Texans and the Dollar
August 15, 2011
When Texans have been in a position of high authority, bad things invariably seem to happen to the dollar, so my reaction to Governor Rick Perry’s entry into the Republican race was “there we go again.” For the record, Texas is America’s second most populous state, yet Texans have exerted a disproportionate influence over U.S. currency management during the past half century. As a group, their impact on the dollar has been adverse. A Texan has been president or vice-president during 55% of the years since the Kennedy inaugural in 1961, and the Treasury Secretary has been a Texan for 16.3% of that period. Only 8% of Americans live in Texas.
Here are some of notable Texans who’ve promoted a weaker dollar in one way or another.
- Lyndon Johnson’s guns and butter policies as the 36th president in the 1960s prepped America for the inflation that came later and subjected the balance of payments to persistent strain that eventually made the 1971 dollar devaluation and eventual adoption of a flexible exchange rate system necessary.
- Treasury Secretary John Connally famously sneered to his European counterparts that the dollar is America’s currency but their problem. His 16-month stewardship included the suspension of dollar-gold convertibility and the December 1971 devaluation of the U.S. currency.
- G. William Miller, a Texan, succeeded Arthur Burns as Fed Chairman, in January 1978. That was an awful year for the dollar, and the central bank was slow to understand that depreciation was not only reflecting accelerating U.S. inflation but an integral part of the dynamics feeding inflation.
- James Baker III, Treasury Secretary from February 1985 until August 1988, negotiated the Plaza Accord to weaken the dollar, which during his time in office fell by 40.6% against the German mark and 48.4% versus the Japanese yen.
- During the presidency of George Herbert Walker Bush, dollar/mark fell 29.5% over the span of 20 months between June 1989 and February 1991
- Lloyd Bentsen, Bill Clinton’s first Treasury Secretary, took a verbal hatchet to dollar/yen, which declined 19.7% from JPY 125.0 at the time of the inaugural in 1993 to a low of JPY 100.4 just seven months later. After leaving office and after the U.S. had adopted a strong dollar policy under his successor, Bentsen was still jabbing away, warning in late 1996 that further dollar gains would hurt American trade competitiveness.
- After 8 years, President George W. Bush left a legacy of debt and war, with the dollar 28.3% and 22.4% weaker against the euro and yen than he found it.
Other Texans like Tom Delay and Dick Armey played major roles in the evolution of the Congress into a bastion of partisanship that American and world investors love to hate. As key players in the Tea Party movement, Armey and Ron Paul, another Texan who wants to close down the Fed, are doing a good job of scaring international holders of dollars.
The state of Texas is a huge exporter, accounting for 16.2% of the nation’s total shipments abroad. It’s understandable that politicians from Texas would embrace weak-dollar policies.
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: George W. Bush and the dollar, John Connally, Lloyd Bentsen, Ron Paul
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