Editor's note: This is a special bonus column for TheStreet.com readers. Peter Eavis' commentary regularly appears on RealMoney.com. To sign up for RealMoney, where you can read his commentary every day, please click here for a free trial. A weak dollar is a sign of a weak government and a weak economy. So why are so many people saying the sagging greenback is nothing to worry about? Though the dollar is down 21% against the euro over the past 12 months, the U.S. Treasury and Wall Street economists, and even media commentators, have downplayed the relevance of the slide. Indeed, some people say the decline, if moderate, is a good thing, because it will make American goods cheaper to foreigners and will therefore boost exports and add juice to the sluggish economy. Truth be told, this fondness for a depreciating currency springs out of the something-for-nothing school of economics, which also advocates higher government spending and lower interest rates as solutions to any form of economic malaise. Though all these things actually end up causing more economic malaise, we should never underestimate the seductiveness of quack solutions to politicians, traders and idealists. Now, with the economy showing few signs of strength after drastic cuts in interest rates and massive lending to individuals for houses and cars, we have reached the point at which central bankers and government officials start to favor the next brand of snake oil. After months of rock-bottom interest rates, an influential Federal Reserve governor said that the central bank must be prepared to buy all manner of financial assets to reflate an economy not responding to very low interest rates. And we have had Treasury Secretary John Snow making strangely soft remarks on the dollar. On March 4, Snow said he was "not particularly concerned about" the dollar's drop. Then, in a Sunday TV interview, he made the following remark: "When the dollar is at a lower level, it helps exports, and I think exports are getting stronger as a result."
To some, It sounded like Snow was saying he could tolerate a weaker dollar if it led to higher exports. Tuesday, however, Snow seemed to back away from the devaluation-is-good stance. In an interview with Reuters, he said: "As I've said on various occasions, devaluation strategies are not well calculated to breed long-run domestic prosperity. You can't devalue your way to long-term high standards of living."