Daniel Gross: How hating Bush is wrecking the economy
Quick quiz: Is the dollar weak because Americans think President Bush is a miserable failure?
Tom Gallagher of the ISI Group has observed a bizarre, and obscure, economic indicator: The fortunes of the American president and the fortunes of the American currency seem to move in tandem. Though there is no clear reason the dollar and the president's popularity should be connected, as the chart shows, for at least the past 18 years, there has been what Gallagher calls "a loose correlation" between presidential approval ratings, as measured by the Gallup organization, and the value of the U.S. currency, as measured by the trade-weighted dollar. In general, the dollar is buoyant against its global competition when Americans approve of their president. Performance slumps when Americans disapprove. Both President Bush and the greenback have been in the grips of a steep decline since their respective early-2002 peaks.
Now, Gallagher has more hedges around this simple data presentation than you'll find ringing estates in Southampton. Correlation does not imply causation. He is quick to note that there are a gazillion-and-one factors that influence the market values of currencies and presidents. Since currency traders and Americans are essentially economic beings, it could be that they tend to buy the security (the dollar, or the president) when the U.S. economy is thriving and short it when the U.S. economy is in the dumps. In other words, both the presidential approval ratings and the dollar may be following economic health and are independent of each other.
Gallagher, though almost sheepish about boiling down the complexity of the dollar-president relationship to a chart, puts forth a poli-sci argument about how a weak president might help weaken the dollar. "I think it makes sense that the political standing of the president is a factor in the dollar's value," he said. Just as the dollar occupies an outsized role in the global currency stage, so does the U.S. president....
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Tom Gallagher of the ISI Group has observed a bizarre, and obscure, economic indicator: The fortunes of the American president and the fortunes of the American currency seem to move in tandem. Though there is no clear reason the dollar and the president's popularity should be connected, as the chart shows, for at least the past 18 years, there has been what Gallagher calls "a loose correlation" between presidential approval ratings, as measured by the Gallup organization, and the value of the U.S. currency, as measured by the trade-weighted dollar. In general, the dollar is buoyant against its global competition when Americans approve of their president. Performance slumps when Americans disapprove. Both President Bush and the greenback have been in the grips of a steep decline since their respective early-2002 peaks.
Now, Gallagher has more hedges around this simple data presentation than you'll find ringing estates in Southampton. Correlation does not imply causation. He is quick to note that there are a gazillion-and-one factors that influence the market values of currencies and presidents. Since currency traders and Americans are essentially economic beings, it could be that they tend to buy the security (the dollar, or the president) when the U.S. economy is thriving and short it when the U.S. economy is in the dumps. In other words, both the presidential approval ratings and the dollar may be following economic health and are independent of each other.
Gallagher, though almost sheepish about boiling down the complexity of the dollar-president relationship to a chart, puts forth a poli-sci argument about how a weak president might help weaken the dollar. "I think it makes sense that the political standing of the president is a factor in the dollar's value," he said. Just as the dollar occupies an outsized role in the global currency stage, so does the U.S. president....