The NYT, the Dollar, and the Savings Rate

Back in August, the NYT editorial page displayed its economic ignorance by blaming the weak dollar, inter alia, on a low domestic savings rate. It got slapped down by both Greg Mankiw and Dean Baker: a low savings rate causes a stronger dollar, and raising the domestic savings rate would only serve to weaken the dollar further. D'oh!

Of course, we all make mistakes. But smart people learn from their mistakes, especially when they get free advice from eminent economists pointing those mistakes out. Which is why it's rather depressing to see the NYT make exactly the same mistake all over again this morning:

Dollar weakness is home-grown. It is rooted in the borrow-and-spend behavior of the United States government and American consumers and in a corollary lack of domestic savings that necessitates foreign borrowing.

Baker's on the case, again, of course. But if they didn't listen last time, the NYT ediorialists are unlikely to listen this time. The fact is that fiscal recklessness of the sort displayed by the present administration is harmful in many different ways – but the one thing you can't blame on fiscal recklessness is the weak dollar.