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Making Sense of the Dollar

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Making Sense of the Dollar

Exposing Dangerous Myths about Trade and Foreign Exchange

Bloomberg Press,

15 min read
10 take-aways
Audio & text

What's inside?

A contrarian, cantankerous, consummately well-informed checklist of currency myths and facts.

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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

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.

Summary

“Myth 1: The Trade Deficit Reflects U.S. Competitiveness”

Antiquated accounting methods distort the picture of the United States’s international competitiveness. When a U.S. company sends parts abroad for assembly and then brings back a finished product, trade accounts record the transaction. Because the finished product has a higher value than the parts exported, the U.S. trade deficit grows. However, the entire transaction has taken place within a single company. Does such accounting make sense?

Trade accounting ignores much of the value that an American export creates. For instance, the trade value of services is notoriously hard to calculate. Europeans who vacation in the U.S. consume tourism services, but trade accounts do not reflect such transactions. Balance of payment accounts also do a poor job of measuring the value added by technology, specialized skill and management ability. Antiquated accounting fails to measure the right things and leads to misconceptions about what policymakers should do. The trade deficit is not a problem that needs to be corrected; the problem that needs correcting is the way trade is measured. International trade does not put American...

About the Author

Marc Chandler, chief foreign exchange strategist at Brown Brothers Harriman, is the former chief currency strategist for HSBC Bank U.S.A. He has contributed to many financial publications, and teaches in New York University’s School of Continuing and Professional Studies.

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