Replies to post #28580 on Abet Chichi2 (Chichi2)

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O'Neill Says U.S. `Strong Dollar' Policy Is `Vacuous Notion'

By Rhonda Schaffler and John Brinsley

April 16 (Bloomberg) -- Former Treasury Secretary Paul O'Neill said the ``strong dollar'' policy that he and every other Treasury chief since 1995 endorsed is ``a vacuous notion.''

``It implies in it that somehow we have the ability to manage the relationship between the value of the U.S. dollar and other currencies around the world,'' O'Neill, now a special adviser to Blackstone Group LP, today said in an interview with Bloomberg Television.

O'Neill roiled currency markets when he was in office from 2001 to 2002, at one point with comments in an interview with a German newspaper that the U.S. pursued a policy of a strong economy, rather than currency. The current Treasury Secretary, Henry Paulson, has repeatedly stated that he is a ``very strong'' supporter of the ``strong dollar'' policy.

``When I was Secretary of the Treasury I was not supposed to say anything but `strong dollar, strong dollar,''' O'Neill said today. ``I argued then and would argue now that the idea of a strong dollar policy is a vacuous notion.''

The U.S. currency today fell to a record low against the euro, and has declined 15 percent against its European counterpart in the past year.

``The markets actually have control over those relationships. When people say strong dollar, if they don't mean that `we believe intervention can work and we're prepared to intervene,' then `strong dollar' is ridiculous.''

G-7 Meeting

Finance chiefs from the Group of Seven major nations ended their April 11 meeting in Washington with a statement signaling concern over the slide in the dollar by denouncing ``sharp fluctuations in major currencies,'' and their ``possible implications for economic and financial stability.''

Paulson emphasized to the G-7 ``our commitment to a strong dollar,'' he said at a press conference after the meeting.

O'Neill, President George W. Bush's first Treasury secretary, said during his tenure he repeated the mantra originated by Clinton Treasury chief Robert Rubin that a ``strong'' dollar is in the best interests of the U.S.

Every secretary since Rubin has repeated the phrase, regardless of whether the dollar was rising or falling.

The dollar traded at $1.5973 per euro at 12:01 p.m. in New York, after reaching an all-time low of $1.5979 earlier. It was also at 101.45 yen, and has dropped about 14 percent against the Japanese currency in the past 12 months.