Bloomberg Businessweek - USA (2019-06-24)

 ECONOMICS Bloomberg Businessweek June 24, 2019

Warmongering?

○ TrumpsaysEuropeandChinaarepurposelyweakeningtheircurrencies.The

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ILLUSTRATION BY NICHOLE SHINN FOR BLOOMBERG BUSINESSWEEK. *YEAR-TO-DATE THROUGH MIDDAY JUNE 18. DATA, LEFT: COMPILED BY BLOOMBERG. DATA, RIGHT: ILO

extending the island up to 500 feet into the

East River. In Miami, voters backed a $400 mil-

lion bond issue that will help finance protections

across the city. San Francisco is spending hun-

dreds of millions of dollars to rebuild its 100-year-

old sea wall.

Boston is especially vulnerable to the rising

sea level and the fierce storms known as nor’eas-

ters. Since 1980 it’s experienced the most high-tide

flooding of any city along the East Coast, according

to NOAA’s Sweet. By the end of the century, Boston

Harbor could be 2 to 4 feet higher than it is now.

To prepare for the watery onslaught, WS

Development, the Seaport’s biggest developer,

is building up the ground beneath its projects.

The Massachusetts company is juggling $3 bil-

lion in projects—7.6 million square feet of hotels,

stores,restaurants,andoffices,includinga tower

for2,000 Amazon.comInc.employees.Atthe

$360millionSt.Regiscondotower,nowunder

construction,thelobbyfloorhasbeendesigned

so it can be permanently raised by four feet as

flooding worsens, according to developer Jon

Cronin. He’s hopeful that his neighbors and the

city will follow suit. “We don’t want to be the only

building in the middle of an island,” he says.

The new MassMutual building, which will be

completed in 2021, will be equipped with so-called

aqua fences, portable water barriers that can be

assembled in a matter of hours. Roger Crandall,

MassMutual’s chief executive officer, says other

countries have been able to protect themselves

from the ocean. Why not Boston? “Our spe-

cies has been engineering against the seas for

a long time,” he says, noting that he’d recently

visited the Netherlands. “There’s a cost to it—

make no mistake—but there’s also a cost of pick-

ing up and moving development further inland.”

—PrashantGopalandBrianK.Sullivan

THE BOTTOM LINE Boston’s Seaport District may become a

testing ground for climate change adaptation, as city officials work

with developers to safeguard billions of dollars in new investment.

It’s usually not hard to tell when a war has started:

One nation crosses another’s border with soldiers,

tanks, and planes. Currency wars are tougher to

call, partly because there isn’t even a clear defini-

tion of what they are. Keep that in mind when eval-

uating President Trump’s accusations against central

banks in Europe and Asia, such as this June 18 tweet:

“Mario Draghi just announced more stimulus could

come, which immediately dropped the Euro against

the Dollar, making it unfairly easier for them to com-

pete against the USA. They have been getting away

with this for years, along with China and others.”

Trump is right on two scores. The euro really

did decline against the dollar, to $1.12 from $1.16 a

year ago, after Draghi, the outgoing president of the

European Central Bank, said “additional stimulus

will be required” if the economic outlook for the

19-country euro zone doesn’t improve. Trump is also

correct that a cheaper currency would likely boost

the region’s economy by making exports from the

euro zone cheaper abroad, and by making imports

from the U.S. and elsewhere more expensive.

But many economists disagree with Trump that

Draghi is doing something wrong. It would be legit-

imate for the ECB to cut interest rates, they argue,

to stimulate domestic economic growth by lower-

ing borrowing costs for consumers and businesses.

Of course, cutting rates would likely reduce the

value of the euro, which adds to the stimulus, but

that’s a side effect, not the goal. “We don’t target the

exchange rate,” Draghi said during a June 18 panel

discussion in Sintra, Portugal.

Let’s say the depreciation of the euro man-

aged to worsen the U.S. trade deficit enough to

slow down the American economy. The Federal

Reserve could respond by cutting interest rates to

rev growth. That would incidentally lower the value

of the dollar, returning it to its previous exchange

rate with the euro. But as in the case of the euro,

a weaker greenback would be a side effect of the

lower rates, not a primary goal.

It might look like a zero-sum stalemate when

two trading partners both cut interest rates, leav-

ing the exchange rate where it started. But it’s not.

○ Percentage change

in nation’s currency vs.

the U.S. dollar*

Japan

China

U.K.

Euro

-2.4% zone

1.2%

ey’re not