In an interview this morning on CNBC, following the release of yet another
monthly trade deficit in excess of 40 billion dollars, Treasury Secretary John
Snow was presented with a Hobson’s choice when asked if he was worried about
the current account deficit. Posed in such terms, the question is ridiculous
on its face. The query is akin to asking a CEO if he is worried about his company’s
massive, continuous and indefinite quarterly losses. However, the stupidly
of the question was only exceeded by the stupidity of the answer.

In classic Orwelian style, Mr. Snow replied that he was not worried at all
and declared that the current account deficit was a reflection of the attractiveness
of U.S. assets, and blamed America’s faltering exports on overseas weakness.
To use the same analogy, this is like a CEO of a money losing company stating
that its enormous debt is merely a reflection of the attractiveness of its
bonds, and that its faltering revenues are not a matter of concern because
they simply reflect the problems of its customers.

Downplaying so obvious a problem sends a terrible message to the currency
markets and to America’s creditors. After all, if the Treasury Secretary is
not worried about the growing and enormous current account deficit, nothing
will be done to prevent it from getting even worse. Therefore, the correct
response to such compliancy would be to sell the dollar. However, upon deeper
reflection, it was the only answer that a treasury secretary pursuing a mythical “strong
dollar policy” could give. A truthful reply would have been an official
admission that the current account deficit is in fact a problem, the reaction
to which would have been even more dollar negative.

The next time that a reporter asks Mr. Snow this question, this best thing
that he can do would be to change the subject. Or better yet, refrain from
giving interviews at all, and simply issue occasional press releases declaring
that “a strong dollar is in the national interest” and hope for the
best.