involved in the economic production of foreign consumption.
(Fair enough, but that doesn't make the trade deficit go away. As for equity participation -- that's why the excessive financialisation of America's economy is such a tragedy; all the competitiveness of US MNCs disproportionately goes to lining bankers' pockets.)
2). Current account is irrelevant anyway, as capital account is bigger, and on that front, everyone still loves the USD -- evidence is that SWFs are still buying US Treasuries, the US financial markets are the deepest and most liquid in the world, and much of global trade is still priced in USD.
(I agree but this is water under the bridge. He makes no attempt to engage with ongoing and future change -- there is no discussion here of Brad Setser's analysis that SWFs are shifting toward the short term end of Treasuries, implying they are looking for longer term alternatives, or of China's noises about the preservation of reserves, or of denominating trade in RMB, or of oil producing nations talking of using another pricing currency -- all points that while in the news only recently, are things that have been hinted at and should've been discussed)
3). Actually, economic growth means that cost of living has fallen, leisure time has risen, and living standards in the US are very high. (Agreed. Point being? It's the direction of change and not the level 0that counts)
4). Americans spend a lot on college education, which is classified as consumption but should arguably count as investment. (I concede this point, and also the point that America is the most research intensive economy in the world, though I'd argue the Chinese are fast catching up; the problem of not being familiar with that language means that so much of their knowledge creation is virtually invisible)
What I did find interesting was his discussion of different capitalistic/socialist systems, but isn't this quite irrelevant in a book that purports to be about the dollar? Also, he tends to defend America's social contract, but from reading the Naked Capitalism and other blogs, I'd guess that cracks are starting to show.
March 2, 2024
Basically just keeps hammering in the same general points like a broken record:
• Trade deficit is overrated
• Ntg to worry abt the deficits
• BOP accounting doesn't capture the dynamism of modern economies
• BOPs can't reflect intangibles
• Intra-firm trade accounts for up to half of the US trade deficit (learned smtg new here)
I agree with these points but feel like they should be substantiated more. And obviously, agree that the dollar is here to stay - no other currency is coming close to it atm.
Lowkey reads like pro-American propaganda at times. Wanna check out other sources on the persistent US deficits lol.
• Trade deficit is overrated
• Ntg to worry abt the deficits
• BOP accounting doesn't capture the dynamism of modern economies
• BOPs can't reflect intangibles
• Intra-firm trade accounts for up to half of the US trade deficit (learned smtg new here)
I agree with these points but feel like they should be substantiated more. And obviously, agree that the dollar is here to stay - no other currency is coming close to it atm.
Lowkey reads like pro-American propaganda at times. Wanna check out other sources on the persistent US deficits lol.
June 2, 2016
Marc Chandler takes the reader through a critical review of ten myths about exchange rates, the dollar, and international trade in a well-written 200 pages. The book might have been suitably named, "Against the New Mercantilism." The author completely takes apart the commonly held picture of a world in which the U.S. runs huge trade deficits that lead to an accumulation of dollars overseas that will weaken the U.S. standing in the world and that its manufacturing can be saved only by a weak dollar policy. In every point, Chandler presents a fresh perspective to show how the common view is wrong.
His first key point is that trade statistics do not capture how American firms compete in global trade. Rather than producing everything in the US and shipping finished goods, US firms establish foreign subsidiaries to produce locally. Much of what is measured in trade statistics is actually intra-firm movements of goods in production. This means that trade data understate US competitiveness. His second point is that dollars overseas serve more functions than simply being used to purchase goods made in the US. This strikes at the commonly held notions of the proper exchange rate or the role of the dollar in the world economy. Finally, he addresses the impact of institutions on the development of markets in modern societies. This includes an insightful look at the myth that there is only one way to capitalism.
The book is a fresh and much-needed antidote to the facile assertions about the US economy and its future in global trade.
His first key point is that trade statistics do not capture how American firms compete in global trade. Rather than producing everything in the US and shipping finished goods, US firms establish foreign subsidiaries to produce locally. Much of what is measured in trade statistics is actually intra-firm movements of goods in production. This means that trade data understate US competitiveness. His second point is that dollars overseas serve more functions than simply being used to purchase goods made in the US. This strikes at the commonly held notions of the proper exchange rate or the role of the dollar in the world economy. Finally, he addresses the impact of institutions on the development of markets in modern societies. This includes an insightful look at the myth that there is only one way to capitalism.
The book is a fresh and much-needed antidote to the facile assertions about the US economy and its future in global trade.
January 5, 2010
Cantankerous currency exposé
Marc Chandler is one of the most widely respected, prolific pundits on currency markets and foreign exchange. In this book for lay readers, he summarizes “dangerous myths” about currency markets and foreign exchange. The myths are dangerous because they can lead to the kinds of mistakes in public opinion that generate disastrous political and economic policymaking. getAbstract recommends this accessible book and finds that Chandler does an excellent job of summarizing and countering some of the most wrongheaded, naïve or confusing blunders, blinders and bewilderments that vex discourse about the dollar, the trade deficit and the economic strengths of nations.
Marc Chandler is one of the most widely respected, prolific pundits on currency markets and foreign exchange. In this book for lay readers, he summarizes “dangerous myths” about currency markets and foreign exchange. The myths are dangerous because they can lead to the kinds of mistakes in public opinion that generate disastrous political and economic policymaking. getAbstract recommends this accessible book and finds that Chandler does an excellent job of summarizing and countering some of the most wrongheaded, naïve or confusing blunders, blinders and bewilderments that vex discourse about the dollar, the trade deficit and the economic strengths of nations.
Displaying 1 - 5 of 5 reviews