Bloomberg Businessweek - USA (2020-11-02)

◼ ECONOMICS Bloomberg Businessweek November 2, 2020

Q1 1973 Q3 2020

125

75

25

▼Trade-weighted

U.S.dollarindex

Republican

administration

Democratic

administration

controlofCongress,hasthepotentialtospeed

theU.S.currency’sslide.Thepartyhasdrafted

acoronavirusreliefpackagethatwouldincrease

thegovernment’salreadysubstantialborrowingby

trillionsofdollars.

Astheissueroftheworld’sforemostreserve

currency,theU.S.hasuniqueadvantages.There

willalwaysbea certainlevelofdemandforgreen-

backs,andthecountryis unlikelytoeverdefault.

Nevertheless,anyperceptionthatU.S.debtis

spiralingoutofcontrolcouldfuelconcernsabout

thevaluationofthedollar.AbdelakAdjriou,a

moneymanageratAmericanCenturyInvestment

ServicesInc.,saysthatwithU.S.debtrising,thedol-

larwillweakenoverthelongtermregardlessofwho

wins.UnderBiden,whointendstoraisetaxes,the

depreciationcould“happenveryquickly,”hesays.

Hangingoverallofthisis thelessonof2016,when

markets’unexpectedlyupbeatreactiontoTrump’s

victoryleftmanyonWallStreetred-faced.Thecon-

sensuswisdomis thata BidenWhiteHouseanda

DemocraticCongressequalsa weakerdollar,butany

economicrecoverytheypresideovercouldattract

moneytotheU.S.,supportingthecurrency.On

theflipside,a Trumpwinanda dividedlegislature

mightwellextendthecurrentstalemateoverfiscal

stimulus,cementingtheneedforultralowinterest

ratesthatweighonthecurrency.Andthenthere’s

thebigunknown:theriskofa contestedelection.

Monthsofuncertaintywouldlikelyfueldemand

forthegreenbackasa haven.�SusanneBarton,

AnchaleeWorrachate,andBenjaminPurvis

27

THEBOTTOMLINE A Bidenvictorymayspeedthedollar’sslide,

renderingU.S.manufacturersmorecompetitiveandhelpingwhittle

downthetradedeficit,whichareamongTrump’sstatedgoals.

with China fueled demand for the dollar, which has
long been viewed as a safe-haven currency. “Trump
was seen as business-friendly and pro-growth—less
taxes, lower regulations—and that’s good for the
dollar,” says Jack McIntyre, a money manager at
Brandywine Global Investment Management LLC.
“But probably more important was the U.S. rate
structure relative to the rest of the world.”
The dollar’s unprecedented strength has proven
a boonforU.S.consumersandcompaniesthat
buyproductsoverseas.Butit’sdrivenupcosts
formanufacturers,whichis whymanyAmerican
companies have continued to offshore produc-
tion and jobs, even at the risk of being called out
byTrump.Nowthetideappearstobeturning:
Thedollarhasfallenmorethan8%fromitspeak
earlierthisyearandis forecasttoweakenfurther.
ThepremiumthatU.S.Treasuriesprovideover
comparable debt from major economies such as
Germany has shrunk as the Fed has retreated from
its foray into higher interest rates.
U.S. policymakers intend to keep rates near
zero for years to come to encourage people and
businesses to spend their way out of a recession,
a stance that typically weighs on a nation’s cur-
rency.Thepainthatthepandemichascausedmay
promptevenmoremonetaryeasing.
Themedianestimateina Bloombergsurvey of
currency strategists is for Intercontinental Exchange
Inc.’s widely watched dollar index—a gauge that
tracks the greenback against its biggest industrial-
ized peers such as the euro and the yen—to fall by
almost 3% from now through the end of 2021.
A Biden presidency, especially if com-
bined with a “blue wave” that gives Democrats

● The search for alternative ways of measuring

economic well-being has new impetus

Is GDP Falling

Out of Fashion?

Bank’sfirstpublichearingaspartofapolicy

review,contributorsraisedthetopicofalternative

economicmodels.

“Thepandemichascompletelyhighlightedthat

whatwecareabout,includingaseconomists,is not

theamountofmoneycirculatingintheeconomy

but people’s well-being in a broader sense,”

saysDianeCoyle,professorat theUniversity

ofCambridge andauthorof GDP:ABriefBut

AffectionateHistory. But“there’snoobvioussingle

candidate to replace GDP at the moment.”

Historymayshowthatit wasduringthepandemic
that our fixation with gross domestic product really
started to wane.
A renewed push to demote GDP as a measure
of economic welfare has emerged amid a crisis
that’s brutally exposed gaps in health care and
social safety nets. A World Economic Forum (WEF)
reportreleasedonOct. 21 proposesembedding
GDPintoa dashboardthatalsotakesintoaccount
factorssuchasinequality,energyuse,andpublic
health. The same day, at the European Central