Federal Reserve Chairman Ben S. Bernanke and U.S. Treasury Secretary Henry Paulson are guilty of “Zimbabwe economics” by failing to step in to support the dollar, said Forbes Inc.’s Chief Executive Officer Steve Forbes.
Neither the Fed nor the Treasury has bought dollars since August 1995 and last stepped into foreign-exchange markets in September 2000 when they sold U.S. currency to buoy the euro. Paulson has said repeatedly the U.S. favors a “strong dollar” with its value set in free markets.
“I want to hear that Bernanke and Paulson are going to shore up the dollar,” Forbes told reporters at the annual meeting of the World Economic Forum in Davos, Switzerland, today. “Eventually the markets will force them to. If the Fed shored up its value, it would help bring interest rates down.”
The U.S. currency has fallen in five of the past six years, according to the Fed’s trade-weighted dollar index. Policy makers cut the target rate for overnight banks loans by three- quarters of a percentage point on Jan. 22 as global stock markets tumbled on concern the fallout from the U.S. subprime- mortgage crisis is spreading.
The U.S. prefers a “weak” dollar because it helps the nation’s exporters, Forbes said. “That’s Zimbabwe economics.”