[How About This Book] For America, By America... America's Dollar Policy

"Strong Dollar Aligns with National Interest," Former Treasury Secretary Rubin's Policy
Caused Manufacturing Decline... Led to Trump's Rise
"US Should Be Adjuster of Global Financial System Beyond National Interest"

John Snow, the 73rd U.S. Secretary of the Treasury (served 2003?2006), claimed in an interview after his retirement that financial journalists and foreign exchange dealers were in collusion. He said, "Journalists want to hear statements from the current Treasury Secretary that are markedly different from those of their predecessors, and the financial markets like such statements because they cause market fluctuations."

This was a veiled expression of his frustration with reporters who troubled him with difficult questions and dealers who exaggerated his remarks, increasing market volatility. Dollar Wars covers the stories of those who have served as U.S. Treasury Secretaries over the past 30 years. In the book, Secretary Snow is portrayed as a Treasury Secretary who could not avoid the trap of issuing dollar-related statements without disturbing the market.

The U.S. Secretary of the Treasury, along with the Chair of the Federal Reserve?the head of the U.S. central bank?is one of the most influential figures affecting the movement of the dollar, the world's key currency. A single word from him can determine the dollar's direction and reverse astronomical flows of capital. Given the importance of the position, the pressure is inevitably immense.

Dollar Wars tells the stories of U.S. Treasury Secretaries who had to endure such pressure. While mentioning figures like Salmon P. Chase (25th Secretary of the Treasury, 1861?1864), who was instrumental in issuing Greenbacks during the Civil War, and Henry Morgenthau Jr. (52nd Secretary, 1934?1945), who served during the 1944 Bretton Woods Conference, the book mainly focuses on the 70th Secretary Robert Rubin (1995?1999) and his successors. It examines how U.S. dollar policy changed amid the wave of globalization in the 1990s and what impact those changes had on the world.

The author, Saleha Mosin, was a Bloomberg News reporter who covered the U.S. Treasury from 2016 and likely troubled the Treasury Secretaries. She explains that the most important task of the U.S. Treasury Secretary is to protect and maintain the dollar as a source of power. Ultimately, Dollar Wars shows that U.S. dollar policy has thoroughly evolved to serve the country's own interests.

[How About This Book] For America, By America... America's Dollar Policy

Former Secretary Rubin advocated a strong dollar policy, asserting that "a strong dollar aligns with U.S. national interests." A strong dollar was also a core principle of globalization that emerged in the 1990s. Rubin served as the first chairman of the National Economic Council (NEC), established during the Bill Clinton administration. President Clinton, who took office in 1993, sought to implement middle-class tax cuts?a policy disliked by Wall Street because it risked inflation and could worsen the fiscal deficit, thereby lowering the value of U.S. bonds.

Wall Street took it upon itself to act as a bond vigilante opposing the middle-class tax cuts. They sold large amounts of government bonds, driving up bond yields, and ultimately, President Clinton abandoned the middle-class tax cut policy. During this process, Rubin, a former Goldman Sachs chairman, was frequently consulted for advice. After serving as the inaugural NEC chairman, Rubin became Treasury Secretary in 1995. He adopted policies favorable to Wall Street, such as shifting toward reducing the fiscal deficit and balancing the budget.

During Rubin's tenure, the U.S. economy prospered. The 10-year Treasury bond yield, which was in the 8% range at the start of the Clinton administration, stabilized to the low 4% range by 1998, and the dollar's value rose by 16% over Rubin's four years as Treasury Secretary. However, Rubin's strong dollar policy led to a decline in U.S. manufacturing jobs because the strong dollar reduced the price competitiveness of American products. This ultimately paved the way for Donald Trump's rise in 2016. Trump successfully targeted the Rust Belt, a region of declining manufacturing, and won the presidential election. Although he failed to secure re-election, he is currently seeking a return to the White House. During Trump's administration, U.S. dollar policy became more overt. Steven Mnuchin, who served as Treasury Secretary under Trump, caused global turmoil at the 2018 Davos Forum by stating that "a weaker dollar is good for the U.S." The clash with China, which had expanded exports based on a weak yuan, became inevitable, leading to a trade war with retaliatory tariffs between the U.S. and China.

The atmosphere was drastically different from when the U.S. and China held their first Strategic and Economic Dialogue in 2006. At that time, the U.S. Congress was considering a bill to impose a 27% tariff on Chinese products, but Treasury Secretary Henry Paulson tried to stop it. Paulson persuaded Congress that what was needed in the relationship with China was dialogue, not tariffs or economic sanctions.

In 1971, the U.S. abandoned the Bretton Woods system to finance the Vietnam War, ushering in the era of floating exchange rates. The fundamental reason the world today pays close attention to dollar value fluctuations is the U.S.'s pursuit of its own interests. In this context, the fact that Dollar Wars reveals how changes in U.S. dollar policy were made in pursuit of national interests and the emergence of Trump, who prioritized American interests, is not surprising.

However, Mosin advises that through the Bretton Woods agreement, the dollar secured its important position as the key currency, allowing the U.S. to finance its economy at low interest rates and enjoy growth benefits, and that with these benefits come responsibilities. She emphasizes that the U.S. should not pursue only its own interests but should also play the role of a global financial system coordinator through dollar management. Regarding relations with China, she notes that the U.S. and China are connected by a massive credit cycle. China has accumulated enormous wealth through export booms driven by a weak yuan and invests this wealth in the U.S., with Chinese funds becoming a source of U.S. public spending. Thus, confrontation with China is not the best solution.