U.S. system makes dollar strong, says greenspan

  • Friday, November 30, 2001 9:00pm
  • Business

Associated Press

WASHINGTON — Federal Reserve chairman Alan Greenspan said Friday the dollar’s strength against the new European currency, the euro, stems from America’s better performance in boosting the productivity of the workforce.

While cautioning that it is always difficult to forecast directions in currency rates, Greenspan said it was evident that the dollar’s surprising strength against the euro owed a great deal to a more flexible U.S. workplace.

"Over the decades, Europe has sought to protect its workers from some of the presumed harsher aspects of free-market competition," Greenspan said in a speech to a Washington, D.C., business group. "To discourage layoffs, discharging employees was made more difficult and costly compared with doing so in the United States."

Greenspan said this difference in workplace flexibility was especially important in new fields such as the high-tech world, because start-up firms have a critical need to find innovative ways to cut costs.

If a country’s laws prohibit the easy hiring and firing of workers, that will limit the number of entrepreneurs willing to invest in new technologies, he said.

Greenspan said providing capital in new areas of technology offers investors greater chances to make large returns on their money. But restrictions in one country, such as tight labor market rules, will dampen the desire of foreigners in particular to make such investments.

Since the United States has fewer labor force restraints compared to Europe, investors view America as a superior place to make investments and earn bigger returns. Greenspan said this has been a key force boosting the value of the dollar compared to the euro.

The greater U.S. labor market flexibility has helped American companies be more productive, and this has attracted foreign capital even as America’s trade deficit has soared to record highs.

"The steady flow of capital from Europe to the United States in recent years is, presumably, the consequence of Europeans finding many investments in the United States persistently more attractive than those at home," Greenspan said.

Greenspan has been a major proponent of the view that the United States has entered a new era of greater productivity growth because of large investments made in information technology. He said in response to an audience question that he saw no evidence that U.S. productivity growth was faltering in the current quarter.

Greenspan made no comments about the overall economy or interest rates during his appearance. Many private forecasters are looking for the Federal Reserve to cut interest rates for an 11th time when the central bank next meets on Dec. 11 in a continued effort to restart an economy that slipped into a recession in March.

While there were predictions that the euro would overtake the U.S. dollar as the dominant international currency, this has not happened and Greenspan said it is unlikely to happen for some time to come.

"These expectations were probably overstated. History has shown us that once currencies achieve the status of an international vehicle currency, as the guilder and pound did in previous centuries, the established infrastructure of deep and liquid markets favors their continuing to be used."

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

Lead climbers head up their respective routes at Vertical World North on Monday, Nov. 20, 2023, in Lynnwood, Washington. (Ryan Berry / The Herald)
Beginner’s ascent: A newcomer’s guide to indoor climbing

Indoor climbing gyms in and around Snohomish County offer thrills without winter chills.

Alexis Burroughs holds a bigleaf maple leaf while guiding her participants through sensory observation during a forest bathing session Sunday, Nov. 19, 2023, at Lord Hill Regional Park near Snohomish, Washington. (Ryan Berry / The Herald)
To restore human bond with nature, locals lead forest bathing sessions

A yoga instructor in Bothell and Adopt a Stream in Everett say the meditative practice evokes emotion, health benefits.

Instructor Gael Gebow checks her stopwatch while tracking her group’s exercises during her Boot Camp fitness class Monday, Nov. 13, 2023, at the YMCA in Everett, Washington. (Ryan Berry / The Herald)
YMCA fitness instructor challenges, empowers Everett residents

Gael Gebow has made inclusivity and healthy living her focus in 23 years at the YMCA.

A view of the Broadway construction site of Compass Health’s new mental health facility on Wednesday, Nov. 29, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Compass Health dedicates Everett block to housing and behavioral health services

The “state-of-the-art” project is set to total over $90M. The nonprofit has asked for public support.

More than 150 people attend a ribbon cutting event on Nov. 16, 2023 celebrating the completion of Innovation Hall at the University of Washington Bothell and Cascadia College campus. The building, which highlights STEM instruction and research, opens to students in January. Credit: Tara Brown Photography/UW Bothell
New science, math facility opens in January at UW Bothell

Innovation Hall is the first new building to be constructed at the Bothell university campus in 10 years.

Everett
Rairdon Auto Group acquires Pignataro VW in Everett

Everett VW dealership is the 12th for the Rairdon Group, which marks 30 years in business this year.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.